60 face redundancy as MD suspended

Mar 19 2008 by Peter McCusker, The Journal

ALMOST 60 workers face redundancy at a North East clothing company and its managing director has been suspended following the discovery of a £2m black hole in its accounts.

Darren Spurling, of Woolsington, managing director of Sandcity, based on Stephenson Industrial Estate, Washington, is being investigated by its parent company Blacks Leisure.

His suspension follows a review of all aspects of the Blacks Leisure business – of which Newcastle United owner Mike Ashley has a 29% stake – launched by its new chief executive Neil Gillis late last year.

Blacks believes the Sandcity business, which is the sole distributor of the O’Neill surf clothing brand in the UK, had overstated its performance by around £2m in total over the past two financial years. They said profits for both last year and the current will be £1m below market expectations.

It also announced plans to close Sandcity’s Washington headquarters and merge the business with Black’s Freespirit operations in Northampton, putting 59 North East jobs at risk.

A company spokeswoman said there was no evidence of any fraud and that Northumbria Police had not been informed. The spokeswoman said: “The new chief executive launched a review of the business and these accounting discrepancies emerged as a result of this review.

“Following the identification of these problems, the board has taken action which it felt necessary in the circumstances and has suspended the managing director of the Sandcity subsidiary Darren Spurling.

“The investigation is continuing. There is no suggestion of fraud and no indication that anyone has made any personal gain.” The spokeswoman said that staff had been given redundancy notices but talks will continue in a bid to see if the Washington headquarters can be saved from closure.

Sandcity’s turnover for the year up to February 2007 was £32.3m. Its retained profit was £756,000.

Following the review, anticipated profits for the year ended February 2008 and the current financial year are expected to be around £1m below analysts’ estimates.

Blacks Leisure is one of the UK’s largest outdoor clothing companies and also trades under the Millet and Freespirit brands. Mr Spurling, 41, is also a main board director of Blacks Leisure. Blacks’ shares plunged from 116p to 112p when the markets opened on the back of the news but had rallied to 131.25p by the close, finishing the day 13% up.

Mr Spurling could not be contacted for comment yesterday.