Tuesday, 14 July 2020 05:59

TechnologyOne denies allegations it inflated profits in audited results Featured

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TechnologyOne denies allegations it inflated profits in audited results Image by Free-Photos from Pixabay

Australian enterprise software firm TechnologyOne has denied allegations made by Hong Kong-based GMT Research that it inflated its profits in its audited results.

The company's stock fell 6.4% on Monday following the allegations, which were published in the Australian Financial Review on Monday, closing at $8.18. It has forecast a rise in after-tax profit ranging from 8% to 12% after returning a 6% increase in profit to $19.1 million for the six months to 31 March.

In an announcement to the ASX on Monday, the Brisbane-based TechnologyOne said GMT Research had only spent half an hour with its personnel.

In the report, GMT accused TechnologyOne of inflating its pre-tax profit by 200%. Apart from alleging that the tech firm had changed contract renewal dates to hide a drop in revenue and profits, GMT also claimed that TechnologyOne had upped the rate of capitalisation on software development costs last year.

"... we are very surprised [that] with their limited knowledge that they would have published a report in the first place, and more importantly without verifying the accuracy of the report with us. TechnologyOne was at no time shown the report," the technology firm said in the statement which was released by its chief executive Ed Chung and chairman Adrian Di Marco.

"TechnologyOne confirms that the claims made in the AFR by GMT Research are false and misleading. TechnologyOne unreservedly stands 100% behind our audited accounts as being a true and accurate reflection of our business over the last 21 years.

"TechnologyOne will refer this matter to [the] Australian Securities and Investment Commission. TechnologyOne has provided Guidance for the full year and remains committed to this guidance."

The AFR quoted Morningstar analyst Gareth James as claiming the move to increase capitalisation was common knowledge and analysts, including himself, had already quizzed TechnologyOne about it.

James said he had been surprised when TechnologyOne changed its policy. "[When the accounting standards changed] I said to Ed Chung 'why are you bothering offsetting the difference with the capitalisation?' The requirement they had to change revenue recognition is irrelevant, because it doesn't change cash in the door. Any serious investor would say they didn't care."


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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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