Auditors in the firing line
MaTEy photographs are not the only things that connect sir Philip Green to Mike ashley, the proprietor of sports Direct.
Both burly entrepreneurs are investors in the aussie clothing website Mysale Group, and both also have intimate knowledge of audit firm Grant Thornton.
Green partly relied on the reputation of Grant Thornton for due diligence done on Dominic Chappell and his Retail acquisitions Group before selling Bhs for £1.
Grant Thornton subsequently received a rap across the knuckles from the Commons select committee probing the Bhs collapse. It criticised it for sheltering behind confidentiality when the ‘public would have been better served by full and frank disclosure’.
Grant Thornton now faces a fresh investigation into its audit of sports Direct.
The beefed up Financial Reporting Council (FRC) has launched an inquiry into the troubled sports firm’s 2016 accounts. In particular, the watchdog is looking at the failure to disclose details of arrangements between the retailer and Barlin Delivery, the logistics firm operated by Mike ashley’s brother John.
after the negative response to its failure to co-operate with MPs, Grant Thornton was quick to say the FRC and the firm ‘have a common interest in promoting good corporate governance and reporting standards’.
One imagines that auditing sports Direct has never been the easiest of tasks. Firms with a dominant shareholder and executive can be tricky to deal with. at present there are also gaping holes in the sports Direct executive team, including the lack of a finance director.
some people will dismiss governance concerns as of little consequence to shareholders. But they have been really serious for sports Direct investors, who have seen the share price drop 62pc over the past 12 months.
Contrast this with competitor JD sports that has just acquired Go Outdoors for £112m and has seen a share price surge of 53pc this year.
Grant Thornton has serious work to do to shore up its reputation as a challenger to the ‘big four’ audit firms.
and ashley should move speedily to clean up the way his firm is run and restore public faith in a damaged retail model.
Selling Britain
hOW fascinating that Mondelez International is again running roughshod over all that was once valued at Britain’s best-known chocolatier, Cadbury.
an enduring theme of this column – which today appears for the 3,000th time since I began writing it 16 years ago – has been the many perils of overseas ownership. since Irene Rosenfeld of Kraft and its successor firm Mondelez took control of Cadbury in an £11.5bn bid in 2010 it has been a never-ending saga of job and brand desecration.
Within weeks of the purchase the somerdale factory near Bristol was closed and Wispa bar production moved to Poland. The hQ in slough was defenestrated, the tax domicile moved to switzerland and cuts made at Bourneville. Mondelez then forbade a housebuilder redeveloping the Bristol site to name the streets after totemic CadburyFry’s confectionary brands.
In the aftermath of the Kraft deal, the consumer has seen shrinking bars of chocolate; changes to the recipe of the iconic Creme Egg and change in the milk content in Dairy Milk. Now we learn the Fairtrade logo is to be replaced with Mondelez’s internally monitored Cocoa Life scheme.
None of this may be considered very significant when we look at some of the other foreign takeovers. This includes the dismemberment of the UK’s greatest industrial group ICI and the loss of UK control over the nation’s energy future, with four of the Big six firms in overseas hands. The country’s airports and ports also passed seamlessly into foreign hands.
Many companies with British in the title, including British Energy, British Plaster Boards, British airports authority (Baa), associated British Ports, British Oxygen, British Nuclear Fuels and British steel, also have been absorbed by overseas owners.
There has been a parallel run on modern technology waving farewell to these shores – some of them taking patents and engineering talent with them.
It is a thoroughly depressing outcome for the command and control of the nation’s economic future, headquarters skills, hMRC’s share of corporation tax and the long-term safety of some of the pension funds involved.
yet only now, in the shape of Theresa May’s Government, are politicians coming to terms with the consequences.
Savers lament
ThE message from Bank of England policymaker Gertjan Vlieghe on the favourable impact of low interest rates on savers and retirees may be unpopular in Downing street or in the cafes where pensioners discuss their privations. But the message is unmistakable.
Britain’s silver surfers hold significant amount of non-cash assets, corporate profitability and dividends have benefited from loose monetary policy, and retired households have experienced faster income growth than the rest of the citizenry.
Things aren’t always as they seem.