The High Cost of Bad Accounting; CITY FOCUS
Byline: LUCY FARNDON
ST IVES, the poster and publishing group founded by Labour peer Bob Gavron, joins a string of firms whose credibility has been dented by accounting problems.
'Incompetent' totting up of its finances means annual profits at St Ives will be [pounds sterling]2.8m lower than expectations.
It has found 'serious accounting errors' in a division which makes marketing posters and signs for Marks & Spencer, Boots and George at Asda.
The admission sent its shares tumbling 10pc to 1911/2p, having halved in a year as it battles against overcapacity in the printing sector.
But to their credit, St Ives bosses immediately came forward to discuss frankly what had gone wrong.
This was a refreshing change from situations such as iSoft and Sanctuary Group, where management rolled down the shutters leaving investors to dissect terse statements made to the stock exchange.
Lord Gavron is no longer involved in the business, but St Ives chairman Miles Emley said: 'It was a combination of incompetence and a lack of oversight.' Finance director Ray Morley said: 'We have identified the issue and we know what we are doing about it.' The blame has been heaped on an unnamed financial controller for the Point-of-Sale division, who had been with the group for just over a year.
He failed to account for the fact that customers such as M&S, Spar and Levis would be due to receive rebates and discounts if they exceeded order volumes.
He also failed to write off some costs for project work, such as store surveys and sign 'mock-ups' for which the company would not be paid.
Lastly, the internal accounts relating to the M&S business got into a 'bit of a muddle', so the revenues were overstated.
Emley said he cannot put into words the emotion he feels at such a setback, admitting it is 'more than frustrating'.
This could not have come at a worse time for St Ives, which is struggling to win business in a cutthroat publishing market.
It prints Harry Potter books and lots of sensitive documents, including annual reports for Rolls-Royce, Unilever and BP, so the last thing it needs is to be hitting the headlines for its own ineptitude. …