Reseller insists suitors will not have been deterred by accounting inconsistencies

The chief executive of VAR Netstore has claimed potential bidders will not be scared off by the firm’s admission of accounting inconsistencies.

Netstore is inviting bids from external parties and management as part of a review process launched last week. The Microsoft, Juniper and Check Point partner said it has already received several approaches and expects to make a recommendation to shareholders in mid-March.

However, it revealed on the same day that a recent discovery of incorrectly applied accounting policies may force it to “significantly reduce” previously stated profit figures. For the year to June 2007, Netstore banked a pre-tax profit of £3m on turnover of £37.6m.

Netstore said the errors related to cost accrual and revenue recognition, but refused to go into detail.

Graham Kingsmill, who joined Netstore as chief executive in July, claimed the revelation was unlikely to affect the valuation of potential bids.

“Netstore is a gem of a business and just has some historical legacies to sort out,” he said. “If people understand Netstore, I do not think it will have an impact.”
Kingsmill said that Netstore’s board would consider all options. “Selling part of the business is an option, but it does conflict with our OneNetstore strategy to create a unified Netstore,” he explained.

“However, if you look at the component parts of Netstore and compare them with more specialist players, be that in datacentres, security or managed services, the [valuation] multiples at which they operate are much higher. We are trading at sub-six, whereas datacentre specialists are trading in the late teens or early twenties.”
Mike Norris, chief executive of Computacenter, one of several firms linked with Netstore in the national press, said: “I can categorically say we are not interested in Netstore and never will be.”

Ettiene Greeff, director at security VAR MIS, said: “Netstore’s share price is not doing well, which is maybe why it has become an attractive acquisition target.”