Good morning again! Paul might not find it necessary to write today, as news is likely to be quiet.
As is customary before Christmas, the LSE closes this afternoon at 12:30.
Redcentric (LON:RCN)
Share price: 84.25p (+1.5%)No. shares: 147.2m
Market cap: £124m
Interim Results to 30 September 2016
This technology services provider has been at the centre of an accounting misstatement issue, as discussed by Paul here.
I also recommend this article by Mark Bentley at ShareSoc.
Today's H1 2017 results are quite positive on the operational side:
The financials are a lot more mixed, however.
Accounting problems tend to affect public valuations in a dramatic way. This is largely to do with questions around integrity but also because they make the act of valuation itself far more complicated.
For example, today's announcement includes restated H1 2016 figures, which need to be compared with the original figures as published here.
Here's a selection from today's results:
- Revenue up 2.0% to £53.0m (H1 FY16 restated: £51.9m)
- Adjusted EBITDA* up 16.6% to £9.1m (H1 FY16 restated: £7.8m)
- Statutory profit before tax £0.3m (H1 FY16 restated: £2.5m loss)
- Net debt £34.4m (31 March 2016 restated: £37.8m)
And here are the effects of the restatements for the year ended March 2016:
- Revenue restated at £103.3m vs £109.5m (reduction of £6.2m)
- Adjusted EBITDA* restated at £13.0m vs £25.8m (reduction of £12.8m)
- Statutory operating loss restated at £4.4m vs a profit of £8.4m (reduction of £12.8m)
- Statutory loss after tax restated at £5.2m vs a profit of £5.2m (reduction of £10.4m)
For me, these changes make it impossible to value the company in a sensible way. We can think about applying an earnings multiple to a £5.2 million profit, but we can't do the same for a £5.2 million loss!
To give credit where credit is due: despite the disastrous nature of recent events here, the company seems to have dealt with it in a very professional way. A forensic review is underway, a new CFO has been appointed, and the latest interim results have been produced, along with restated numbers, in a reasonable timeframe.
An explanation of what happened:
A number of accounting policies and practices, specifically those in respect of cost accrual, cost deferment and revenue recognition had been incorrectly applied and other accounting errors and misstatements had been made. To date there has been…
