Knights of Old has come out fighting after landing a major new contract and vowing to overcome a difficult period that saw it record a “substantial” operating loss of £2.7m.
The Kettering-based group’s latest accounts for the year to 31 May 2017 reveal a bruising period in which it restructured its finance team and replaced senior personnel within it.
In the strategic report to the accounts, the business describes “a material misstatement of information presented to the board during the course of the year”.
Knights of Old group director Paul Abbott told MT that the information being presented appeared positive but was actually the opposite.
“The board wasn’t made aware of this and it only became apparent when the new team investigated,” said Abbott.
“There were also some challenges in terms of certain contracts,” he said. “We had to make a decision to part company with a particular contract. It was an extension for some existing business that we won, but due to the misrepresentation it wasn’t stacking up.
"It wasn’t working for us or the client... so you have to move on but it generates some losses.”
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Abbott alluded to the fact that AE Parker, purchased in 2013, had also been a victim of this and consequently “proved quite costly to the point that we brought it to a close at the end of last year”.
This meant that despite a 1% increase in turnover to £49.9m (2016: £49.4m), the group’s operating loss for the period was £2.7m (2016: £943,881 profit).
Administrative expenses ballooned £900,000 to more than £9m as a consequence of bringing in the new team, duplication and the cost of identifying and addressing the reporting issue.
The pre-tax loss for the period was £2.9m compared with £698,192 a year ago.
With Mainland already absorbed (and AE Parker retired), Abbott sung the praises of wholly owned subsidiary Nelson Distribution, which remains a distinct company within the group, and performed well.
Actions taken since the end of the reporting period include the sale of Mainland’s Northampton site on 20 March for £3.05m, the integration of that operation into Knight’s Kettering base that "will resonate into this year", and annual cost savings of approximately £3m.
The group has the support of its bankers and landed a “significant win” this March with a £7m-a-year contract with a client in the construction and building sector.
“We have work to do but we have a good, committed team,” said Abbott.
“We have an improved balance sheet, we posted an operating profit in March, and we expect that trend to continue,” he added.
