Tool rental firm Speedy Hire saw shares tumble by as much as a fifth yesterday after its long-standing boss resigned following the discovery of a £4.5m to £5m black hole in its overseas accounts.
The group has called in a legal team and is hiring forensic accountants to investigate its Dubai-based international division after it found evidence suggesting processes for a small number of contracts had been “repeatedly and deliberately circumvented”, leading to mis-stated accounts for recent years.
The finance director of the international division has been suspended and Speedy Hire said other senior managers were under investigation.
Chief executive Steve Corcoran has stepped down after 26 years with the group, but will remain with the company until a successor is appointed.
Shares in the Merseyside-based firm initially slumped by 22 per cent after the announcement, which came after the market close on Thursday night, before settling around 16 per cent lower.
Speedy Hire stressed the dubious accounting was isolated to the international arm, which operates largely in the Middle East and accounts for 5 per cent of total revenues.
But it expects this financial year’s pre-tax profits to be hit by around £3m due to the accounting shortfall, with the previous two years’ results likely to be restated. The group made underlying pre-tax profits of £16.8m in the year to March 31.
It said it was also in talks with its banks after the revelations left it in breach of lending terms.
Andrew Gibb, analyst at Investec Securities, said: “This is clearly a very disappointing development and whilst it looks to be confined to a division which currently accounts for 5 per cent of group revenues, there are clearly many questions which will need to be answered.”
Shore Capital expert David O’Brien added it may cost the company customers if they “reconsider their options in order to ensure that their projects, some of which will be under time penalties, are completed on time”.
Speedy Hire said the information came to light after recent management changes at its overseas business, having appointed Andy Wright as managing director of Middle East and North Africa earlier this month.
For Mr Corcoran, it marks the end of a lengthy career with the firm. He joined in 1987 and rose through the ranks to become chief executive in 2005.