LONDON (Reuters) - Galliford Try (GFRD.L) overstated its net assets by 94 million pounds in 2018 and its accounts have been restated, Britain’s audit watchdog said on Thursday after its latest inquiry into the construction industry.
Shares in Galliford, which also reported wider first-half 2019 losses on Thursday, were down 15% at 126.24 pence by 0958 GMT.
The Financial Reporting Council (FRC) said it had raised a number of issues with the company, including the recognition of revenue on construction contracts, and the classification of certain cash flows in its cash flow statement.
“The FRC found that Galliford Try overstated its revenue in 2018, which the company has now corrected,” said David Rule, the FRC’s executive director of supervision.
“We will continue to hold companies to account when they do not comply with the requirements of relevant financial reporting standards,” Rule said.
Galliford said it has worked closely with the FRC and that the watchdog had concluded its review as a result of action taken by the company. The FRC confirmed its inquiries had concluded after corrective action by the group.
Its Chief Executive Bill Hocking told reporters the restatement related to a “technical point” regarding how much revenue to recognise from a loss-making contract in Aberdeen.
The FRC, which spotted the discrepancies during routine spot checks, said the company should not have recognised an 80 million pound claim recoverable from the customer for a Scottish road contract.
The total effect of all the errors identified was to overstate net assets by 94.3 million pounds at June 30, 2018, the FRC said.
In its annual report Galliford said BDO will replace PwC as auditor. PwC could not be immediately reached for comment.
Galliford, which recently sold its residential units to Vistry Group (VTYV.L), formerly known as Bovis Homes, said on Thursday its pre-exceptional pretax loss widened to 5.6 million pounds in the first half from 2.2 million pounds a year before.
The group, which helped to redevelop the Wimbledon tennis venue, launched a review of its construction business last year as part of its turnaround plan.
That led to the loss of 350 jobs as it focused on its core strengths in building, water and highways.
The FRC is also scrutinising contracts at builder Carillion, which collapsed in 2018. The watchdog expects an outcome from its investigation into Carillion’s auditor KPMG around year-end.
Builder Kier has also amended elements of past accounts after intervention by the FRC.
Reporting by Huw Jones; Editing by Sinead Cruise, Mark Potter and Jan Harvey