Accounting hiccup turns Danwood profit into £7.3m loss

A "fundamental tax error" has knocked office print supplier Danwood into the red.

The UK's largest independent office kit supplier posted full-year results that showed pre-tax profits up nearly 50% to £6.7m.

But an error in its tax accounting for previous years made an £11.3m dent in its figures, resulting in a net loss of £7.3m.

The mistake was revealed after the company's board commissioned a Deloitte & Touche LLP investigation, which showed that the way it had accounted for tax liabilities as far back as 2005 had erroneously accounted a liability as an asset, and not properly recognised other deferred and corporation tax liabilities in its accounts.

"The board now believes that all current activities are fully compliant with UK taxation regulation," the company said in a statement.

"The group's professional advisers are now employed on an ongoing basis as major operational changes occur to assess any impacts on the group's taxation commitments."

The firm, which supplies print and copy kit from the likes of HP, Ricoh and Konica Minolta, pushed past the £100m mark with a turnover of £103.7m in the year ending September 2006.

It now has 45,000 printers, copiers and fax machines installed throughout its customer base, up 21.6% year-on-year, serviced by 271 engineers and producing 221m prints every month.

Despite an aggressive acquisition strategy, it still retained £6.2m in cash at the end of the year.

In 2006, Danwood picked up seven companies and chairman Colin Daniels said that strategy would remain in place for 2007.

Daniels added: "The group's main strategy for growth continues to be that of the ongoing re-investment of retained earnings in the acquisition of smaller companies focussed within local markets.

"These acquisitions contribute to building our existing branch network and are an essential ingredient in developing our success in the SME marketplace."

That growth has resulted in the company building a new site at Swyndebury, near to Lincoln, which will operate as its central warehouse. The site will officially open next month.
Source: printweek