Yu plunges after yanking £10m from guidance

The company said it had identified “areas of concern” related to recognition of historic accrued income, impairment of trade debtors and gross margins being achieved against prior expectations.

Bobby Kalar, chief executive of Yu Group, said: "As founder and majority shareholder, nobody is more disappointed in this development than me."

A review highlighted that a significant amount of the aged accrued income was not recoverable and required adjustment, reducing profitability in the current year.

Meanwhile, a review of trade debtors identified that the level of non-repayment was “significantly above” the level that Yu Group had provided for, while a significant reduction in gross margin had been forecast in 2018 and beyond.

Yu said it is committed to commissioning a forensic review of its systems to fully identify the underlying issues and implement all necessary further measures, with a return to profitability targeted for next year.

"Our booked revenue from new sales remains strong and contracted revenue for 2019 is already £67m as at the end of September 2018. We have improved internal controls around working capital management and the board is absolutely focused on restoring the profitability of the business," said Kalar.

Yu Group shares were down 83.53% at 98.00p at 0920 BST.

House broker Shore Capital said the amounts are unlikely to be recoverable and assessed that bad debt provisioning will result in around a £5.7m charge to the historic accounts.

"These two factors combined, with a requirement of greater provisioning, indicate that the gross margin achievable in future is likely to be at a lower level."

Analysts added: "Clearly, this news comes as a disappointment, we look forward to a resumption of profitability next year with continued revenue growth. In the interim, whilst we assess the position for FY2018F and beyond, we temporarily withdraw our current forecasts. We expect to post revised expectations shortly post discussion with the management team."