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Carl Cowling has stepped down as chief executive of WH Smith following an investigation into an accounting error within its US division, as the retailer issued a fresh profit warning.
The departures come after an independent review by Deloitte revealed “shortcomings” which led the group to overstate profits at its US business by more than £50 million.
Andrew Harrison, who currently heads the group’s UK division, has been appointed on an interim basis while a permanent successor is searched for. WH Smith now expects profits from its US operations to fall between £5 million and £15 million due to delayed full-year results. The figure represents a significant reduction from the initial market expectation of £55 million and the revised guidance of £25 million issued when the accounting issue first emerged.
Wider group profits for the year to August 31 are now expected to be between £100 million and £110 million, down from its previous earnings decline of £110 million.
Annette Court, chair of WH Smith, said: “This is an extremely serious matter which deserves the board’s full attention and we sincerely apologize for the shortcomings identified.
“While the issues identified came to our attention North America Division, we recognize the importance of strengthening control, governance and reporting processes across the Group.
“We have acted quickly to create a comprehensive corrective plan and will strengthen the financial discipline and integrity that helps our business move forward.
“Our priority now is to rebuild trust and credibility and improve our performance and profitability North America Division.”
This brought an abrupt end to Mr Cowling’s six-year tenure and his 11-year career at the company.
He said: “While the issues have been identified Deloitte The review arose in our North American division, I recognize the seriousness of this situation and as Group Chief Executive Officer it is right for me to step down from my position.
WH Smith said in October that full-year results were being delayed by more than a month due to US accounting issues and a Deloitte review.
The data for the year till August 31 was supposed to be released on November 12, but is now expected to be published on December 16.
Deloitte’s review found problems with the accounting treatment for supplier income in the US, which it said arose “against the backdrop of a target-driven performance culture and decentralized divisional structure, combined with a limited level of group oversight of finance processes in North America”.
It also said there were weaknesses in the structure of the US finance team and “inadequate systems, controls and review processes for supplier income across the commercial and finance functions.”
WH Smith appointed a new chief executive for the US business in June and is conducting a review of the wider North America leadership team as part of a recovery plan, which is being monitored by the board.
After selling off its high street chain of around 480 stores, WH Smith is now focusing solely on its 1,300 stores in global travel locations – such as airports, train stations and hospitals. hobbycraft Owner Modella Capital in June.
As part of the deal, the WH Smith name is disappearing from British high streets and being replaced by the brand TGJones.