WH Smith's Chief Executive Steps Down Amid Accounting Error Crisis
The sudden departure of WH Smith's CEO has sent shockwaves through the company, following a devastating accounting error in its North American division. This blunder has resulted in a massive £600 million loss in market value, causing a 42% plunge in shares within a single day. The crisis comes on the heels of the company's recent sale of its high-street business, now rebranded as TGJones by its new owners.
Carl Cowling, who had led WH Smith for six years, is stepping down, replaced temporarily by the UK CEO, Andrew Harrison. This decision follows an independent investigation by Deloitte, which uncovered significant shortcomings in the North American division's accounting practices. The report revealed that supplier income was exaggerated, leading to an overstatement of profits by up to £50 million.
The investigation highlighted several issues, including weaknesses in the US finance team's composition and inadequate systems, controls, and review procedures for supplier income. It also noted limited oversight of US finance processes within the group.
Annette Court, the WH Smith chair, expressed deep regret and emphasized the company's commitment to strengthening controls, governance, and reporting procedures across the group. She assured stakeholders that rebuilding trust and credibility, along with improving the North America division's performance and profitability, are top priorities.
Cowling, acknowledging the gravity of the situation, stated that his departure is in the best interest of the company, despite the issues being confined to the North American division. WH Smith, now focusing on its travel business and airport/railway stations, had previously targeted North America for growth.
The company's profit outlook for the US arm in 2024-25 has been revised downward from £55 million to between £5 million and £15 million. This adjustment, along with other factors, has led to a projected 55% decrease in group profits for the year ending August 31, with a forecast of £100-110 million.
