Phoenix IT hit by accounting irregularities

Michael Bow
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CLOUD computing firm Phoenix IT Group’s shares plunged 35 per cent yesterday after a probe into one of its subsidiary firms revealed £14m of “accounting irregularities”.

The Northampton based company, listed on the FTSE 250, said a manager from the finance division of its Servo Ltd subsidiary in Leeds had been suspended on the back of the discovery.

It came after mis-statements of accounts over three consecutive accounting periods were found following a restructure of its business divisions.

PwC and Nabarro have been appointed by the firm to carry out a forensic investigation into the accounts.

“The information currently available suggests that certain control processes within the finance function at Servo Limited’s Birstall site in Leeds have been repeatedly and deliberately circumvented,” the firm said yesterday.

The mis-stated balances are understood to total around £14m of net assets on a post-tax basis, or £19m before tax.

Analysts downgraded their ratings on the stock from Buy to Hold following the revelation.

Numis analyst Will Wallis said in a research note: “Uncertainty remains high, but we think it likely that recent underlying profitability has been considerably below stated figures.”

Shares closed at 135p.