Sports Direct (SPD.L) has written to the government to update it on its hunt for an auditor, after failing to appoint one in the last week.
The discount sports retailer has been desperately hunting for a new account checker after Grant Thornton resigned at Sports Direct’s AGM last week. Sports Direct has struggled to attract major auditors who see the company as too much of a reputational risk.
Sports Direct now finds itself in the extraordinary situation of being without an auditor despite having presented its last set of accounts.
PIRC, the shareholder advisory group, said last week that Sports Direct would be forced to contact business secretary Andrea Leadsom if it was unable to appoint an auditor within seven days of presenting its accounts at the AGM. That deadline was based on PIRC’s interpretation of the 2006 Companies Act and falls today.
Sports Direct confirmed it has notified the Department of Business, Energy, and Industrial Strategy (BEIS). However, the company has not asked for help because it is still running a tender process and therefore believes it does not need the secretary of state to step in.
“Sports Direct is currently in a tender process for a new auditor, as noted at the Annual General Meeting on 11 September 2019,” a spokesperson said.
“The company will announce the appointment in due course, following the successful conclusion of that process. Any formal procedures, particularly in relation to the Companies Act, are being adhered to and Sports Direct can confirm it has written to the Department of BEIS under the terms of the Act.”
If Sports Direct is unable to find an auditor at the end of a tender process, then the government will be forced to step in and appoint one on its behalf. It would be the first time in history a major UK company was forced to seek government help of this kind.
The Department for Business, Energy, and Industrial Strategy declined to comment.
It is unclear which companies are involved in Sports Direct’s tender process. “Big four” auditors PwC, Deloitte, KPMG and EY have all ruled themselves out.
Firms are reluctant to work with the company due to the reputational risk it could pose as a client. In July, Sports Direct’s results were delayed for hours with no explanation and the final publication revealed a surprise tax bill of £605m ($748m) from Belgian authorities.
Founder and majority owner Mike Ashley has also been criticised for making high-risk bets on the high street despite falling sales and footfall. Ashley has used Sports Direct to buy stakes in Game, Debenhams, and Evans Cycles. The company has also taken over bust department store House of Fraser and struggling preppy retailer Jack Wills.
John Gray, vice-chair of the Local Authority Pension Fund Forum, told the press at Sports Direct AGM last week: “Without being personal about it, there is insufficient challenge to Mike Ashley on a board level.
“I’m hoping that everybody wakes up, smells the coffee, realises there’s a problem and fix it.”