Silver Chef chief executive Damian Guivarra has laid the blame for a fraud attack that sparked a write-down and a plunge in the lender's shares on cyber criminals.
The Brisbane-based company, which provides equipment funding to small to medium sized businesses predominantly in the hospitality and fitness sectors, revealed on Friday that a fraud involving fake customers and equipment vendors would impact earnings.
"What makes this unique is financial services fraud and cyber crime," Mr Guivarra told AFR Weekend. "This was a coordinated sophisticated attack."
The fraud came in the form of about 60 small contracts originating from Victoria and NSW, with an average of less than $65,000 per contact. The crime involved someone applying with a fraudulent identity and using a fake vendor.
Silver Chef has two operating segments: Hospitality and GoGetta. Fraudulent customers and equipment vendors had targeted the GoGetta division, which provides equipment rental finance to other industries outside hospitality such as fitness and agriculture.
The fraud was targeted to financing for fitness equipment and believed to be over a three-month period. Silver Chef's collections department first identified multiple payments in arrears two weeks ago, and alerted management. At first the irregularities weren't picked up because they were linked to a long-time equipment broking partner, who is not involved in the fraud.
The stock tumbled as much as 18 per cent following the news, but finished the session down 10 per cent, or $1.11 to $9.96. Silver Chef founder and executive chairman Allan English is the group's biggest shareholder, and suffered nearly $10 million in paper losses in the rout.
Mr Guivarra – who was appointed just two weeks ago – said the business was achieving its acquisition targets and performing in line with expectations in the first quarter, despite the setback.
"We have got confidence we can deliver for our shareholders," he said. "Despite this event, the company is in a strong position. We are hitting our numbers for the year."
The fraud forced the company to write down the value of rental equipment to the tune of $3.3 million. Silver Chef also flagged a one-off impairment charge of $2.2 million in its half-year accounts, with statutory earnings tipped to be in the range of $4 million to $5 million after tax. Underlying earnings are expected to be in the range of $6.3 million to $7.3 million.
Full-year earnings expectations were lowered also due to fraud. Statutory earnings is now expected to be in the range of $21 million to $23 million after tax, with underlying earnings in the range of $23 million to $25 million after tax.
The group previously guided net profit after tax of $23 million to $25 million for the 2017 financial year.
