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Danwood axes 200 after discovering 'accounting weaknesses'
Troubled print biz lost £8.5m in fiscal '12
Top brass at print consultancy the Danwood Group axed 200 staff as part of an operational review following the discovery of systemic accounting errors relating to services contracts.
The details of the job cuts were laid bare in a Companies House filing today for the Lincoln-based HP, Xerox and Canon sales biz, covering results for the year to 30 September 2012.
The office gear supplier confirmed it made an operating loss of £21m in fiscal 2012, but received income from shares in group undertakings of £15m which left it with a pre-tax loss of £6.3m.
Net losses after tax were £8.13m, compared to a net loss of £11.4m in fiscal 2011. Sales for the period came in at £208.4m, compared to £184.8m a year earlier, the filing revealed.
Danwood's exec team has completed a review of operations including "contract documentation" this month. It began the review in September 2012 when a whistle-blower blew the lid on dodgy book-keeping practices spanning fiscal 2005 to fiscal 2010.
Execs found problems in Managed Print Services contracts, treating upfront hardware revenues as sales rather than spreading them across a contract's lifespan.
The company also changed the accounting treatment for supplier rebates and leasehold property dilapidation.
This discovery forced the group to restate its numbers for the six years ending fiscal 2011, which it refiled in January this year, showing a near £17m drop in sales and £8.5m less in operating profits.
The "accounting weaknesses" (PDF) admission and subsequent review, initiated by private equity backer Bregal Capital, saw the departure of founder and chief executive Colin Daniels, who resigned in January to be replaced by Stephen Francis.
The Danwood Group then filed the termination of five directorial appointments at Companies House: those of Kevin Ingman, Ian Grundy, Jeremy Shaw, Andrew Brown and Nicholas Swindin. A whole wave of new people were then brought in to the Board by Bregal. Grundy, Shaw, Brown and group services director Swindin are still with the firm, however.
Bloodletting at Danwood was not confined to the chief, with the wider sales force also made to pay for the mistakes of the few at the top.
"The review of operations has enabled the business to reduce total headcount levels by just over 200 since the end of September 2012," the firm stated today in its Companies House filing.
According to the report, Danwood employed 1,674 people in the year ended September, up from 1,563 in fiscal '11.
Danwood had not responded to calls for additional comment at the time of writing. ®