Lyca Mobile UK Auditor PKF Littlejohn Refuses to Sign Off Accounts

News reports have indicated that the auditor – PKF Littlejohn – for mobile network operator Lyca Mobile, which is a virtual operator (MVNO) on EE’s platform in the UK, were unable to sign off the company’s most recent accounts (to December 2022) due to various concerns, such as the recoverability of a due balance of nearly £150m.

According to Lyca’s latest company accounts (here), which were published at the start of this month, the operator had 1.7 million subscribers at the end of 2022, a churn rate of 9% and revenues of £145m (up from £138m). But they also made a loss after tax of £25.1m, which compares with a profit of £1.8m in 2021, and they’re still in dispute with HMRC over an issue related to the treatment of Value Added Tax (a provision of £99m has been recorded to reflect their current best estimate of potential exposure).

However, the accounts also included an independent auditor’s report (page 11) from PKF Littlejohn, which saw the auditor state that it did “not express an opinion on the accompanying financial statements” and that’s partly because they had “not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion” of those statements.

The core issue seems to concern the recoverability of around £150m, which includes a balance of “£105,979,000 due from related parties“, as well as “£41,704,000 due from directors and parties associated with directors” and the “completeness and accuracy of the deferred income balance of £10,870,000” related to creditors. The Telegraph (paywall) has a bit more detail on these items.

Generally, it’s worth noting that PKF Littlejohn expressed some concerns around the statements in Lyca Mobile UK’s accounts in the previous year, too (here). But despite all this, the Directors’ report in the filing does still say they: “believe the company will be able to continue to operate and meet its obligations as they fall due for the foreseeable future.”

A spokesperson for Lyca Mobile said:

“Lyca has a number of successful private businesses and entities under common control, but it is not a ‘group’. There is no obligation to produce consolidated group accounts, nor to have these audited. As a result, no single auditor has a remit to audit or review related party transactions, which is noted by the auditor of Lycamobile UK as a reason for the disclaimer in the audit report.”

The development follows last year’s cyberattack (here), recent problems with 5G connectivity (here) and the conviction of Lyca’s French entities for money laundering and VAT fraud. The hope is that Lyca will be able to find a way through all the recent bumps, but then we’ve still got the outcome of the Information Commissioner’s Office (ICO) investigation into last year’s hack to come.

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