Snoozebox was one of the big winners from the London Olympics, as its portable hotel solution that can provide extra room capacity within 48 hours proved a big hit. Management said as recently as the end of January that it expected revenues for the year ended 31 December to be ahead of analysts' expectations of around £5m, and that it would hit profit guidance. Trading in the new year had also started strongly, with the "Events" programme expecting to have its 520-room inventory fully deployed from March.
Then came the shock news that the accounts would be delayed and there would be a big revenue miss of some £1.2m down to around £3.78m, with an equivalent drop in profit. How could results change so much in a little over two months?
Sources close to the situation think one of the areas of contention may be around something called the recognition of third party revenue. Where Snoozebox owns the underlying asset, or bedroom in a box, it can recognise all the revenue it receives. But if they take on a contract that exceed the number of rooms they have available and have to lease the assets, or rooms, from another supplier for the duration of the event to meet demand, there is a question around whether they can recognise gross revenue or whether they have to take a smaller revenue figure, net of lease costs. If this were indeed the case it could make quite a difference to the headline number, and would go some way to explaining the abrupt forecast change. Snoozebox has described the issue as an accounting technicality and says 'some or all of the shortfall may reverse' in the current year.
This isn't the first time that chief executive Robert Breare has been at a company with accounting problems. Merchant Inns, a boutique pubs-with-rooms operator that he founded with Sir John Ritblatt, called in administrators Deloitte in October 2009, following the sacking of Mr Breare in August that year. Deloitte said the decision to place the pub operator into administration was taken following the discovery of "unknown" financial liabilities, as it was reported in the Publican's Morning Advertiser at the time. Of more concern was the production of a report by Baker Tilly in July of that year, labelled "Project Venice", which warned that Merchant Inns' financial forecasts were "simplistic" and its financial control "weak".
Snoozebox were unavailable to comment specifically on the accounting issues ahead of the results announcement, but said in a stock market announcement that with a strong pipeline of events such as the Silverstone Grand Prix and Glastonbury Festival directors remain confident of the outlook. It also announced a contract worth £3.8m to provide 170 cabins for the G8 Summit in Northern Ireland in June. But investors now have an uncomfortable wait until the results and review of trading, due by 26 April.
