Sports Direct faces race against time as auditor Grant Thornton quits

Sports Direct faces race against time as auditor Grant Thornton quits

August 14, 2019

Sports Direct has less than a month to find a new auditor after Grant Thornton told the embattled retailer that it intends to quit at its annual meeting in September.

Grant Thornton, which has audited Sports Direct since it floated on the Stock Exchange in 2007, will stop working with Mike Ashley’s business following its annual general meeting on 11 September.

The announcement comes a day after Sports Direct published its annual report stating that it proposed Grant Thornton be reappointed by shareholders at next month’s meeting.

The resignation puts Sports Direct in a difficult position as the company admitted at its annual results last month that it has not been able to attract rival accounting firms to tender for its contract. The company, which is struggling to make its £90m acquisition of House of Fraser work, is facing a €674m (£605m) tax bill from the Belgian authorities.

Trouble on the UK high street

Gourmet Burger Kitchen: The upmarket burger chain wants to close 17 of its 85 restaurants via an insolvency process known as a company voluntary arrangement (CVA)

House of Fraser: The department store chain is expected to close about 12 stores after being bought out of administration by Mike Ashley. It had agreed a CVA under which 31 stores were to close, but this lapsed on administration.

Homebase: The DIY chain is closing at least 42 stores after completing a CVA organised by new owner Hilco.  The restructuring expert bought the DIY chain for £1 from Australia’s Wesfarmers who botched an attempt to bring its Bunnings chain to the UK.

Poundworld: The discount retailer has closed all its 355 stores, with the loss of 5,100 jobs after falling into administration in June.

Cau: The owner of the Gaucho and Cau steakhouses fell into administration in July leading to the closure of all 22 Cau restaurants, with loss of 750 jobs. The groups lenders have since bought the 16 Gaucho outlets.

Mothercare: The chain is closing 60 of its 137 outlets after agreeing a CVA in May. Additional closures in July mean 900 jobs will be lost.

Carluccio’s: The Italian chain secured a CVA to close 30 of its 99 restaurants in late May.

New Look: The chain is closing 85 stores in a restructuring plan announced earlier this year. Its chairman, Alistair McGeorge, said the future of a further 39 stores was in doubt as talks with landlords continued.

Carpetright: The retailer obtained a CVA in April to close 92 of its 409 UK stores in September with the loss of about 300 jobs.

Prezzo: In March the Italian-themed restaurant group secured a CVA to close 94 of its 300 restaurants, with the loss of 500 jobs. Rent cuts were agreed on a further 57 locations.

Jamie’s Italian: The chain closed six locations in 2017 and this year agreed a CVA to close about a third of its 35 loss-making outlets.

Byron: The upmarket burger chain is closing up to 20 of its 67 restaurants after a CVA agreed in January.

Debenhams: The under-pressure department store chain has said it could close up to 50 of its 165 stores stores and wants to get rid of space at 30 more by bringing in gyms and other services.

M&S: The high street stalwart wants to close 100 outlets – a third of its main stores by 2022 as part of a ‘radical transformation’ plan.

Sports Direct has now asked the UK government what its options are as it faces breaking stock market rules if it cannot appoint an official auditor at its annual general meeting, according to the Financial Times.

The business secretary, Andrea Leadsom, has the power to appoint an auditor to a quoted company if it cannot do so itself. If Sports Direct fails to find an auditor it will be the first major publicly listed company to do so.

In July, Sports Direct said that the other “big four” accounting firms – Deloitte, PwC, KPMG and EY – had said they could not take on the business because of client conflicts.

It emerged at the end of last month that Grant Thornton had told the Financial Reporting Council, the audit watchdog, of its plans to resign as Sports Direct’s auditor. However, an official announcement from Sports Direct was only released to the stock market on Wednesday.

The company’s annual report, which proposed the reappointment of Grant Thornton, appears to have been finalised at the end of July – before reports that the auditor intended to step down.

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