Shares in Sports Direct (LON:SPD) plunged on Monday morning, following the Financial Reporting Council (FRC)’s announcement of its intention to investigate the discount sports retailer.
The FRC has announced its intention to investigate the embattled company after it failed to disclose its connection with Barlin Delivery as “a related party” in financial statements. The connection was revealed by the Financial Times in August of this year.
Barlin Delivery brings in revenue of around £300,000 for handling international deliveries for Sports Direct. In addition, the delivery firm is reportedly owned by Sports Direct founder Mark Ashley’s brother, potentially presenting a conflict of interest. The sports stockist has yet to publicly comment on the non-disclosure of the business relationship, and instead informed auditors Grant Thornton that it was not necessary. Last year, the company was also exposed for employing the boyfriend of owner Mike Ashley’s daughter for a high-level position,as well as the issuing of a £10.7 million loan.
This follows various controversies surrounding the company, as it was earlier in the month forced to deny claims that it had illegally spied upon MPs. Reportedly, Anna Turley MP was presented with a tray of sandwiches at a Shirebrook warehouse which featured a recording device. Parliamentary investigations remain ongoing into its warehouse, which came under criticism for its working conditions which were compared to that of a “victorian warehouse”. This was amid company admissions that it indeed had paid workers less than the legal minimal wage requirement.
“The Board is disappointed that reporting of a possible recording device (the veracity of which has yet to be determined) has overshadowed the truly important issues that the visit should have focused on – the true working conditions and worker satisfaction at Shirebrook,” the company said in a statement.
The company is looking to rejuvenate its business following the resignation of CEO Dave Forsey in September. As of currently, founder Mike Ashley is set to replace Mr Forsey in the role.
The announcement of the FRC’s intention to investigate the UK retailer further sent already weakened share prices lower by 2 percent on Monday morning.