Blacks is carrying out an investigation into the accounts of Sandcity, which distributes and retails the O’Neill Boardwear brand in the UK, after a strategic review revealed some discrepancies in the management accounts.
Blacks had been investigating the rationale behind retaining Sandcity as a separate entity. Sandcity operates in the same market sector as Freespirit – also owned by Blacks – and yet has a separate management, structure and head office in the Northeast.
New Blacks chief executive Neil Gillis had initiated a review to assess the feasibility of merging Sandcity with Freespirit when the discrepancies emerged. The group’s auditor, BDO Stoy Hayward, was pulled in to establish the nature of the problem.
The investigation is ongoing, but the company said that, during at least the past two financial years to February 2008, Sandcity’s performance has been overstated by a total of approximately£2 million – of which approximately 50 per cent relates to the year to February 2008. The problem means that the group’s pre-tax profit for 2007/2008 and 2008/2009 are both likely to be approximately£1 million lower than market estimates.
Managing director of Sandcity and Blacks main board director Darren Spurling has been suspended and the retailer has begun a consultation with employees of Sandcity.
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