- Australian software company TechnologyOne (TNE) has denied allegations it used ‘accounting tricks’ to improve financial results
- Hong Kong firm GMT Research published a scathing report against the software company
- GMT claimed TechnologyOne misconstrued numbers to artificially improve a 13 per cent climb in revenue for the 2019 Financial Year
- TechnologyOne has called the allegations “false and misleading”, and referred the matter to the Australian Securities and Investment Commission
- Shares in TechnologyOne fell 6.41 per cent over Monday trade, closing at $8.18 each
Software company TechnologyOne (TNE) has denied allegations it has been ‘artificially improving’ its profit guidance by using ‘accounting tricks.’
Hong Kong-based firm GMT Research published a report titled ‘Growth illusion,’ making the claims against the company.
GMT Research has also published similar negative reports on other Australian companies, including CIMIC and Treasury Wine Estates.
Specifically, GMT claims TechnologyOne adjusted contract renewal dates to hide a slowdown in company growth, and increase pre-tax profits by 200 per cent.
On Monday this week, TechnologyOne Chief Executive Edward Chung, and Chairman Adrian Di Marco, addressed the claims — calling them “false and misleading.”
“GMT Research spent only 30 minutes with us, so we are very surprised 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,” a media statement read.
“TechnologyOne was at no time shown the report,” the company continued.
GMT’s allegations relate to TechnologyOne’s $76.4 million net profit for the 2019 Financial Year — a 13 per cent climb in revenue.
The GMT report claims that TechnologyOne misconstrued its data to appear more attractive under new accounting rules in 2019.
The new rules, which calls for revenue to be recognised over a contract’s period (rather than upfront), influenced GMT to believe the Australian company had adjusted key contract dates to make the fiscal year look better.
“Instead of reported growth of nine per cent and 13 per cent, we estimate underlying revenue was flat in FY18 and grew just one per cent in FY19” GMT said.
TechnologyOne is one of the country’s largest software companies, sitting on the Australian Securities Exchange’s top 200. It hosts clients such as Seven West Media.
“TechnologyOne unreservedly stands 100 per cent behind our audited accounts as being a true and accurate reflection of our business over the last 21 years,” it added.
The company under fire has referred the matter to the Australian Securities and Investment Commission.
Shares in TechnologyOne fell significantly on Monday, shaving 6.41 per cent to close at $8.18 each.