WH Smith investigated over accounting scandal as execs lose bonuses

WH Smith is under investigation by the City’s financial watchdog over its multimillion-pound accounting scandal as the retailer moved to claw back “overpaid” bonuses from bosses.The Financial Conduct Authority (FCA) has launched a formal investigation into whether WH Smith breached UK listing and transparency rules after the retailer admitted to overstating its profits by tens of millions of pounds.The scandal has wiped more than 40pc off WH Smith’s share price, sending it to its lowest level in more than 12 years.The turmoil has already led to the exit of Carl Cowling, WH Smith’s former chief executive, who stepped down last month saying the move reflected the “seriousness of this situation”.Mr Cowling was paid a total of £2.7m in 2024, according to the company’s latest financial report, including £884,000 in annual bonuses. He received a £2.8m pay-out the prior year – including a £998,000 annual bonus – which was a 78pc jump on a year earlier.WH Smith said it would be clawing back “overpaid bonuses” from executives for previous years, given they had received the pay-outs because of its wrongly-stated profits.Last month, WH Smith said that profits in its North American division would be up to £50m less than originally expected after a review discovered a series of accounting failures.Robert Moorhead, then WH Smith’s chief financial officer, also received a £637,000 bonus in 2024 and a £754,000 bonus the prior year. Mr Moorhead retired last November. WH Smith did not clarify how much it was seeking to recover from the executive.It comes after the independent review, carried out by Deloitte, had pointed to WH Smith’s “target-driven performance culture” in the North American division as a key issue and said the UK-based parent group exercised “a limited level of group oversight”.The FCA has the power to fine companies or directors, as well as hand out suspensions to individuals and bring criminal charges against them.WH Smith said it was “committed to cooperating fully with any engagement in relation to the North America accounting issue from any regulatory body or other authority”.It is currently hunting for a new chief executive to replace Mr Cowling, as well as two non-executives to “strengthen the board”. WH Smith said it was looking for candidates to have North America retail experience.It comes after a major period of upheaval for the retailer, which earlier this year staged an exit from the high street after 230 years.In March, WH Smith sold its high street stores for £76m to private equity group Modella Capital, the owner of Hobbycraft, leaving it to solely focus on airports and train station stores.The high street shops have been rebranded as “TG Jones”, a name that its new owners have made up to sound similar to WH Smith.On Friday, WH Smith said it was now aiming for “stability”. Andrew Harrison, who is acting as interim chief executive, said he was aiming to “lead the group with transparency and discipline”.Mr Harrison said: “The board and I are acutely aware that we have much to do to rebuild confidence in WH Smith and deliver stronger returns as we move forward.“We are acting at pace progressing our remediation plan and are committed to ensuring that we strengthen our financial controls and governance as we move forward.”