Bulmer accounting gap grows to £3.8m

HP Bulmer, the crisis-struck cider maker, yesterday sacked its finance director and revealed that the size of an accounting hole was greater than previously anticipated.

The group ousted Alan Flockhart after a board meeting on Friday and it alleged that he had been aware of errors in recording the cost of promoting its products such as Strongbow as far back as June.

It said the alleged errors, which had been estimated at a cost of £3.3m, now stood at £3.8m, according to its auditors, Deloitte & Touche. The costs, which are thought to date back to 1999, relate to discounts promised to retailers such as Tesco and J Sainsbury to persuade customers to buy Bulmer's products.

Mike Hughes, the former chief executive who was forced to resign a few weeks ago, had also been aware of the extra promotional expenses months before the board was informed, the company added. Will Samuel, Bulmer's chairman, said an investigation into who was to blame for the fiasco was continuing. Although there is no suggestion of any impropriety, he added: "Ultimately the finance director and the chief executive have to be responsible for putting the company into the position we find it in."

Bulmer, which has scrapped its final dividend payment while its accounts are re-audited, said the impact of the review reduced its pre-tax profits for the year to 26 April by £900,000. This left its pre-tax profits for the year to April 2002 at £4.9m, against £21.5m a year earlier. The net effect after tax at 26 April reduced shareholder funds by £2.7m, it added. The remaining £2.9m is to be accounted for as a prior year adjustment.

The news sent Bulmer's shares, which last month plumbed a 10-year low, down 5 per cent to 206p. They traded at 442p a year ago.

The revisions to the accounts for 2002, which will be fully detailed on 25 October, will put the group in breach of its banking convenants. "We will have to negotiate for a waiver," Mr Samuel said, adding that the company's bankers and loan noteholders were being kept fully informed.

Mr Flockhart, who had been with the company since 1994, was on a two-year contract. He had a salary of £157,000 last year, with a total remuneration package of £184,000. Like Mr Hughes, he will be entitled to compensation; both packages are still being negotiated.

Mr Samuel reiterated that he hoped to fine someone to take Bulmer's helm by Christmas, adding that the new chief executive should help to find a finance director. He said the company was "yet to see the outcome of a triennial pensions review". The group had a £29.1m pensions deficit at 26 April.