Datrontech counts cost of growth plan

Distribution European staff dismissed after inaccurate reportings

Datrontech Group's acquisition strategy has been called into question after poor performance in two divisions and inaccurate reporting in another led to the dismissal of some of its Central European management team.

According to a statement by chairman Ray Way, both the general manager and financial controller of Datrontech's Polish arm have been replaced, due to 'discrepancies between the results shown in the management accounts and the true underlying position'. The discrepancies came to light following an audit in the run-up to the year-end, in which losses of nearly #2 million were discovered.

In addition, interest payments on outstanding considerations for previous Datrontech acquisitions came into effect, after they rose because higher levels of borrowing were required to pay them off.

The payments escalated to #2.5 million, from #940,000 in the year ended 31 December 1997, while Datrontech's net debt rose from #8 million to #18.1 million year-on-year. Of this figure, #6.6 million was attributed to deferred payment relating to acquisitions made before the 1998 financial year.

Datrontech will now service the debt with a #6.4 million, five-year loan from NatWest Bank. It has also secured a #23 million overdraft facility with four different banks.

In the year ended 4 January, Datrontech Group recorded a pre-tax profit of #2 million, down 67 per cent from #6.1 million the previous year. Turnover for the year stood at #248.8 million, up 13 per cent on last year's #220.5 million.

In a statement, Mark Mulford, chief executive of Datrontech, said he regretted the situation. An internal audit department has now been established to conduct checks on all units, to prevent irregularities from happening again.