WH Smith PLC (LSE:SMWH) chief executive Carl Cowling has offered his resignation following a Deloitte review that found that supplier income had been overstated in North America, breaching the group’s accounting policies.
The review was called after a profit warning in August that found profits for its current financial year will be £30 million lower than current market expectations.
Deloitte found that it was mostly an issue about the "timing rather than existence" of income in how accounting standards were applied.
Adjustments to profits in prior years are also expected as a result.
Group headline trading profit are expected to be between £100 million and £110 million, with trading profit in North America now forecast at £5 million-£15 million, sharply below previous market expectations of £55 million.
The shortfall includes a net reduction in supplier income of around £22 million and inventory-related charges of approximately £20 million, some of which may lead to restatements.
As a result of the findings, group CEO Cowling has resigned with immediate effect. WH Smith has started the search for a successor.
"This is an extremely serious matter that has had the Board's full attention, and we sincerely apologise for the shortcomings identified,” said chair Annette Court.
"While the issues identified arose in our North America division, we recognise the importance of strengthening controls, governance and reporting procedures across the group.
"We have acted swiftly to build a comprehensive remediation plan and will reinforce the financial discipline and integrity that underpin our business moving forward."She said the board's priority now is "to rebuild trust and credibility and to improve the performance and profitability of our North America division."
Steps have been taken to strengthen financial oversight and internal controls, including leadership changes in North America, a finance transformation programme, and the rollout of a new supplier income system across the group.
Net debt is expected to be around £390 million with leverage of 2.1x.
A full update on outlook and guidance for the new year will be provided alongside preliminary results on 16 December.