Shares in recruitment and training firm Staffline (STAF:AIM) drop 6% to 154p on Monday after it announces that auditors PricewaterhouseCoopers LLC (PcW) have resigned from 1 August.
Part of the reason for PwC’s decision is that Staffline is launching a competitive tender process for the position of auditor. However it also says that ‘matters connected with (the) resignation that need to be brought to the attention of the company’s members or creditors are included within PwC’s audit report on pages 62-70 of the annual report 2018’.
That section of the annual report deals with the auditors’ report, banking covenants, exceptional costs and the company’s ability to continue as a going concern.
PwC makes it clear in its comments in the annual report that Staffline ‘is reliant on the ongoing support of its lenders’ and their willingness to make funds available. It also says that there exists ‘a material uncertainty which may cast significant doubt about the group and company’s ability to continue as a going concern’.
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Staffline’s troubles began in January of this year when PwC received an email from an anonymous third party ‘raising concerns regarding certain of the group’s practices, accounting and disclosures’ which caused it to delay publishing its results.
Specifically, concern was raised around certain customer disputes, the timing of recognition of VAT liabilities, compliance with the National Minimum Wage (NMW) regulations and ‘various adjustments and balance sheet releases’.
As a result of its investigations PwC found no material liabilities or adjustments other than in relation to non-compliance with NMW regulations, therefore there were no material changes to the 2017 or 2018 accounts.
Staffline took an exceptional cost of £15.1m against last year’s earnings to provision for its non-compliance with the NMW.
However PwC cautioned in the annual report that there is ‘a significant amount of uncertainty regarding the valuation and timing of payment of this liability’ and a risk that it could be ‘materially different’.
