Hat Pin duo quit over 'accounting errors'

The recruitment consultancy firm Hat Pin suspended trading in its shares after uncovering accounting errors at one of its divisions.

The errors forced Hat Pin to unveil its second profits warning since the start of the year, and the company said yesterday that the chief executive, Angela Campbell-Noe, and the finance director, Paul Billett, who both joined the company just over two years ago, would resign on the day that preliminary results are announced. Though no date has been set yet, this is usually in March.

Three weeks ago, the AIM-listed Hat Pin warned that full-year profits would be 25 per cent lower than market expectations, sending its shares down 40 per cent. The company blamed a poor performance at its media recruitment firm, The Talent Business. The firm was sold a week later to its former chief executive, Gary Stolkin, for £1.5m.

Hat Pin told shareholders that the proceeds would be used to reduce the company's debts and an audit was launched into the company's accounts.

Yesterday, the company said that since the first profits warning "various accounting errors have come to light in one subsidiary, which are likely to cause the 2007 results to be materially worse than previously indicated". It added: "There is no suggestion or evidence of fraud, or wilful deceit."

It is believed the statement relates to the group's Akami Financial Markets head-hunting arm. Its non-executive chairman, Terry Hitchcock, has assumed the role of executive chairman with immediate effect and Hat Pin said it is in talks with its principal bank lender, Kaupthing Singer & Friedlander, regarding the group's ongoing facilities.

"The bank has indicated that it wishes to continue to provide facilities, subject to the audit providing satisfactory answers to certain questions that have been raised by the bank," it said.

Hat Pin added that share trading is expected to start again the day of the preliminary results announcement. Shares were suspended at 34.25p yesterday, after a peak of 83p last spring.

The firm's woes are partly attributable to the downturn in the financial recruitment market. Hat Pin also operates in the public sector jobs market through its subsidy Saxton Bampfylde Hever, and the general industrial sector through Executive Access.

The company said that it believes the "underlying trading position of its three operating businesses is still fundamentally sound".