Allied Carpets shares plunged 29 per cent to a new low of 53p on their return from suspension as the company revealed that the early booking of carpet sales had been practised in almost all its 258 stores without the knowledge of the board.
As analysts said the group was now vulnerable to a bid, Allied's directors said they would be considering the position of all its advisers that brought the company to the stock market two years ago at a price of 215p per share. Particular focus is likely to be placed on the role of Arthur Andersen, the group's auditors, which failed to uncover the problem.
The company laid the blame squarely on Steve Barber, its senior operations director who instigated the scheme. He directed store managers to book sales when orders had been placed and the money taken rather than as the carpets were fitted, as was company policy. The effect was to drag forward sales which would otherwise have fallen into the subsequent accounting period.
Though Allied said there was "no evidence of personal financial gain", the managing director, Ray Nethercott, conceded that the group's aggressive culture of driving branches to achieve set targets could have been a factor. "We have to look at a culture that led people to this kind of action," he said.
Two directors have resigned over the issue, it was announced last week. David Pout, finance director, receives a payoff of pounds 221,000, although he had no knowledge of the problem. Mr Barber resigned after being suspended due to his role in the affair. However, analysts questioned the justification of his pounds 156,000 settlement.
Mr Nethercott, who said he was "gutted" by the discovery, said he had considered offering his resignation but had been persuaded not to by the board.
Julian Lee, the chairman, added that the board now considered the matter closed and no action would be taken against any employees.
Allied Carpets' interim results, announced yesterday, showed a sharp fall in profits from pounds 16.7m to pounds 11.2m, including a pounds 3m charge to cover the accounting irregularities. Like-for-like sales fell by 4 per cent and are still down by 1 per cent in current trading.Reuse content