Call for changes at Lewis Group after R375m hit
Just three months after vehemently defending its accounting policies, furniture retail group Lewis has been forced to change them and take a R375-million hit in the process. The dramatic about-turn, revealed in the recently reported interim results, has led to shareholder activist David Woollam calling for the resignation of the group's chairman, David Nurek, the firing of auditors PwC and the repayment of executive bonuses."Somebody must be held accountable for this," Woollam said.The restatement of the accounting policies reduced earnings by 4.2% and net asset value by 6.4% - equivalent to R375-million.story_article_left1But the company, whose share price slumped from R100 in June to the current R53 in the wake of charges by the National Credit Regulator, is holding firm.On Friday, a spokesman said that at the time of the AGM the 2015 financial statements were deemed to be a fair representation of the group's performance. "This view has not changed, therefore there will be no resignation of directors."Asked what prompted the unexpected accounting policy changes, the spokesman said the board had subsequently identified areas for improvement. Because the changes were not material and had not changed the fundamentals of the business, there would be no clawback of bonuses.Woollam said: "There's no expectation that a company's accounts are perfectly accurate, but they have to be materially accurate. A R375-million adjustment to [net asset value] is material."Woollam also criticised the manner in which the changes were disclosed - understating the full impact - describing this as inadequate and not in accordance with international financial reporting standards.The R375-million reduction in net asset value is particularly significant given Nurek's dismissal (during the AGM) of Woollam's allegations that Lewis's accounting policies were causing its figures to be overstated by hundreds of millions of rands.The issue was the focus of the tense AGM in August, when Nurek aggressively defended the group's accounting policies, saying the board had considered "these allegations" and was "firmly of the view the company's financial statements present fairly, in all material respects, the consolidated financial position and performance of the group in accordance with [international financial reporting standards]".He later stressed that "the auditors have come to this view after consideration of the issues raised and in consultation with their technical department".story_article_right2Nurek launched a scathing personal attack on Woollam, saying Woollam had been an executive director of African Bank Investments and was a nonexecutive director of Summit as well as nonexecutive chairman of Bayport South Africa - meaning "Mr Woollam's interest in this matter is not entirely altruistic".It was through his involvement in Summit, which investigates unsecured lending practices, that Woollam studied Lewis's accounting policies. Attempts to raise his concerns with the board before the AGM came to nothing.Woollam was not the only shareholder to call for a review by an independent auditor.Pw C declined to comment, saying it was bound by the rules of confidentiality governing the accounting and auditing profession.Woollam also challenged Lewis's glib dismissal of its contraventions of the National Credit Act, which led to the action by the National Credit Regulator, saying that 45000 of the group's poorest customers had been charged for services they were never going to receive.Also in the pipeline for Lewis and its shareholders is the likely tough knock from the recently announced caps on credit life charges. "Lewis is currently charging around R13.50 per R1000 insured; this has to be reduced to a maximum of R4.50," said Woollam.The Public Investment Corporation, which manages a 10.5% stake in Lewis, did not respond to requests for comment.