E&Y 'uncertain' on Maddox accounts

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The Independent Online
ERNST & Young, auditor of the computer servicer Maddox Group, has identified a 'fundamental uncertainty' over the valuation of pounds 15.1m worth of bonds paid to Maddox as consideration for two businesses sold earlier this year.

The audit report accompanying Maddox's report and accounts identifies worries E&Y has over a range of bonds paid to Maddox for a dollars 29.4m ( pounds 19.5m) buyout of two cables businesses that have been valued by the US securities house Whitman Heffernan at pounds 15.1m. The auditors said: 'We believe . . . there is a fundamental uncertainty surrounding the recovery in full of the stated amount.'

At yesterday's share price of 43 4 p, Maddox's market value was pounds 21.1m.

The phrase is one of a new range of comments introduced by the Accounting Standards Board that can be made by auditors if they want to highlight concerns about the accounts of a company. It is understood that if the new standard, SAS600, had not been introduced, E&Y would have been forced to qualify Maddox's accounts.

Hugo Biermann, Maddox's chairman, said that he had argued with the auditors about the inclusion of the word 'fundamental'. However, the phrase is set down in the accounting standard as the term to be used.

E&Y also insisted that Maddox remove a pounds 680,000 profit included in its preliminary results statement, which came from the sale of the two cables businesses.

It was decided that if there were any problems at the businesses, which were loss-making when Maddox sold them, Maddox might have to write back the profit, so hitting future earnings.

The item has been included in the accounts as deferred income.

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