Dick Smith's chairman hits back at allegations of inflating earnings
Dick Smith chairman Rob Murray has hit back at allegations the electronics chain's managers and directors used rebates and stock to inflate profits, characterising the letter that was the source of the claims as "deeply flawed".
The Metcash chairman and former Lion Nathan chief broken his silence this week after a letter from lawyers acting for Dick Smith's receivers, Ferrier Hodgson was leaked.
The letter intended for Dick Smith's directors and managers, including executives from former owner Anchorage Capital Partners alleges a number of "wrongful acts", which played a role in the dramatic collapse of the high-profile electronics chain in early January.
Just hours out from the release of the administrators' report into Dick Smith, Murray said: "Dick Smith non-executive directors are looking forward to co-operating fully with any investigation into the company.
"It is disappointing that correspondence from the Receivers' lawyers, which is deeply flawed in many respects, has been leaked to the media. I am confident that we were diligent and compliant at all times in exercising our duties as company directors."
Metcash would not comment on its chairman or Murray's role at Dick Smith but it's understood he has kept in close communication with Metcash chief executive Ian Morrice since Dick Smith collapsed in January, owing more than AU$400 million (NZ$417 million), including about AU$140 million to National Australia Bank and HSBC.
The risk to Murray's reputation from the receiver's investigation into Dick Smith, which will include ASIC-sanctioned, public examinations of 10 directors and managers in the NSW Supreme Court later this year could also represent a risk for Metcash according to analysts, particularly if the investigation drags on.
One experienced retail analyst said it wasn't a question of what Murray knew, it was about the accountability of the chairman role.
"I'm 100 per cent sure he didn't know about these issues but he's still accountable because he was the chairman of the company," he said. "The question for Metcash is if this guy wasn't on top of key issues of significance at Dick Smith, will he be on top of key issues at Metcash?"
Metcash is finalising a bid for Woolworths' profitable Home Timber & Hardware chain, which could transform its Mitre 10 operation into a powerful No.2 player in hardware, and its turnaround of its grocery wholesale operations, still a work in progress despite recent gains.
The Dick Smith investigation is likely to be an "unwelcome distraction", according to a source close to Metcash.
"We got more excited about Metcash following Rob Murray's appointment ... I'm more worried he will be very busy with Dick Smith," he said. "I want a chair who is on the ball, not dealing with something that's potentially really negative.
"The Metcash business is still challenging, they've got through their near-death experience by selling their auto business but many elements of the strategy are still to play out."
It's understood the administrators' report will focus on the factors behind the collapse of Dick Smith and sources close to McGrath Nicol suggest this material will support some of the allegations set out in the letter from Norton Rose Fulbright.
"Inventory has been recorded incorrectly and I think this will become a discussion about rebates," he said.
McGrath Nicol partner Joe Hayes would not comment on the report before it was published but sources close to Dick Smith suggest the circulation of the Norton Rose Fulbright letter has forced the administrator to bring forward its timeline for the release of the report.
- Sydney Morning Herald