Construction group Galliford Try has wrongly inflated its net assets by more than £94 million after a series of accounting errors uncovered by Britain’s audit watchdog.
An investigation by the Financial Reporting Council (FRC) found the firm overstated its revenues from the Aberdeen bypass project by £80 million, which meant pre-tax profits were pumped up in 2016/17 and 2017/18.
Shares in Galliford also plunged 12% as half-year results showed it pushed back a key profit target.
We will continue to hold companies to account when they do not comply with the requirements of relevant financial reporting standardsDavid Rule, FRC
The FRC said it uncovered a raft of accounting errors, some dating back to 2015/16, as part of its probe.
“The total effect of all the errors identified was to overstate net assets by £94.3 million at June 30 2018,” according to the FRC.
But it said Galliford had since corrected its mistakes.
David Rule, executive director of supervision at the FRC, said: “The FRC found that Galliford Try overstated its revenue in 2018, which the company has now corrected.
“We will continue to hold companies to account when they do not comply with the requirements of relevant financial reporting standards.”
This has been a period of significant change with the successful strategic disposal of the group's housebuilding divisions transforming Galliford Try into a well-capitalised, UK construction-focused businessBill Hocking, chief executive of Galliford
The accounting errors came to light as Galliford revealed it was pushing back its target for a 2% divisional profit margin to 2022.
It swung to a statutory pre-tax profit of £16.6 million in the six months to December 31 from losses of £24.7 million a year earlier.
But on an underlying basis for continuing operations, it slumped to a £5.6 million pre-tax loss from profits of £2.2 million a year ago.
It comes after the sale of its housing arm to Bovis Homes, which has since been renamed Vistry Group, late last year.
The move left Galliford with its building division, which represents about two-thirds of earnings and focuses on the education, defence and health sectors.
Its infrastructure arm, which accounts for the final third, works on highways and environmental projects.
Galliford said its order book stood at £3.2 billion in the first half.
Bill Hocking, chief executive of Galliford, said: “This has been a period of significant change with the successful strategic disposal of the group’s housebuilding divisions transforming Galliford Try into a well-capitalised, UK construction-focused business.”