DX Group is to take a close to £2m profit hit after an accounting error relating to the treatment of a leasehold property.
In a statement, the embattled operator said that during the preparation of its final result for the year ended 30 June 2017, it had “become aware of an incorrect application of accounting policies relating to lease incentives on one of its sites”.
“Following appropriate application of the policies, there will be a non-cash impact of £1.8m to previously guided underlying profits for the year ended 30 June 2017. This does not impact prior accounting periods,” it said.
Lease incentives are sweeteners offered by landlords such as payment holidays to make deals more attractive.
Under recently changed UK accounting practice, lease incentives must be recognised the entire lease period, which in DX Group’s case is 10 years.
Traditionally they would have been calculated against a shorter period, such as up to the first rent review. The new treatment brings with it and increased tax burden (although the benefit of any incentives will in turn be felt for longer).
“The audit of the full year results remains in progress and the company continues to expect to announce its preliminary results in early Q4,” DX said.
Last month John Menzies backed out of an acquisition deal for DX Group, in part due to a poor trading update from the later.
An “exceptionally difficult year” saw chief executive Petar Cvetkovic and financial director Daljit Basi step down from their roles at DX in July.
The haulier has also faced a, now dropped, police investigation and a fraught relationship with its biggest shareholder Gatemore Capital.
Last year’s annual results saw the operator hit by £92.1m of exceptional items, resulting in a pre-tax loss of £82.7m (2015: £24.8m profit). Its interim results released in March for its 2017 financial year recorded a 75% collapse in profit.
