Struggling supermarket Morrisons’ bid to solve its accounting systems crisis by calling in outside assistance from KPMG during its annual general meeting has been branded ‘arrogant’, ’embarrassing’ and a ‘FTSE100-first’ by a leading corporate governance research body.
Following comments by group chief executive and newly appointed chairman Bob Stott during Morrison’s AGM last week, Alan MacDougall, managing director of Pensions Investment Research Consultants, called Morrisons’ inability to accurately forecast its profits for the next quarter ‘highly embarrassing’.
‘Morrisons must have known of the change in accounting systems when it was carrying out its due diligence, but I suspect they bit off more than they could chew,’ he said.
‘This is possibly the first time a FTSE100 company has had to announce that it is asking for outside help because it can’t handle problems internally. They were too arrogant not to ask for help at the time, could have but refused to do so.’
During the AGM, Stott announced that due to insufficient resources, and accounting systems problems experienced during its £3bn takeover of rival supermarket Safeway in Spring 2004, the company’s level of operating profit to be reported for the current financial year would remain ‘unclear’ until the completion of further detailed work on the financial forecasts by KPMG.
The Big Four firm has said it could not comment on any aspect of its work with the supermarket.
Stott admitted that Morrisons’ financial team ‘perhaps hadn’t been up to the test’ and said KPMG was being brought in to ‘do some analytical work’. However, he said that a new finance director, Richard Pennycook, who is currently FD at the RAC, would start work on 1 October this year.
A Morrisons spokeswoman said that Pennycook was ‘sorting out’ his current contract and ‘could arrive sooner’ than the arranged date.
Stott refused to admit that Morrisons had ‘got rid of too many people in the Safeway team’ but said that it ‘didn’t have the right number in resource terms’.
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