UPDATE: Findel Begins Business Review; Trading Tough

20th Jul 2010 15:21

(Adds detail, share price, analyst comment.) By Hannah Benjamin Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. home shopping and educational supplies company Findel PLC (FDL.LN) Tuesday said it has begun a "full potential review" of its business, as it posted a widened full-year loss largely due to tough trading at its Education Supplies unit and said current trading remains tough. Findel's education business has prompted the review by Chairman David Sugden, as errors in accounting entries from this unit forced Findel to cut its pretax profit result for fiscal 2009. "Financial systems and controls across the group are being reviewed and will be strengthened," Findel said in its statement Tuesday. Risk management and internal auditing are to be of focus. In June Findel said accounting errors at its education division had underestimated its fiscal 2009 pretax loss by GBP6.4 million and net assets by GBP20.6 million. While a review by accountants KPMG found that the accounting issues only affected its education business, Sugden, who joined the firm in April, and new Chief Executive Phil Maudsley have nonetheless begun a full review of Findel's entire business, with the results to be announced in the coming months. "As this year progresses, we will implement the actions identified within the full potential review to achieve an improvement in group performance," Sugden said in the company's statement. Findel wants to complete the review as quickly as possible in order to return to profit. It made a fiscal 2010, ended April 2, pretax loss of GBP76 million, widened from a GBP57 million loss a year earlier. Revenue dipped to GBP600 million from GBP610 million in fiscal 2009. The company said current trading remains challenging, but it has "a number of profitable and cash generative businesses, with significant potential for improved performance." Last week Findel entered into a deal with its bank for two amended revolving credit facilities of GBP250 million and GBP77 million, which both terminate in 2012. It said as a result of the changes to the facilities financing costs will rise "significantly" in the current year. It didn't specify by how much. Seymour Pierce analyst Freddie George kept a "sell" rating on Findel and in a note to clients said the company's results are broadly in line with his expectations, following several downgrades over the last year. He is provisionally reducing his fiscal 2011 pretax profit forecast to GBP20 million from GBP23 million previously, which lowers his earnings per share forecast to 3 pence from 3.5 pence. He expects to make similar cuts to his fiscal 2012 forecasts. George remains concerned at the level of Findel's net debt, which at the fiscal end totaled GBP310 million. Findel continues to work with its financial advisers "to identify ways to remedy" the high level of debt. At 1348 GMT Findel's shares were trading 5 pence, or 33%, lower at 11 pence, underperforming a 0.6% fall in the Dow Jones U.K. Smaller Companies index. -By Hannah Benjamin, Dow Jones Newswires; 44-20-7842-9298; [email protected] Order free Annual Report for Findel PLC Visit http://djnweurope.ar.wilink.com/?ticker=GB0003374070 or call +44 (0)208 391 6028 (END) Dow Jones Newswires July 20, 2010 10:21 ET (14:21 GMT)