St Ives shares plunge as it fires financial controller

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The Independent Online

St Ives, the printer of magazines from Vogue to The Economist as well as the last Harry Potter novel, has fired one of its financial controllers after unearthing "serious accounting errors".

Shares in the group plunged 10 per cent, or 21p, to 191p, piling on the misery for its investors who have already endured two profits warnings this year.

The problems were isolated in its point-of-sale division, which prints promotional material for some of the high street's biggest retailers, including Marks & Spencer and WH Smith. The accounting errors mainly concerned costs that were not properly expensed, work in progress that was overvalued and debts that could not be recovered.

St Ives said the discrepancies would wipe £2.8m off the group's full-year profits, although its cash position is not affected. Numis Securities, the broker, had previously been expecting profits of £23.9m in the 12 months to 28 July.

Miles Emley, the company's chairman, said the person responsible had been sacked. He blamed the errors on "incompetence", adding: "We have not found any trace of fraudulent or deliberate manipulation for personal gain. There is no cash impact on the group."

The company discovered the profit shortfall during its year-end review and charged its "financial people" with mounting a thorough investigation. "We are satisfied that the issues are confined to the point-of-sale division and that we understand how they have arisen," Mr Emley said.

St Ives hired the financial controller in June 2005. Despite admitting the company had appointed someone who was not up to the task, Mr Emley said it was happy with the rest of its staff. The person who hired the financial controller has kept their job, he added.

In a statement, the group said an "extensive review of the records has identified that the errors mainly affected the results in the financial year". It added trading and margins in the second half were in line with expectations.

In June, the company issued its second profits warning in five months, blaming fierce price competition in a saturated printing market. Its magazine and brochure printing operations are being undercut by new entrants in the market, while its direct mail business is suffering from credit card companies slashing their marketing budgets.

The group has moved to expand its point-of-sale business, which prints the posters retailers display in their shop windows and the banners they hang from their ceilings. It also makes "dump bins" - the cardboard structures that Smith's uses to display books. This division contributes about 12 per cent of St Ives' revenues and it has a 7.5 per cent share of the market.

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