Xchanging CEO quits amid accounting concernsby
Company founder David Andrews is to step down from the Xchanging board with immediate effect amid analyst concerns over "unnecessarily aggressive" accounting practices.
The chief executive resignation follows an operating profit warning that the company would miss analysts’ expectations resulting in its share price falling from 60½p to 56½p.
In a trading update Xchanging warned that underlying operating profits in 2011 will be "below the lower end" of analyst expectations of £55.5m to £80.2m.
Matthew Earl, an analyst at Matrix, told The Telegraph: "Aggressive accounting appears to have caught up with Xchanging” and also warned that the group's decision to write down assets could trigger a breach of one of its banking covenants.
Henry Carver, an analyst at Peel Hunt, added that "bankruptcy remains a distinct possibility".
The accusations have been strongly denied by Xchanging, however, the business processer which handles procurement, accounting, HR and technology jobs, has said it will refine how it accounts for contracts.
Xchanging chief financial officer Ken Lever told the Financial Times: “Within the application of accounting policies there are inevitably refinements”.
Lever, an Accounting Standards Board member, continued that the company had not changed its accounting policies, which have been audited by PwC, and referred to the unnecessarily aggressive claims as “extremely misleading”.
He continued: “There are grey areas about what you do and don’t include as assets on the balance sheet, and the refinement is for us to ensure that we are doubly sure that any asset we include has a benefit in the future.”
Andrews has agreed to stay on as senior adviser to executive chairman Nigel Rich to support the company's business development initiatives.