Findel shares fall after 'errors' disclosure

The Burley-in-Wharfedale company said it was reviewing a number of accounting entries in the division which appear not to be properly substantiated.

The errors came to light following changes in the management of the division. The employees concerned with the errors have since left the company.

The group said it expected the accounting errors to reduce 2009 pre-tax profits by 5m and reduce net assets by 14m.

They are not expected to have a negative impact on profits in the current financial year.

The shares closed last night down 12 per cent at 23.75p.

Further details – including the impact on previous years – will be provided in the company's year end statement on April 28.

The accounting errors have had no impact on the company's current net debt position, which is in line with expectations.

Findel is investigating the accounting errors alongside the group's auditor Deloitte. No official investigation has been launched yet.

Analysts at KBC Peel Hunt said: "Clearly, this will not help to engender investor support for Findel. Market forecasts seem conservative in light of intended and delivered cost/interest savings, although sentiment and confidence remain the primary impediments to share price recovery."

Earlier this year Findel reported a fall in underlying sales, but said its turnaround plan is gathering pace and it is on course to make savings of 25m.

Like-for-like sales fell three per cent in the 39 weeks to the start of January.

The education supplies arm struggled with sales down 12 per cent, hit by falling export and project sales. School closures due to the snow storms also affected sales after 8,000 schools closed across the UK.

The education division has suffered as teachers are being asked to keep some of their budgets back for the following year and the uncertainty caused by the General Election has also led to reduced spending.

The group said in the light of this performance, it continues to cut costs in this division, and has already made 6m annual savings.

Underlying sales in its home shopping arm were flat. The group saw strong demand for its expanded casual and fashion clothing range which has been extended into tracksuits and sportswear.

But revenues from the financial services arm fell 10 per cent on last year after a decision to tighten credit requirements and focus on customers with good credit ratings. The group is keen to reduce bad debts over the coming months.

Sales at Kitbag remained strong at over 35 per cent ahead of last year. Kitbag, which is Europe's leading online sports retailer, operates official online stores for Manchester United, Chelsea, Real Madrid, Barcelona, Everton, the English FA, British Lions, Formula 1, Wimbledon and the Ryder Cup.

But Findel said that trading conditions at its other brands Confetti and I Want One Of Those.com remain challenging.

The cost reduction programme has achieved 15m of annualised savings to date and a further 10m has already been identified.

Findel has been through a tough time as the recession hit its core home shopping business.

But it hopes to reduce borrowings by 165m over the next three years, a considerable improvement on the previous 100m target. There are no plans for any more job losses.

Following a refinancing, the Kitbag home shopping business is no longer up for sale.

Last year Findel said it was parting company with chief executive Patrick Jolly, who leaves the group at the end of this month.