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MJ Hudson Group PLC on Monday said its annual results are expected to be below guidance due to auditing uncertainties.
Shares in the asset-management consulting company fell 30% to 16.55 pence each in London on Monday morning.
Following feedback from EY LLP, MJ Hudson is in discussions with its auditors about the treatment of revenue recognition on a major contract alongside certain costs included in its full year adjusted earnings before interest, taxation, depreciation and amortisation.
The consequence, MJ Hudson said, is that ‘the company is unlikely to be in a position to meet prior guidance.’
In July, the company said it expected adjusted EBITDA to be slightly more than £8.3 million for the financial year ended June 30. This was reiterated in August.
The auditing adjustment relates to the treatment under International Financial Reporting Standards of £1.3 million of revenue deriving from a single, multi-year contract with a public sector body.
The time taken to assess the revenue means that it can no longer be recognised in the 2022 financial year, reducing both adjusted EBITDA and profit by an equal amount.
The company noted that it ‘should improve revenue and profits in the current and future years instead.’
The other potential adjustments relate to the capitalisation of IT development costs after a significant period of internal investment as well as the level of allocated costs for management time in mergers & acquisition fundraising. The company remains in ‘close discussion’ on both these issues with its auditors.
Current trading, MJ Hudson said, is encouraging. The company's key ‘transformative growth opportunities’ in environmental, social & corporate governance, and sustainability and the ManCo businesses in Ireland and Luxembourg are continuing their strong gains from the 2022 financial year.
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