Construction business Rok appears to have succumbed to an analyst and investor revolt in its decision not to hire former Amey FD David Miller as its interim CFO, just two weeks after announcing that he would replace suspended FD Ashley Martin with immediate effect.
Rok announced on 11 August that it had suspended Martin and brought in Miller after an independent review by mid-tier accounting firm BDO found that faltering profitability in one of Rok’s divisions was coupled with “serious failings” in its financial controls.
But a spokesperson for Rok told Financial Director on 25 August that the board had decided to cancel Miller’s appointment. Rok’s finance team and its senior managers will now caretake the FD role while the company decides Martin’s fate. The decision not to have an interim CFO suggests the company no longer needs cover – and it is unlikely Martin will survive what has been uncovered on his watch.
“The finance team is working on it until the situation is resolved,” the spokesperson said.
Rok would not comment on the reason for the U-turn, but observers believe it bowed to intense criticism of the decision to bring in an interim CFO whose last publicly-quoted role ended in controversy.
Miller was FD of construction business Amey between 1998 and 2002, but his departure is remembered as the conclusion of a disastrous period from which he is yet to recover his credibility in the quoted company world.
In 2002, responding to criticism of the way Amey reported costs associated with bidding for Private Finance Initiative contracts, Miller led the decision to adopt the Financial Reporting Council’s Urgent Issues Task Force ‘abstract 34’ accounting standard for pre-bid costs. But the change forced the business to restate its numbers for the two previous years and unveil a full-year loss of £18m – when it had been expected to post £53m in profit. Analysts also panned the way Amey communicated the accounting change.
Miller resigned six months later and then gave an interview to the Telegraph in which he called international accounting standards “a little cup of sick”. He was said to have had trouble establishing a rapport with analysts – who some think pressured Rok into dropping him.
Since Rok, Miller has built a portfolio of advisory and FD roles in privately-controlled, unquoted companies in a range of sectors. But the thinking behind Rok’s choice – when it already has a sizeable credibility and performance issue given the uncovering of financial failings in its plumbing, heating and electrical business – brought a barrage of criticism. Sources close to Rok say they are unsure if the board, led by chief executive Garvis Snook, ran the idea of hiring Miller past analysts or investors prior to announcing it.
“They had to react very quickly. David is a very experienced individual but because of that negative publicity from his time at Amey and now, that’s where the decision came not to appoint him,” a source close to the board told Financial Director.
One analyst, who prefers to remain anonymous, pointed to Miller’s handling of his departure from Amey as what resonates with the market today and the reason why there could have been a backlash.
“David made some interesting decisions, but it is unreasonable to put all of the blame for Amey at his door,” says the analyst. “He was a bit arrogant and said some things he shouldn’t have – he was young and I think everyone hoped he would be forgiven eventually. But he wasn’t.
“Rok needed someone who could cover as a plc FD and bring that sector perspective, and it had a miniscule market of people to choose from. But it goes to show that if there’s a problem with your numbers and you don’t deal with it, you just won’t work in the publicly-quoted world again. The market will ostracise you.”