Travel software company Datalex confirmed today that a review of its accounts found its revenue, adjusted EBITDA and profit for the half year to the end of June 2018 were misstated.
The review, carried out by PwC, also found that Datalex's recognition of services revenue for the six month period was not in line with the its accounting policy and was materially overstated.
In January, Datalex first said that its revenue and profits for the six months to the end of June may have been misstated. It said it expected to report an adjusted EBITDA loss of between $4-1m for the full year.
It said this was mainly due to a shortfall in services revenue caused by a failure by the end of the year to recover costs incurred in the delivery of the services revenue component of a significant customer deployment.
Datalex said today that the PwC review found that it incorrectly recognised about $3.5m of services revenue in its half yearly results.
It also identified about $2.9m of other services and platform revenue that was incorrectly recognised in the first half of 2018.
$0.7m of this has been determined not to be recoverable, with the balance being revenue that will be recognised in the second half of 2018 or in the 2019 financial year.
"The review identified significant accounting irregularities during the period as the underlying cause for the group's overstatement of revenues, noting material weaknesses in the internal control environment," Datalex said in a statement today.
Datalex said its accounting process in this area has been largely manual, and dependent on individual judgement, and not subject to internal audit oversight.
"There has been a failure by the group to track sufficiently operational and financial performance on the deployment and to retain sufficient supporting documentation for accounting entries," it added.
Datalex chairman Paschal Taggart said the events of recent weeks have been distressing for the shareholders, directors and for all of the company's stakeholders.
He said the review has confirmed accounting irregularities and material historical internal system and control failures.
"These are now being addressed and the board is committed to implementing all necessary improvements," he said.
"We have said that 2019 will be a year of transition but the fundamentals of the business remain strong and we remain confident in Datalex's future growth," he added.