FTSE 250 building products supplier SIG has revealed its profits for 2016 have been overstated by up to £3.7m, with possible further overstatements in prior years, after a whistle-blower alerted the company to accounting irregularities which have been confirmed by forensic accountants
In a statement to the stock exchange, SIG said the whistleblowing allegation centred on SIG Distribution (SIGD), its core insulation and interiors business in the UK. It asked the company’s external auditor, Deloitte, along with KPMG, to conduct a forensic review of the recoverability of a number of balances recognised at 31 December 2016 in relation to rebates and other potential recoveries from suppliers.
The review confirmed that a number of these balances were overstated at 31 December 2016, in some cases intentionally.
This resulted in an overstatement of profit for the year ended 31 December 2016 of up to. £3.7m, with up to a further £0.4m overstatement of profit relating to years before 2016.
The review has also identified an overstatement of balances at 30 June 2017 relating to recoverable balances brought forward from 2016 and some additional receivables accrued in the first half of 2017. This resulted in up to a further £2.5m overstatement of profit for the half year ended 30 June 2017.
SIG said it intends to restate previous financial statements for these overstatements, which remain subject to audit, and is currently working with Deloitte to ensure the correct accounting treatment.
In the meantime, the company is suspending from employment a number of individuals who are being placed under disciplinary investigation into the circumstances surrounding the accounting for these balances and the cash overstatement disclosed in the trading update issued on 9 January 2018.
SIG’s remuneration committee is reviewing maIus and clawback provisions in relation to incentive payments made to certain individuals in relation to prior years.
In addition, the company says it is to tighten up controls at SIGD, including some specific additional controls around rebates and other supplier recoverables, which are being implemented with immediate effect.
KPMG has been asked to conduct a detailed review of financial reporting controls to confirm the accounting treatment of other material items at 31 December 2017, prior to finalising the year end results.
SIG stated: ‘As the overstatements relate to 2016 and prior years, and to an overstatement in the first half of 2017 which has been reversed in the second half, expectations for underlying profitability for the year ended 31 December 2017 remain unchanged.’
Report Pat Sweet
