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Stock Spirits in €6m fraud investigation
Central and Eastern European spirits producer Stock Spirits has announced that potentially €6 million of allegedly fraudulent payments were made within its Polish business over the last five years.
Using its annual financial results announcement to make the revelation, Stock Spirits’ audit committee reported a series of “allegedly fraudulent payments” within its Polish business over the last five years that could total €6 million.
In its financial report, under the heading “Extract from the Audit Committee Report”, the UK-based company said, “During the second half of the year, Polish management found evidence of transactions which did not comply with Group policies relating to marketing support and sales agency contracts. Our internal audit team and external advisors were appointed to investigate the evidence and to recommend remedial action.
“The investigation has shown evidence of alleged fraudulent payments having been made within the Polish business in the current year, which may amount to €1.2million in 2014, and similar amounts in each of the four preceding years.”
Keen to distance these payments from the overall financial results, the company said, “The amounts are not material in the context of Group’s financial performance and no restatement of prior periods was deemed appropriate.
“Adequate provision has been recorded in the financial statements for the costs and related taxation connected with this matter. The necessary actions and internal control improvements that were identified are in the process of being implemented.”
No further information on the nature of the payments or the investigation has been provided.
The revelation of these potentially fraudulent payments in Poland comes as Stock Spirits also announces that “difficult trading conditions” in the country are to blame for a 14% drop in company revenues.
Citing 15% increase in excise tax in Poland, the spirits company saw revenue drop from €340.5 million in 2013 to €292.7m in the 2014 financial year.
But despite the fall, Stock Spirits claims consumers in the market have “accepted” duty driven price increases, which the group has upped by an average of 4% per case.
Group CEO Chris Heath said that the trading environment in Poland – which accounts for 60% of Stock Spirits sales – will “remain difficult” in 2015, although he expects stability to return “during the course of the year”.
Meanwhile Stock’s profits after tax grew to €35.8m, up from €8.9m in 2013, thanks in part to distribution agreements with Beam Suntory in Poland and Diageo in the Czech Republic.
Group chairman Jack Keenan said, “These agreements have benefitted the brand owners and ourselves as we have achieved significant value growth in the first year of our relationships. It is a testament to our delivery that we have signed a new agreement with Beam Suntory, Inc. for the distribution of their brands in Croatia and Bosnia.”