Accounting problems ravage Wickes
Wednesday 26 June 1996
Wickes shares were suspended at 69p compared with Monday's 109p close. However, after-hours trades on Monday of 159,000 shares at 80p are expected to prompt a Stock Exchange enquiry.
The accounting errors will place considerable pressure on Henry Sweetbaum, Wickes chairman and chief executive who earned pounds 1.2m last year including a pounds 750,000 long-term bonus. Mr Sweetbaum had been expected to step down from the chief executive position next year. That move was now likely to be accelerated, some analysts said.
Mr Sweetbaum, who only returned from Russia earlier this week, was said to be "devastated" by the crisis. After the collapse of its share price Wickes will now be a takeover target. Analysts see it as a fundamentally sound business that might attract the attention of Kingfisher, which controls the B&Q chain or a builders merchant such as Graham. At yesterday's price, Wickes is valued at pounds 260m.
Though full details of the accounting problems have yet to emerge, they relate to the way the company has been accounting for supplier discounts and contributions towards in-store promotions. It is thought that long- term suppliers to Wickes give the company discounts on goods supplied, assuming Wickes will generate a certain volume of sales.
If those sales fail to materialise and the discounts are later rescinded, the group's profits margins could be affected. The practice of booking supplier discounts as profits is not uncommon but questions remain unanswered on Wickes' timing of the bookings.
A similar problem emerged earlier at a Wickes subsidiary in Europe and some analysts have been critical about the company's accounting practices.
"One might have expected Arthur Andersen [the company's auditors] to have looked carefully at the UK accounts after the situation in Europe," one analyst said.
The company will conduct an immediate investigation to discover the scale of the problem. There are no current plans to bring in outsiders to probe the accounting errors. A spokesman said: "There's no fraud. No cash has gone missing and there has been no personal gain. The stock and the cash position remain unchanged. It's is really about the timing of the way these discounts were booked."
Wickes said it was unlikely that Mr Sweetbaum might have to repay all or part of his recent long-term bonus payments even though were linked to profits as well as share price performance.
Last year, Mr Sweetbaum's pounds 750,000 bonus took his total pay to pounds 1.2m making him one of the highest earners on the high street. The previous year he earned pounds 1.1m including a long-term bonus of pounds 670,000
Last year Wickes recorded a pounds 258m loss caused by pounds 269m of exceptionals relating to the sale of Hunter Timber and Builders Mate. This compared with profits of pounds 30m the previous year.
Wickes recruited a new finance director, Stuart Stradlin, a year ago from SG Warburg. He replaced Trefor Llewellyn, who is now at Caradon, the building materials group. Wickes shares had been hit by a profits warning at the company's annual meeting in April when it said profits would fall significantly below those of the previous year due to a difficult first quarter an poor winter weather.
Prior to this, Wickes had been one of the most highly regarded companies in the difficult DIY sector. It appeared to have avoided the worst ravages of the recession by targeting the professional builder rather than the DIY enthusiast.
The company's supporters had been touting the shares as a good recovery play that would benefit from any upturn in the housing market.
Diving in at the deep end is no excuse for shirking the style stakes
- 2 Why I'm on the brink of burning my Israeli passport
- 4 War is war: Why I stand with Israel
- 5 Blackest is the new black: Scientists have developed a material so dark that you can't see it...
Ian Thorpe gay: Olympic swimmer comes out in Parkinson interview
Stephen Fry ‘criticises Operation Yewtree in dinner party rant’ calling for tougher laws to deter false sex abuse allegations
Israel-Gaza conflict: ‘Sderot cinema’ image shows Israelis with popcorn and chairs 'cheering as missiles strike Palestinian targets'
Israel-Gaza conflict: Israeli air strike destroys home for the disabled killing two women residents
Israel-Gaza conflict: Israeli PM says conflict may 'continue for a long time' as hundreds of Palestinians flee their homes
Sustained immigration has not harmed Britons' employment, say government advisers
War is war: Why I stand with Israel
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Australia facing international condemnation after turning around Sri Lankans at sea
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
iJobs Money & Business
£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...
£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...
£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...
£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...