Kingfisher among potential predators eyeing Wickes

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The Independent Online
Leading DIY retailers, including Kingfisher, are taking a close look at troubled Wickes, and might consider bids for the company once the extent of the profits overstatement scam that emerged last week is confirmed. Wickes hopes to report within two weeks.

"Of course we are taking an interest, although it is too early to expect anything dramatic," a source at Kingfisher, which owns the B&Q chain, said yesterday. Despite the problems, "Wickes are quite highly thought of, and are an excellent brand".

Another DIY industry source added: "Wickes would be a welcome addition to many companies in the sector. They have a reasonable market share, and good quality shops."

But Boots, owner of AG Stanley and Do It All, is unlikely to be interested, insiders indicated yesterday. The company has just bought the half of Do it All it did not already own from WH Smith, and has said it will seek to close as many as 60 shops. It is believed the company is not looking to expand further in the DIY sector.

Auditors are continuing their investigations this week into controversial discount schemes between suppliers and buyers at Wickes, attempting to calculate the amount by which the company's profits have been overstated in the accounts.

Insiders suggested yesterday that the cumulative overstatement since 1990 was likely to equal the company's operating profits of pounds 30.8m in 1995.

The extent of the scam has shocked some industry executives, although one said yesterday that "there had been industry rumours for some time" because of the company's ability to weather even significant downturns in the economy.

The overstatement relates principally to payments made by suppliers to secure contracts with Wickes. Common in the industry, the "golden hello" payments in Wickes' case were often payable over two or three years, even though the company accounted for them in a single year, thus inflating profits and thereby bonuses for management.

Similarly, suppliers were allowed to increase prices in subsequent years to offset cash payments earmarked for in-store promotions and other marketing schemes.

At the heart of the scam is the apparent connivance of at least some suppliers. Investigators are also trying to determine who at Wickes was directing the large-scale cover-up needed to keep auditors in the dark year after year. "We are trying to determine who knew, and when they knew it," a source close to the investigation said yesterday.

The inquiry widened late last week to include the former finance director, Trefor Llewellyn, now at building materials company Caradon. Two executives were also suspended last week, although they are helping with the investigation.

Copies of some of the secret agreements were given to Stuart Stradling, the company's current finance director, 10 days ago, prompting last week's dramatic events, including the resignation of Henry Sweetbaum, the group's chairman and chief executive, and a halving of Wickes' share price. By Tuesday, when the shares were suspended, the company was worth just pounds 260m.

Wickes has 108 shops in Britain and 40 on the Continent.