Troubled Findel expects profits fall

The Burley-in-Wharfedale company is reviewing a number of accounting entries in the division which appear not to be properly substantiated.

Yesterday the group said benchmark pre-tax profits for the year to April 2 would be lower than expected at between 16m and 17.5m. The group's house broker had previously pencilled in profits of 20m.

The educational supplies division has been hit by a decline in sales in a difficult market environment and a more prudent approach to

accounting following the discovery of the errors last month.

The education arm struggled with sales down 12 per cent in the 39 weeks to the start of January, hit by falling export and project sales. School closures due to the snow storms also affected sales after 8,000 schools closed across the UK.

The division has also suffered as teachers are being asked to keep some of their budgets back for the following year. The uncertainty caused by the General Election has also led to reduced spending.

But home shopping sales have held up well thanks to new clothing ranges. Home shopping default levels have also improved following tighter credit management.

In the year to April 2, the group expects sales to show a one per cent improvement to 582m.

It said the trading performance of each of the home shopping –with the exception of Webb Ivory – and healthcare divisions were in line with expectations.

The benchmark profits exclude exceptional charges.

In addition to the 12m of fees arising from the group's refinancing, the results will include intangible impairment charges of approximately 61m.

They will also include 8m of onerous lease provisions in respect of properties vacated and general restructuring charges of 12m.

The group's net debt at the beginning of April was in line with expectations at 309.7m.

Errors at the education arm came to light following changes in the management of the division. The employees concerned have left the company.

The group expects the accounting errors to reduce 2009 pre-tax profits by 5m and reduce net assets by 14m.

Findel is investigating the accounting errors alongside the group's auditor Deloitte. No official investigation has been launched yet.

The group said it would provide further details when it announces its preliminary results for the year to April 2.

Earlier this year Findel reported a fall in underlying sales, but said its turnaround plan is gathering pace and it ison course to make savings of 25m.

Sales at sports home shopping brand Kitbag remain strong.

Kitbag, which is Europe's leading online sports retailer, operates official online stores for Manchester United, Chelsea, Real Madrid, Barcelona, Everton, the English FA, British Lions, Formula 1, Wimbledon and the Ryder Cup.

Following refinancing, the Kitbag home shopping business is no longer up for sale.

Chairman went after 25 years

Earlier this month Findel parted company with chairman Keith Chapman, who spent more than a quarter of century with the business.

Findel said Mr Chapman, who joined the board in 1984, had decided to stand down as executive chairman with immediate effect.

No reason was given for Mr Chapman's sudden departure, but analysts said a change of management was vital for investors to regain confidence in the company.