Farnell finds Danish flaw
Farnell paid the US conglomerate ITT pounds 46.2m for Multicomponents, a Continental components supplier. But during an audit of the business Farnell found that profits in a Danish subsidiary were overstated by pounds 750,000.
Howard Poulson, Farnell's chief executive, said yesterday: 'This was a case of misrepresentation rather than fraud. No money went out of the business.'
He said the problem arose when an employee began massaging figures to meet budgeted goals. Mr Poulson said a bank account was set up from which the employee borrowed money to boost profits.
Under the terms of the sale agreement, ITT was responsible for all Multicomponents debts and has taken on the dollars 7m ( pounds 4.6m) accrued in Denmark. Mr Poulson said the employee had resigned and no further action was envisaged. The initially agreed price of dollars 70m was reduced to dollars 58.5m taking account of all matters arising from the audit.
Farnell also published much- improved figures for the year to 30 January. Helped by a two- month contribution from Multicomponents, sales increased by 26 per cent to pounds 320m and pre-tax profits jumped 36 per cent to pounds 49.4m. Tressan MacCarthy, an analyst with the stockbroker Panmure Gordon, predicts pre-tax profits of pounds 59.5m in the current year.
Underlying earnings per share - ignoring a one-off gain in last year's results - advanced 42 per cent to 24.4p.
Mr Poulson said the higher profits were earned as Farnell's underperforming manufacturing businesses were reorganised. He said the company also benefited from increased activity in the UK economy.
The dividend was increased by 19 per cent to 7.4p.
Emergency landing at Heathrow sparks further controversy over London airport capacity
Unrest may spread across Europe, warns Red Cross chief
French government seeks to ban extreme right-wing group
BNP and EDL accused of attempt to fuel racial hatred after Woolwich terror attack
You want to get an Eton scholarship? All you need to do is answer four (not so simple) questions
- 1 What, let gays get married? We must be bonkers
- 2 Rocky Horror star Tim Curry 'suffers major stroke'
- 3 Exclusive: How MI5 blackmails British Muslims
- 4 Lord of the Sings: Sir Christopher Lee, 91, to release heavy metal album
- 5 Exclusive: Woolwich killings suspect Michael Adebolajo was inspired by cleric banned from UK after urging followers to behead enemies of Islam
BMF is the UK’s biggest and best loved outdoor fitness classes
Find out what The Independent's resident travel expert has to say about one of the most beautiful small cities in the world
Nook is donating eReaders to volunteers at high-need schools and participating in exclusive events throughout the campaign.
Get the latest on The Evening Standard's campaign to get London's children reading.
Win anything from gadgets to five-star holidays on our competitions and offers page.