Investor's Champion Blog
Provides refreshingly forthright, independent comment on predominantly small cap companies and specialist investment funds. Informed opinion, based on first-hand research, but pulls no punches in exposing management weaknesses.

ACERTEC - overstatement of stock, will we find out more tomorrow?

Overstatement of stock and the shares tank 12%
Is there worse to come or does this represent a great buying opportunity - we should find out more tomorrow

Acertec announced back on 5th sept that it had discovered a discrepancy in the accounting for stock at one of its BRC operations (that’s concrete products) in the UK. Based on the information that is currently available, the Company estimates that there is an overstatement of stock amounting to approximately £1.5 million, which has existed for more than a year. A further announcement will be made when additional information becomes available.

Turnover for the BRC division for the last financial year (including joint ventures) was £183.9 million-so £1.5m doesn’t sound that much of big deal. Total operating profit, excluding goodwill amortisation was £9.2 million.

Following the share price fall the shares were trading at just over 6.5x 2007 earnings estimates and 5.9x earnings estimates for 2008. The yield is now a well covered 7%. The group’s BRC division appears to be doing very nicely (at least that was before they discovered they were missing £1.5m of iron bar!) and the Stadco car body business is well entrenched with the ‘good bits’ of Ford.

On 19th July John Sword, the Chief Exec, thought the shares looked such good value that he purchased a further 150,000 shares at a price of 167.83p

So all in all, the shares seem to look quite cheap.
However, could this week’s stock problem be the precursor of more bad news to come?

The interims could prove interesting reading


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