A major British high street retailer is under investigation by the Financial Conduct Authority (FCA) over a series of accountancy failures in its US operations.
A review into WHSmith conducted by Deloitte uncovered shortcomings that led to North American profits being overstated by as much as £50million.
WHSmith has published its delayed preliminary results this morning, conceding the past year proved challenging for the travel retailer amid the FCA investigation into accounting irregularities.
The Swindon-headquartered company's shares dropped by up to six per cent in early trading before recovering slightly, making it one of the worst performers on the FTSE mid-cap index.
WHSmith primarily operates in UK travel outlets
|PA
The stock has now declined nearly 42 per cent since the start of the year as the accounting scandal continues to weigh on investor sentiment.
Furthermore, the board has taken the unusual step of invoking malus and clawback provisions to recover bonus payments from former executive directors following the profit restatements.
Former chief executive Carl Cowling departed with immediate effect last month after the Deloitte report identified weaknesses within the North American operations.
Trading profit in the division collapsed from a restated £34million in 2024 to just £15million in the latest financial year.
WHSmith is under investigation
| WHSmithThe dramatic decline stemmed primarily from a £23million reduction in supplier income alongside inventory write-downs.
Management anticipates the North American business will recover to growth of seven to eight per cent in the coming financial year once the accounting issues are resolved.
For the year ending August 31, total group revenue from continuing operations climbed five per cent to £1.55billion compared with £1.47billion in the prior period.
However, headline group profit before tax and non-underlying items slipped to £108million from £114million, falling short of the company-compiled consensus forecast of £110million.
Group trading profit also retreated to £159million from £170million the previous year. The UK Travel division provided a bright spot, delivering a record trading profit of £130million, bolstered by health and beauty sales surging 20 per cent.
WHSmith expects headline group profit before tax of between £100million and £115million for the current financial year.
Interim chief executive Andrew Harrison pledged to restore trust in the business following the turbulent period.
"It has been a difficult end to the year for the group. The board and I are acutely aware that we have much to do to rebuild confidence in WHSmith and deliver stronger returns as we move forward," he stated.
High street store and restaurant closures are on the rise | PAMr Harrison emphasised the company is progressing its remediation plan swiftly and remains committed to strengthening financial controls and governance.
Following the disposal of its UK High Street business and Funky Pigeon, WHSmith now operates exclusively as a global travel retailer.
The board has commenced a formal search for a permanent group chief executive.
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