An accounting issue is escalating at baseball agent and sports marketing business TLA Worldwide (TLA:AIM) with the shares down 23.4% to 18p.

Finance director Donald Malter has resigned as the firm reveals problems first identified in April with the company’s 2016 accounts which will result in an earnings adjustment of $6.8m.

WHAT IS THE HIT TO EARNINGS?

Taking account of these adjustments, headline earnings for 2016 are expected to total $4.8m, which to place in context compares with $9m in the latest set of estimates from house broker Numis.

Earnings for 2015 will also be restated with a downwards adjustment of $1.9m.

The full numbers will be published on 30 June but the company has already confirmed it will not pay a full year dividend.

The only positive is that these adjustments do not have any impact on cash flow and the net debt position will remain at $21.8m although the company is in discussions with its lenders over covenants due to the hit to earnings, reassuring that they ‘remain supportive’.

TALE OF WOE

External appointment Bill Armstrong is set to take over as interim chief financial officer. The debacle is embarrassing for the company and for Shares given we flagged the stock in November 2016.

We felt the company was worth a closer look as baseball representation, in theory at least, is an attractive business thanks to the long-term guaranteed income from commission on players’ contracts and baseball’s enduring appeal in the US.

Our interest in the story followed a failed takeover by rival Atlantic Alliance Partnership at 65p per share – more than three-and-a-half times the current share price. TLA floated on AIM in December 2011 at 20p.


Issue Date: 19 Jun 2017