Getting your accounting wrong can cost big time, just ask WHSmith!
It was recently forced to admit it had ‘overstated’ its North American profits by £30m. That saw it shares fall by 30%, wiping nearly £600m of its stock market value in just one day!
The reason? Well, apparently it was due to recognising income too early. So, instead of the £55m forecast for US trading profits the real figure was around £24m.
Susannah Streeter head of money and markets Hargreaves Lansdown, said: “Getting it so wrong is not a good look and affects for reputation of the company. What investors want to see is sound financial management, and errors of this kind shake confidence in future guidance. It’s particularly bruising for WHSmith given that it has its sights set on global expansion, with the US market a big part of its plans. This hasty recalculation of its current opportunities demonstrates it’s not in such a strong position as hoped to progress its vision.’’
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