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pointing fingers of blame at each other | accountingweb | ‘Devastated’ Wilko chair recounts collapse of high-street name
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Accusations fly in Wilko collapse blame game

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Liz Truss, Covid, greedy owners, naive managers and audit failures were all blamed for the collapse of retailer Wilko during a fiery government scrutiny panel in which fingers were pointed at all parties involved.

29th Nov 2023
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The demise of 93-year-old high-street stalwart Wilko was down to running out of cash amid former prime minister Liz Truss’s mini-Budget chaos, the retailer’s chair told MPs in a testy parliamentary scrutiny panel on Tuesday.

Lisa Wilkinson, granddaughter of the founder, said she was “devastated” for letting down customers, workers and suppliers, but denied greed caused the firm to implode leaving a £625m debt.

Wilkinson told MPs on the Business and Trade Committee that the firm did not have enough money to plug a £50m pension shortfall, with taxpayers left to cover £42m of redundancy payments following Wilko’s bankruptcy in August.

Wilkinson was asked if greed bankrupted the high-street stalwart, as administrators PwC reported the owners had been paid £9m in dividends since 2019 even as the firm was sinking.

“No,” she told MPs. “Wilko failed because we ran out of cash. That caused the downfall in the end.”

Duty to shareholders

After stating the firm had a duty to shareholders, she listed a number of internal and external “contributory factors” that led to the demise of the firm before it was able to implement a turnaround strategy.

The firm paid its landlords in full throughout Covid, continued paying staff and didn’t furlough its workforce during the pandemic, she said, adding that she should have taken government handouts instead. However, the significantly reduced footfall, cost-of-living crisis and the loss of support from key suppliers and financiers eventually caught up with the firm.

Forced apology

MPs said Wilkinson was seeking to blame everyone else while absolving management, and the committee’s chair, Liam Byrne, forced her to apologise in a tense exchange.

“I don’t know how to put into words how sad I am that we have let down all our customers, all our team members, our suppliers, our advisers genuinely,” she said. "I don’t know what you want me to say,” she added.

"Sorry was the one word I was looking for,” said Byrne.

“You can have the word sorry – of course I’m sorry, if you wish me to say the word sorry. I thought ‘devastated’ covered it. I apologise, I wasn’t trying to be clever,” Wilkinson said.

What went wrong

The retailer had more than £100m in cash at the beginning of 2021, but it was grappling with a number of problems as the pile began to dwindle.

Although the business historically never carried debt, during 2022 it tried to move from an unused revolving credit facility arrangement to a more secured debt position agreement with Australian lender Macquarie, Wilkinson said.

During this negotiation, Wilkinson said, the mini-Budget announced by Truss and then-Chancellor Kwasi Kwarteng caused such severe economic disruption it led to the immediate raising of interest terms far beyond anything the business could deal with.

“We were about to enter into secured lending arrangements with Macquarie when the 2022 mini-Budget happened,” she said. “Literally we were in the midst of that, and at that point the interest terms on that loan were hiked massively and that became unfeasible.”

Revenues fell faster than costs were reduced, and the firm lost the confidence of Lloyds, which had banked the firm for 90 years. 

On the brink of tears, Wilkinson told MPs the firm tried to struggle on in vain, but customers deserted it as attempts to grow the business online failed.

“We were helped by suppliers, but not enough to sustain, and couldn’t manage to obtain inward investment to continue to trade,” she said.

Where were the auditors?

In an earlier session, EY and PwC were also singled out for their roles in the company’s eventual collapse. 

Atul Shah, professor of accounting and finance at City University, said annual audit reports by PwC and, from 2019, EY showed Wilko had both “passed and failed” the key test, with the directors’ cashflow predictions likely to have erased doubts about whether it remained a going concern.

He said the sale of a Wilko distribution centre in Worksop was used to bat off auditor concerns in 2021/22, adding that EY had waited six months to sign off the group’s accounts until after the sale, allowing the business to be declared a going concern.

No advice given

However, Victoria Venning, partner at EY, said to give advice would have broken accounting rules, and repeatedly pushed back on questions by the committee to that effect.

She defended the finding of a “material uncertainty” surrounding Wilko’s ability to continue as a going concern and insisted the director’s assumptions were strongly challenged by the auditors. 

“It’s not our role as auditor to offer advice to a company,” Venning told the panel. “Our role is to assess the status and position of the business and come up with an independent view that the accounts are true and fair.”

She said the firm stood by its 2022 assessment of Wilko’s financial statements, telling MPs it had raised a “serious warning flag” about the fact that the business could run into difficulties. 

“There was a plausible scenario where the company could run out of cash,” she said.

Further fallout

Union figures had also accused the owners of bleeding the business dry. 

GMB Union national officer Nadine Houghton said the company struggled from a lack of investment and leadership over many years, culminating in a weak response to challenges posed by higher-than-average rents and tough competition from discounters.

Multiple investigations into the collapse are continuing by the Insolvency Service and other bodies, said Kevin Hollinrake, the minister for enterprise, markets and small business.

He said the Pensions Regulator had so far found “no evidence of director misconduct”.

Wilko collapsed in August leaving 12,000 workers facing redundancy.

Rescue attempt

Earlier on Tuesday, Doug Putman, the owner of HMV told the BBC he wanted to save most of Wilko’s 400 shops but encountered several problems with “super inflexible” landlords that made a deal “literally impossible”.

Putman said that when rescuing a business, it is vital to gain access to their IT system for around four months to allow a transition to a new system, but he felt the charge to do so was exploitative. 

“I would say everyone just got a little bit greedy and unfortunately weren’t thinking about the 10,000-plus jobs that would have been saved,” he said.

Putman initially aimed to buy 300 of Wilko’s 400 shops, then 100, before he eventually walked away.

The owner of Poundland has taken over the leases of 71 Wilko stores and rebranded them, with discount chain B&M also taking on more than 50 shops.

CDS Superstores, which owns The Range retailer, bought Wilko’s name and website and is opening five Wilko stores before Christmas.

Replies (15)

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By Postingcomments
29th Nov 2023 13:09

Wilco?

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Replying to Postingcomments:
Tom Herbert
By Tom Herbert
29th Nov 2023 13:37

*grimace emoji* thanks PC, that's been amended.

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the sea otter
By memyself-eye
29th Nov 2023 17:50

How do folks fall into insolvency?
Slowly at first, then very, very rapidly.
They didn't have their eye on the ball - doubt they even knew there was a ball.

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By TB93
30th Nov 2023 10:40

Customers deserted it? More like Wilkos couldn't retain it's customer base due to XYZ Reason(s).

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By G Grahame
30th Nov 2023 11:23

Regardless of the reasons, it is incredibly sad, a huge gaping hole has been left on our high streets, the size of which was seen once before when Woolworths went.

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Replying to G Grahame:
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By TB93
30th Nov 2023 11:55

Funnily enough, my local Wilkos was replaced with Poundland in a matter of 2-3 weeks.

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By listerramjet
30th Nov 2023 11:44

Surely the elephant in the room was the govenments insistence that all "non-essential" retail closed down for two years.
But that aside, what on earth does the failure of a private business have to do with government? Scope creep gone mad!

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By Hugh Scantlebury
30th Nov 2023 12:03

I would have loved Doug Putman (the owner of HMV) to have named, on the BBC Today programme, the greedy software company who wanted to massively overcharge and hold the business to ransom charging ridiculous amounts until they could transition his group's systems.

All those jobs, and the significant loss of a respected retail amenity and to mine, and many other's highstreets.

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Replying to Hugh Scantlebury:
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By adjadj
30th Nov 2023 13:32

It was the landlords who HMV were complaining about not the IT company.

The IT kit occupied a small part of a building. The landlords were insisting on receiving rent for the whole building. This knocked the financial viability from HMV's perspective and the deal collapsed with the loss of many many jobs

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By vstrad
30th Nov 2023 12:19

If my town is any guide, it was competition that did for Wilko. Ten years ago, it was the go-to store but since then Poundland, B&M, Home Bargains and others have opened within a 5 minute walk. It takes very astute management to deal with that challenge.

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Replying to vstrad:
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By AndrewV12
30th Nov 2023 14:21

Wilko was better than that lot, in my opinion anyway.

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By AndrewV12
30th Nov 2023 14:20

'He said the sale of a Wilko distribution centre in Worksop was used to bat off auditor concerns in 2021/22, adding that EY had waited six months to sign off the group’s accounts until after the sale, allowing the business to be declared a going concern.'

once you sell of your key assets, chiefly any land and buildings held your a goner, another revolver landlords can hold to your head.

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By AndrewV12
30th Nov 2023 14:26

Wooow Woooow woooow lets just rewind here, anything on the highstreet that does does not sell low value items, sandwiches, coffee, etc is a goner, or will be within the next 10 years.

Even The banks are slowly but surely pulling out.

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By B-free2016
30th Nov 2023 15:46

Why did EY wait so long?
As Mazars it is their strategic procrastination that leads to utter disaster to any company once they are involved.
Yet they charge extortionate amounts for their failed audits…
No consideration for people’s livelihoods
Hence top four as well as Mazars growing rapidly yet anywhere they audit it’s only road to perdition…

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Replying to B-free2016:
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By paul.benny
01st Dec 2023 10:08

What have Mazars got to do with the insolvency of Wilko?

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