FRAUD ATTACK HITS SILVER CHEF HARD
Written on the 18 November 2016 by Lin Evlin
BRISBANE-based Silver Chef Limited (ASX: SIV) has become the victim of a serious fraud involving dodgy customers working with fraudulent GoGetta equipment vendors which has forced the company to downgrade its earnings forecast.
The company says that the circumstances giving rise to the fraud attack is "complex" and that it involves "false identity information used by fraudulent customers and equipment vendors across a number of low dollar value contracts".Silver Chef is currently looking at all options to recoup its losses but will provide for a once off after-tax impairment charge of $2.2 million in its 31 December 2016 financial records.
Silver Chef acknowledged that cybercrime is on the increase and poses a significant challenge to its business as well as the financial services sector as a whole.
"Silver Chef, similar to other financial services companies, operates in an environment where it must constantly improve its systems and processes to guard against the risk of credit application fraud," says the company."During Silver Chef's long history, it has periodically experienced incidences of fraud, but nothing on the scale or complexity of (this) fraud event."
As a result of these developments, the company is implementing various actions to address the risk.This includes the accelerated rollout of third party identity verification software, vendor re-accreditation as well as a re-evaluation of whether or not to purchase cybercrime insurance, which Silver Chef notes is very expensive.
The rental equipment specialist revised its earnings after tax for the six months to 31 December to $4 - $5 million. This is significantly down from its actual earnings after tax of $10.3 million in the same period last financial year.
The company says the dramatic fall is due to bad debts and impairments flowing from the fraud incident as well as changes in overheads such as salaries and marketing costs.The company has also reduced its FY17 earnings expectations to $21 - $23 million after tax, down from its previous prediction of $23 to $25 million.
The company's shares are trading at $9.80 as at 11 am AEST, a fall of 11.5 per cent from yesterday.