C&C chief steps down over €17m accounting mistakes
Previous CEO Patrick McMahon, who was chief financial officer during the related period, has agreed to step down with immediate effect.
The drinks group acknowledged “accounting mistakes”, “errors of judgement”, “failures in reporting” and “opportunities missed”.
In a regulatory update, C&C, the owner of the Tennent’s, Magners and Bulmers, Matthew Clark, Bibendum Wine and Walker & Wodehouse, announced prior year accounting adjustments are expected to be made in respect of inventory and balance sheet items.
The adjustments represent an underlying operating profit adjustments charge of €5m. By year, the restatements comprised a €1m adjustment charge in FY2023, a €3m adjustment credit in FY2022 and a €7m adjustment charge in FY2021.
In addition, the group is expecting to record an exceptional prior year (FY2023) charge with respect to onerous apple contracts of €12m which was initially expected to be recorded in FY2024.
Inventory and balance sheet reviews
The total value of the adjustments (underlying plus exceptional) is €17m. There will also be an impact on the unaudited FY2024 interim results, details of which will be set out in the FY2025 interim results in October.
These adjustments relate principally to five items, inventory related matters at Clonmel (€10m charge), goods received not invoiced (€3m credit), the timing of release of customer discount liabilities (€3m credit), change in accounting treatment of glassware (€1m charge) together with additional items (net €nil) over the three-year period in question.
The adjustments have been made following detailed internal and external reviews of inventory and balance sheet reconciliations after discrepancies were notified to the audit committee earlier this year.
An independent accounting firm was appointed to investigate the relevant issues and to determine any potential financial impact and the time period over which the issues extended.
The issues that were identified were then considered by the group’s audit committee and the board, as part of the finalisation of the group’s FY2024 annual report and accounts.
Failures in reporting
The company said: “In addition to accounting mistakes and errors of judgement underlying these historic issues, it is clear from the reviews undertaken that there were failures in the group’s reporting framework and that in parts of the organisation behaviours fell short of the levels of transparency demanded and required such that opportunities were missed to identify and appropriately address the relevant issues.”
The group’s CEO Patrick McMahon, who was CFO during the period, acknowledges the shortcomings occurred when he had responsibility for the group’s finance function.
As a result, he has informed the board that he will step down as CEO and as a director with immediate effect.
“The board, with regret, has agreed that it would be in the best interests of the group for Patrick to do so,” C&C said.
“The group thanks Patrick for his contribution and service over many years.”
It is expected Ralph Findlay will remain in post as group CEO for between 12 to 18 months, subject to the timing of the recruitment of a long-term successor, with the relevant search to commence in the autumn.
