Extension gives RSM Tenon breathing space

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TROUBLED accountancy firm RSM Tenon won itself some time by extending its banking facilities until October and promising deep cost cuts.

The group unveiled plans to slash 10 per cent of its workforce or about 300 jobs. It plans to “rationalise” offices, starting by merging its Wakefield office into its Leeds site, under a £14m cost-cutting drive.

RSM slumped to pre-tax losses of £70.6m for the six months to the end of December, versus a £1.9m deficit a year earlier.

The accountancy firm also revealed a £12.1m black hole in its accounts for 2010 and 2011, which it blamed on “significant errors and a change in accounting policy”.

But new chief executive Chris Merry said RSM now has “a clear action plan to drive near term profitability and cash generation”.

“Our underlying business performance has been resilient in the face of a tough market environment,” he said. “The majority of our revenues and cash generation arise in the second half of our financial year and this trend is set to continue. RSM Tenon is fundamentally a sound business. It now has a solid base to build for the future and to deliver an appropriate return for shareholders.”

Mr Merry joined the business advisory firm last month, replacing Yorkshire-raised chief executive Andy Raynor. Chairman Bob Morton also resigned in January as it warned over profits for the third time in three months.

New chairman Adrian Martin said: “Significant progress has been made since our January 23 trading update. The financial review has been completed, the prior year accounts restated, funding is in place to October and a new CEO has been appointed. Our executive team is fully focused on restoring the business to profitability.”

Revenues were nine per cent lower at £107.8m. The losses included a £60.7m goodwill writedown.

RSM, which last employed about 200 staff in Yorkshire, is beginning the “consolidation” of its 46 offices by closing its Wakefield site. The firm did not say how many jobs will go.

The UK’s seventh-biggest accountancy firm expects to complete its cost cuts by June.

It also has offices in Harrogate, Hull, and Sheffield. It grew in the region by acquiring RSM Bentley Jennison in late 2009.

The company said yesterday: “We have concluded that the restructuring, cost savings and efficiency measures which followed those acquisitions were not sufficiently comprehensive and did not take full advantage of the potential synergies.”

RSM, a major adviser to entrepreneurs and small to medium-sized enterprises (SMEs), blamed the £12.1m charge to 2011 and 2010 accounts on “a limited number of significant errors and areas where accounting policies had not been applied consistently”. These included miscalculated bank arrangement fees, staff bonuses, contracts, leases, revenues and commission for leads.

The firm said it is now “confident of the group’s ability to implement robust and accurate financial reporting controls and procedures for the future”.

RSM’s life-saving agreement with Lloyds Banking Group gives it committed facilities of £88m until the end of October.

Gloomy view of analysts

SHARES in RSM Tenon gained 16 per cent or 1.02p to close at 7.27p.

But Shore Capital analyst Owen Jones said there are few catalysts to lift its shares.

“With no positive catalysts in the short term, in our view, and with losses announced today of bigger than we had anticipated, we reiterate our sell recommendation,” he said.

“Bank facilities have been extended to October 2012, from July 2012, which will give the company some breathing room, in our view.

“However, revenue for the half fell by 9.3 per cent to £107.8m.”