Tool rental group Speedy Hire's chief executive, Steve Corcoran, has resigned after the discovery of a £5m black hole in the accounts at the company's Dubai-based international division.
In a statement, Speedy Hire said that information 'has very recently emerged' that 'certain control processes within the international division have been repeatedly and deliberately circumvented'. This has resulted in the mis-statement of a number of accounting balances over recent accounting periods, with a total impact of between £4.5m and £5m.
Speedy Hire's external auditors, KPMG, were reappointed at the company's AGM held in July 2012. The firm earned a fee of £300k, which included services for the audit of financial statements, audit of financial statements of subsidiaries and other corporate finance services.
Speedy Hire's international division accounts for approximately 5% of total group revenue and the company says the issues identified are believed to affect a limited number of smaller contracts.
There is likely to be a £3m reduction in the group's profit before tax for the current financial year to 31 March 2014, with the balance resulting in a restatement of the reported financial performance for FY 2012 and FY 2013.
The accounting irregularities were discovered just weeks after the arrival of new management for the international arm.
The division's finance director has now been suspended and other senior divisional management are the subject of further investigation.
Addleshaw Goddard have been engaged to conduct an independent legal investigation and forensic accountants are in the process of being appointed, Speedy Hire said.
Speedy Hire said its UK businesses, which represented 95% of group revenue and 96% of group EBITA in the year ended 31 March 2013 are unaffected by these issues.
It remains in compliance with the financial covenants under its banking facilities but said that 'these circumstances have resulted in a breach of certain other terms' and it is engaged in a 'constructive dialogue' with its lenders.
