DIY firms sets out cost of accounting irregularities

WICKES, the British Do It Yourself retailer hit by accounting irregularities that led to an overstating of profits, said yesterday its ex chairman had accepted responsibility and the cost would be a £51 million sterling writeoff.

The group said the problems had resulted in profits being overstated over recent years and this would be written off shareholder funds. Restatement of the accounts will result in a reduction of £26 million in operating profit for 1995, £14 million for 1994 and £11 million for earlier years.

Profits for 1995 will also be hit by a £2 million charge against shareholder funds relating to European businesses and a £10 million charge stemming from property interests.

In a letter to shareholders, the new chairman, Mr Michael von Brentano, said the group had recorded an operating loss for the nine months so far this year. "A new business plan . . . will be finalised once the negotiations with suppliers are substantially complete. This provides for a substantial reduction in costs, improved marketing initiatives and efficient administrative procedures," he said.

Wickes also plans a refinancing involving a rights issue of new shares to restore its gearing to a more suitable level". Group net debt averaged £65 million in the second half of the year.

The group said it would not seek a relisting of its shares, which were suspended in June, until the new rights shares were issued. A prospectus in connection with the issue was expected to be issued in December, with the new shares being issued following shareholder approval in early 1997.

Mr Von Brentano said his predecessor, Mr Henry Sweetbaum, who resigned in June, had now accepted "ultimate responsibility" for overstating profits. Mr Sweetbaum will repay £1.2 million in bonus payments, including tax, and former finance director Mr Trefor Llewellyn has agreed to repay his £485,000 bonus for 1995.