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FTSE 250 SIG to look into ex-chief over profit errors

SIG sells insulation - Kevin Minter Tel:0113 252 3441 All Rights Reserved 2009.
SIG sells insulation - Kevin Minter Tel:0113 252 3441 All Rights Reserved 2009.

FTSE 250 building materials supplier SIG is to investigate the conduct of its former chief executive and finance director after a whistleblower revealed irregularities in its accounts.

The company said on Thursday that a subsequent investigation by KPMG and Deloitte found it had overstated its 2016 profits by up to £3.7m because rebates from suppliers were booked incorrectly, “in some cases intentionally”.

SIG buys materials from suppliers and then receives money back from them depending on how much it sells on to its customers. Suppliers in recent years have included East Midland Electrical Installations, Stepnell Limited and Solar Power Provider UK, according to contracts database Barbour ABI.

A “number of individuals” had been suspended as a result of the revelations, all of whom work in the group’s SIG Distribution division, a UK-based company. Michael Mitchell, analyst at Davy, said: “The uncovering of additional sub-standard practices can presumably not yet be ruled out.”

SIG, which sells insulation and roofing, also revealed it had overstated profits by £400,000 before 2016 and by up to £2.5m in the first half of 2017.

The discrepancies are understood to mostly relate to work carried out in 2016 under previous boss Stuart Mitchell. He announced his intention to step down in November 2016 after a profit warning which was attributed to delays to projects following the European Union referendum. Doug Robertson, the former finance director, retired early last year.

Current chief executive Meinie Oldersma and Nick Maddock, the chief financial officer, are not part of the probe, as they were not in position when the discrepancies came about. SIG said that it was looking into clawback rules for bonuses paid to “certain individuals”. According to its annual report, Mr Mitchell did not receive any bonus or long-term incentives in 2016, but Mr Robertson received an £84,000 bonus.

SIG’s own rules mean that this bonus could be recouped if it emerges that he was involved in “material misstatement of the group’s financial results”. It is understood that some senior directors in SIG Distribution could also have their incentives package reviewed.

In 2016, the company reported a pre-tax loss of £106.3m after £183.8m in one-off costs. Excluding those, underlying pre-tax profits were £77.5m. It booked a £10.7m loss in the first half of 2017, but a £38.3m profit on an underlying basis.

SIG said: “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 Dec 31 2017 remain unchanged.”

The irregularities bear a resemblance to the scandal that engulfed Tesco in 2014. Shares in SIG fell by 4.2pc to 155.8p.

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