Intertain struggles continue despite committee report

Intertain struggles continue despite committee report

Thursday, February 11, 2016 Totally Gaming
John Kennedy FitzGerald's company has sought to deal with criticism

Bingo operator Intertain said that an independent committee appointed to investigate criticisms of its business practices has backed the performance of its brands and the accuracy of its financial statements.

The owner of JackpotJoy, Vera&John and Mandalay was accused of being “fraught with numerous accounting, financial disclosure, and management/governance issues” by Spruce Point Capital Management in December 2015 and launched a committee to assess the criticisms. 

The findings of the committee, which consisted of non-management directors, as well as advisors Deloitte, Voorheis & Co and Stockwoods, has done little to please investors, with Intertain’s share price trading today (Thursday) at around CAN$8 (€5.1/$5.7), compared to almost CAN$20 last summer.

Spruce Point’s report – which caused Intertain’s shares to be suspended on the Toronto Stock Exchange in December - included concerns about a lack of KPI’s in earnings reports, debt and the “undisclosed and contentious” Management Incentive Plan under which chief executive John Kennedy FitzGerald and director Keith Laslop collect a fee equal to two per cent of each of their acquisitions.

Intertain said in a statement that the committee's review revealed “no basis for concern” with respect to any of the Jackpotjoy, Vera&John or Mandalay acquisitions or the continued performance of those businesses. Spruce Point had questioned the accuracy of earnings margins linked to JackpotJoy, as well as the veracity of its claims to being the market-leader in the UK.

In terms of financial statements, the committee “was satisfied that no changes to Intertain's previously
disclosed financial statements are required”.

The committee’s evaluation of corporate processes and controls was less positive, with “recommendations for changes and improvements in these areas”. The committee said that Intertain “should address inadequate documentation, approvals and record keeping in respect of certain payments previously made by the company that were recorded and fully expensed by it as transaction expenses in connection with its prior acquisitions”.

The company last year also began a consultation process to consider the future of the Management Incentive Plan "in light of concerns ... expressed by certain shareholders".

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