Utilitywise (AIM:UTW) perhaps it’s the unusual accounting treatment which has come back to haunt
Shares in the AIM quoted utility cost management consultancy suffered a sharp correction today following a trading update and news of management changes. We liked this business when it first arrived on AIM and continue to admire its impressive sales mechanism. However, we became increasingly uncomfortable about its unusual, or rather unexplained, accounting treatment in terms of revenue recognition. We just wonder if today’s sell-off remains a reflection of the growing concerns surrounding this rather than simply a short term profit miss.
Revenue for the year ending July 2015 is expected to be slightly ahead of market expectations at approximately £69m, representing growth of c.42%. However, an increase in a number of costs, including costs associated with a significant increased consultant headcount in the Enterprise Division, means that the (dreaded) “EBITDA” is expected to be slightly below market expectations – how we dislike that term! The house broker has now lowered its forecasts by 12% and now estimates adjusted profit before tax for the year to July 2015 of c£15.0m. While June and July have seen record levels of new business (£16m)…