Produce World has moved to reassure staff and customers it is back in profit after a multi-million pound reporting error at Marshalls led to a major loss for the past financial year.
The company last week announced losses of £11.6m for the year to 30 June 2011, with £8m of this put down as an exceptional loss at Produce World Marshalls. Turnover for the period was some £208m.
The £8m loss was built up over a period of four years, explained chief executive William Burgess. Following a review of internal accounting systems the company called in investigators from PricewaterhouseCoopers, who confirmed that accounting errors had been made.
“Accounting controls and records were poor and the major issue was the key control accounts in the balance sheet,” Burgess told FPJ. “There's no evidence of fraud. What has happened is that profits had been overstated.”
The miscalculations related to volatile brassica supply and demand, foreign exchange losses and cost increases. Burgess, who emphasised that Barclays Bank and customers were still supportive, added that the company now has a new finance team led by group finance director Philip Jones, who was appointed in October 2011.
The £3.6m trading loss outside of the £8m exceptional was attributable to difficult market conditions and costs associated with the ongoing restructuring of the business following the Marshalls acquisition, Burgess explained.
But he stressed that the group has now turned the situation around and has recorded a £2.5m profit in the six months to December, having reduced operating costs by some £6.5m.
“We now have an excellent financial director and we appointed a new chief operating officer [Bob Moody] in May, who is driving a lean culture through the business.”
Produce World has reduced the headcount and is operating more efficiently with fewer people and a flatter structure, Burgess said, though he stressed there would not be further redundancies on the back of the newly reported losses.
At Marshalls, steps to reduce costs have included the introduction of field factories and new storage capabilities, the elimination of unprofitable small SKUs, a simplification of the business and a focus on product quality and customer service.
“These historic losses do not affect the trading position of the business today,” Burgess said. “In fact, the results for the first half of this financial year are good with the group trading profitably, and Produce World Marshalls has been one of the driving forces behind this much-improved financial performance for the group during 2011/12.”
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