Wickes problems 'go back to 1990'

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The Independent Online
There are fears that illicit accounting at Wickes, the troubled DIY stores group, may stretch as far back as 1990, with profits overstated by pounds 15m or more.

Accountants Price Waterhouse will be assisted by lawyers Linklaters & Paines to establish how far up the management of the company the knowledge of these practices actually went.

As well as seeking to find a chief executive to replace Henry Sweetbaum, the chairman and chief executive, who resigned on Wednesday, the company is also likely to seek a whole new board of directors once the current crisis is resolved.

Wickes' shares plummeted 40p last Tuesday when the problems were announced, before being suspended at 69p.

The current focus is on the use of cash discounts from suppliers, which are common practice if sales exceed agreed targets. However, the device had been distorted at Wickes to book the cash discounts as current-year profits, even when they would only be paid in year two, as well as booking them before sales were enough to justify them.

Company sources say there is no evidence of any gain to line managers from the practice. However, the boost to margins flattered profitability - leading to a higher share price, bonuses and option profits. Investors will be concerned to recoup losses if there is evidence of wrong-doing at a senior level.

Stuart Stradling, who joined Wickes in July, 1995 as finance director, was aware of the cash schemes by August. He was surprised by their scale and investigated with the auditors, Arthur Andersen, in October. This included writing to all suppliers, asking them to confirm the precise nature of their agreements, not all of which were documented.

This confirmed that cash was coming in and the discounts appeared to tally. That led him to believe the matter was at an end. But in the second quarter of this year, while Wickes sales rose, an expected rise in profits failed to materialise. It was then that further documents were uncovered, on Wednesday a fortnight ago, which conflicted with the plans reported to Mr Stradling. By Monday he was ready to move.