Building supplier ‘inflated its profits’

BUILDING PRODUCTS supplier SIG has admitted to overstating its profits by more than £6m over recent years and has suspended the employees held responsible.

The Sheffield-based group was alerted after a whistleblower revealed the accounting mistake.

SIG overstated its 2016 profit by up to £3.7m, with up to a further £400,000 overstatement of profit relating to earlier years. It also revealed a further £2.5m overstatement of profit for the first half of 2017.

The announcement follows a review after the firm revealed an overstatement of cash and trade payables last month.

SIG said it suspended a number of individuals and was working with auditors Deloitte to ensure “the correct accounting treatment”.

The company, which has been struggling to recover from weak trading in its UK insulation, interiors and offsite construction businesses, said a number of accounts were overstated, “in some cases intentionally”.

The review followed a whistleblowing allegation of potential accounting irregularities at unit SIG Distribution.

On January 9, it disclosed an overstatement of cash of about £20m as of December 2016 and of about £27m as of the end of June 2017.

The company said it identified a number of actions to remedy the problems and had engaged auditors KPMG to conduct a review of financial reporting at the division for the year to December 31, 2017.

Still, SIG reaffirmed its 2017 underlying profit forecast. It is set to announce the full-year results on March 9.

CEO Meinie Oldersma took over in April to lead a turnaround of SIG’s business across Europe. His predecessor, Stuart Mitchell, stepped down after a profit warning.

Jefferies analysts said in a client note: “The previous management described SIG as a loose federation and the current management is tightening things up.

“Inevitably, as word gets round there is a new sheriff in town, cracks start to appear and weak practices are identified.”

Analyst Graeme Kyle at Shore Capital said: “SIG has announced that following a whistleblowing allegation at SIGD division, management has discovered that recoveries from suppliers such as supplier rebates were overstated, some deliberately, at the end of 2016 and the end of 2017.

“This comes hot on the heels and is, we believe, related to the revelation last month that SIGD supplier payments had been window dressed in historic periods.”

Mr Kyle said it should be noted that the issue is contained in one division (SIGD) and is due to malpractice by a few individuals.