Market Overview

Eddie Stobart Fires CEO Over Bloated Financial Estimates As Pandemonium Reigns

Share:
Eddie Stobart Fires CEO Over Bloated Financial Estimates As Pandemonium Reigns

U.K. trucking major Eddie Stobart has announced today that it will be deposing its CEO Alex Laffey, after it found accounting errors in its earnings estimates that unnaturally inflated figures. Following this, the shares of Eddie Stobart were suspended from trading at the market until the board reviews its dividend policy. The firm's stocks trade on the Alternative Investment Market (AIM), where it has witnessed a bloodbath, with its value nearly slashed by half over the past year. 

Eddie Stobart stocks cascade over the past year – London Stock Exchange

This comes in as a significant jolt to Eddie Stobart's largest shareholder Neil Woodford, whose firm Woodford Investment Management, controls 22.9 percent of the trucking company's stock. Notably, Woodford has been in a lot of trouble lately, with his decision to block redemptions from his firm's equity income fund in July, after the fund's continued underperformance led to investors losing faith and detracting their investment. 

However, post the fund freeze, Woodford had managed to raise roughly £650 million by selling listed assets held by the fund, anticipating the rush of investors who would look to take back their investment once the fund reopens. The equity fund, which was valued at £3.7 billion at the end of May, will remain shut until December. 

The financial review at Eddie Stobart by the new CFO Anoop Kang, found discrepancies that showed 2018 operating profits to have been overstated by about 4 percent. The firm has now pushed its half-yearly financial results for 2019, due to be released on August 29 to early September, in an attempt to take stock of this situation. 

That said, the writing was on the wall for Eddie Stobart, when the firm announced on July 9 that it expects its first-half adjusted operating profit to be at the lower end of expectations after it found accounting errors in the calculations to the tune of £2 million. The company also stated that the gloomy forecast was in part due to the downturn in productivity in its contract logistics and warehousing segments. 

Despite the irregularities, the company had assured that it expects to deliver its full-year results "in line with the Board's expectations," pointing out that its volumes have always been skewed towards the second half of the year. However, the market did not take this announcement lightly, with its shares falling by 1.9 percent on July 9, the day this was put in the open. 

With Laffey being fired, the company in its statement today has suggested a financial scenario that might be even worse than what was expected last month – a situation that possibly led to its decision of suspending the trading of its stock proactively. 

"While revenue expectations for the first half are broadly in line with previous guidance, the full impact of these items on Adjusted EBIT is unclear, but it is likely to be significantly lower than anticipated at the time of the half-year trading update on July 9 2019. As a result, the board also intends to review the group's current dividend policy," said the company. 

Laffey will now be replaced by Sebastien Desreumaux, who joined Eddie Stobart in 2017, after being with its rival Norbert Dentressangle for 20 years. The circumstances around the trucking firm will now put added pressure on Woodford, who has been desperately trying to keep his fund from collapsing due to the investor exodus. 

"The board is applying a more prudent approach to revenue recognition, re-assessing the recoverability of certain receivables, as well as considering the appropriateness of certain provisions," said the group in its statement.

Image Sourced from PIxabay

Posted-In: Freight Freightwaves LogisticsNews Eurozone Global Markets General

 

Related Articles

View Comments and Join the Discussion!

Time For Brokers To Turn The Tables On Shippers?

"Ghost" Kitchens Cook Up New Market