Company shares plunged 36% to 206p yesterday after the rapidly expanding retailer issued a profit warning that would see around £3m wiped off last year’s profits. This morning the price was down a further 9.5p at 196.5p.
Tony Potter, FD and company secretary since 1995, resigned with immediate effect. TJ Hughes, which has grown from 11 stores at its flotation in 1992 to 28 today, is already looking for a replacement.
According to the company, the discrepancy was uncovered in January, due to a new management control system and an internal year-end review. Company auditor PricewaterhouseCoopers is expected to be at the centre of the inquiry. PwC today declined to comment on the issue.
An additional charge of between Pounds 2.5m and Pounds 3m will be deducted from company profits due to the overstatement in the valuation of stock which directors believe could have accumulated over several years.
TJ Hughes said the problem was uncovered due to the implementation of a computerised stock-taking system which revealed the paper-based system had overvalued the stock.
KPMG, the second largest Big Five firm, has been brought in to investigate the management information systems and stock valuation.
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