Future Integrated Telephony Plc, whose shares languish at 30.5 pence, provides a cautionary tale for all those who believe that unlimited riches lie in the deregulated telecoms market. The Coventry, UK-based company impressed the market as a company at the forefront of the merger of telephony and computer technology. Certainly revenues jumped from 1.1m pound in 1994 to 4.9m last year. Who, after all, could fail to make progress when the competition consists mainly in sleepy former state monopoly British Telecommunications Plc? But in little over a month, everything has fallen apart at the company. In May, the board said they expected to break even in the financial year to May 31. On June 3, this was amended to a prediction of a substantial loss. At the same time, it was announced that managing director Kevin Clarke, who holds around 30% of the shares, had left the company with immediate effect. A new finance director was appointed and an independent review of systems was undertaken to ensure proper recognition of income. But the board now says that, since 7th May 1998, there has continued to be deliberate incorrect income recognition. As a consequence of this the Board now considers that in the interim statement for the six months ended 30th November 1997 turnover was overstated and trading losses were understated in respect of turnover which should have properly been recognized in the second half of the year. Not only were revenues misstated. Directors also identified certain contract costs which have not been fully provided. In consequence, they expect the loss for the current year to be between 0.9m pounds to 1.3m. So far, so bad. But in its May announcement the company boasted that it has an exclusive agreement with Energis, which operates a fiber optic backbone established by the former national electricity grid, for it to carry a large volume of local traffic via the Energis network. Now the company admits the formal contract with Energis has not yet been signed although this is expected in the next week. And it will not be the only company able to pass local traffic via the Energis network but expects to become a recognized channel partner of Energis. So revenues were overstated, costs understated, there’s no exclusive Energis contract, no managing director and a whacking great loss in prospect. Shares, floated at 115 pence in 1996 and which topped the 150 pence market the following year, currently finds few admirers at 30.5 pence. The one asset is a solid base of medium sized customers who, like investors, must be hoping someone straightens out the whole sorry mess as soon as possible.
