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Darktrace appoints E&Y to conduct review of financial controls

By Frank Prenesti

Date: Monday 20 Feb 2023

Darktrace appoints E&Y to conduct review of financial controls

(Sharecast News) - Cybersecurity firm Darktrace has appointed Ernst & Young to provide an independent third-party review of its key financial processes and controls.
The embattled company has been accused of irregular sales, marketing and accounting practices raised by US-based hedge fund Quintessential Capital Management.

"The board and management are confident that Darktrace's independently audited public company financial statements fairly represent Darktrace's financial position and results," the company said on Monday.

Earlier this month chief executive Poppy Gustafsson published a 1,200 word defence of the company she co-founded in 2013, after its share price collapsed to a record low after the publication of a highly critical 70-page report by New York-based QCM.

Shares in Darktrace plunged by a fifth after the report, before recovering some of the ground lost after the company launched a £75m share buyback to boost investor confidence.

Floated at 250p a share in April 2021, the stock has plunged in value over the past year, most recently hit after US private equity suitor Thoma Bravo pulled out of bid talks last September.

Darktrace plans to report half year results for the six months to December 31 on March 8 and "does not expect to be in a position to provide an update on the review at that time".

The company reiterated guidance given in its trading update of 11 January 2023 where it lowered annual revenue forecasts as potential customers balked at trialling the company's products amid the tougher macro-economic environment.

It expects constant currency annual recurring revenue to increase by 29-31.5% in the year to June 30, down from a previous forecast of 31-34%.

AJ Bell investment director Russ Mould said the news was "better late than never".

"While its first response ... was a boiler plate rejection, Darktrace shows it is now taking concerns over its accounting seriously by bringing in a third-party auditor to conduct a review."

"The appointment of E&Y will do little to quieten the bears in the short term but assuming said review gives Darktrace a clean bill of health it would at least allow the AI-driven cyber security firm some breathing space to re-establish some credibility with the market."

Reporting by Frank Prenesti for


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