WH Smith tries to recuperate bonuses from ex-bosses as watchdog investigates accounting error

[ad_1] WH Smith will attempt to take again as a lot as £7m in bonuses from former executives after revealing the UK’s monetary watchdog has launched a proper investigation right into a devastating accounting error linked to its US enterprise.

Nearly £600m was wiped off the books to paperclips retailer’s inventory market worth in a single day in August after it recognized errors with accounting for provider earnings and provision for misplaced inventory going again to 2023 in its North American arm.

Final month its chief govt, Carl Cowling, stepped down within the wake of the scandal. The corporate is trying to find a everlasting substitute.

On Friday the corporate stated it could be “making use of malus and clawback to recuperate overpaid bonuses” from Cowling, and its former finance director Robert Moorhead, after the restatement of earnings in its 2023 and 2024 monetary 12 months.

Collectively, Cowling and Moorhead – who left final 12 months – acquired simply over £7m in bonuses and long-term share awards for these years. Cowling took dwelling £4m in bonuses and long-term share incentives over the interval, whereas Moorhead acquired just below £3m.

It's unclear how a lot of these bonuses the corporate will try and recuperate, however it's understood to most likely be lower than half.

WH Smith stated the UK’s Monetary Conduct Authority had launched a proper investigation into the corporate’s compliance with UK itemizing, disclosure and transparency guidelines, after it emerged final month it had begun making inquiries.

Andrew Harrison, the retailer’s interim chief govt, stated the corporate had now put in place “a transparent remediation plan” to “strengthen governance and controls to guard worth and restore belief” supported by new programs.

He stated the revamp would cowl the entire group, not solely the US, overhauling insurance policies and processes, tradition, coaching and oversight.

A overview by the advisory firm Deloitte partly blamed a “target-led tradition” for the accounting points in North America. Harrison stated that whereas WH Smith would “not shrink back from targets”, there could be extra room for workers to lift considerations.

He stated the group was additionally simplifying its North American division, exiting about 40 unprofitable vogue and speciality shops, which it runs beneath manufacturers akin to Misura and Marshall Rousso in vacation resorts. Additionally it is reviewing its InMotion know-how retail portfolio, probably exiting about 25 of these 124 shops. He stated it was doable that some shops might be transformed to completely different codecs somewhat than closing.

Harrison stated the group would even be reviewing a few of its different abroad markets and specializing in franchising in new territories.

“It has been a troublesome finish to the 12 months for the group,” Harrison stated. “The board and I are acutely conscious that we now have a lot to do to rebuild confidence in WH Smith and ship stronger returns as we transfer ahead.”

The feedback got here as WH Smith revealed that pre-tax earnings for the 12 months to August 2025 have been simply £16m, after £92m of one-off prices, down from £73m a 12 months earlier than. Gross sales rose 5% to £1.5bn.

Shares within the group fell by greater than 5% on Friday morning because it stated it anticipated underlying earnings for the 12 months to August 2026 to be £100m-£115m, roughly on a par with this 12 months’s £108m.

Harrison stated the corporate could be investing in its UK airport shops, whereas buying and selling at its railway station shops had “softened” as these websites have been “extra uncovered to basic client sentiment”, which has been weak.

The newspaper, books and stationery chain minimize monetary forecasts in August and launched an impartial overview led by Deloitte after it found the accounting blunder.

The revelation got here just a few months after the group offered its excessive avenue enterprise, which has since been rebranded as TGJones by its new homeowners. WH Smith had recognized North America as a development alternative in its new deal with its branches in airports and railway stations.

The Deloitte overview discovered earnings on the division had been overstated by as a lot as £50m.

The FCA confirmed on Friday it had opened an investigation into WH Smith.

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