As a result of these deficiencies, the Company advises that the previously reported profit for the year ended 30 June 2007 requires adjustments to deal with the overstatement of reported profit. The Company currently estimates that the required adjustment will result in a reduction in NPAT of between $3.5m and $4.5m.
The Company is working closely with its current auditors to finalise the necessary adjustments and to prepare the relevant corrections to its financial reports with respect to FY07.
Notwithstanding these adjustments to the FY07 financial reports, the Company:
- reconfirms that it is still on target to meet the forecast EBITA (pre share based payments) of $42m to $46m for FY08; and
- expects no material adverse impact on its future operating or financial performance arising from these circumstances.
Background
The Company recently instigated a review of the new finance system which came into operation in July 2006. This review identified accounting errors that resulted in an overstatement of the reported profit for FY07, and also highlighted deficiencies with the finance system which the Company has progressively worked to rectify. The main problem with the new finance system related to the inability of that system to reconcile sub-ledgers to the general ledger. An upgrade of the interface between the two systems was installed in March 2008. Further enhancements are being worked on as a priority and imminent improvement is expected to the functionality of the system.
Impact on prior year’s financial reports
The identified deficiencies relate primarily to the value of work in progress and debtors in certain (fixed price) projects in the consulting division as at 30 June 2007.
As a result of these errors, the current estimated correction to the financial reports for the FY07 is a reduction in NPAT of between $3.5m and $4.5m. This correction will require a restatement of the Company's financial reports for FY07, reducing reported revenues, profit, work in progress, debtors and retained earnings accordingly.
It is intended that these restatements will be reflected in the Company's financial report for FY08, rather than reissuing separate restated financial reports for FY07.
Consequences for shareholders
Notwithstanding the required adjustments to reported FY07 profit described above, and the issues with the Company's finance system, the Company reconfirms that it is still on track to meet its forecast EBITA (pre share based payments) of between $42m to $46m for FY08.
These issues will not have any adverse impact on the Company's dividend payment policy.
Furthermore, the Company does not expect any material adverse impact on its future operating or financial performance going forward. There are no issues with its existing loan arrangements under its banking facilities.
Remedial actions taken by the Company
The Company believes the deficiencies in its financial reports for the FY07 financial year were caused, in part, by problems associated with the implementation of the new finance system. Substantial progress has been made to resolve these systems issues, and the Company is continuing to work closely with its current auditors to finalise the necessary re-statements for the FY07 financial reports.
The Company is currently undertaking further steps to improve its finance system and to enhance the internal accounting capabilities in order to ensure the reliability and accuracy of the Company's future financial reports.
Contacts
For further information, please contact the Company spokesperson, Mr Roger Olds, Managing Director, via Diana Krause, Communications Manager, Coffey International Limited: (+61) 420 959 942 or (+61) 3 9473 1300, diana_krause@coffey.com
