Dick Smith boss Abboud was in the dark about its cash position

Former Dick Smith chief Nick Abboud admits he didn’t know how much cash the firm had when its lender called him in.

Former Dick Smith CEO Nick Abboud in Sydney yesterday. Picture: Renee Nowytarger

The former chief executive of failed retail giant Dick Smith admitted in an email that he did not know how much cash the company had on hand when it was summoned by its main lender, Westpac.

The final day of a public hearing that has lasted for months in the NSW Supreme Court was told the company, named after its founding entrepreneur, realised in 2014 that problems were starting to emerge and these mounted until its official collapse in January this year.

Dick Smith’s collapse is expected to have caused a $260 million shortfall for shareholders. The firm was floated in December 2013 by then owners Anchorage Capital in a deal valued at $500m.

During a lengthy hearing on Friday, it was revealed then chief executive Nick Abboud — who had been headhunted from Myer — had been called in by Westpac in December 2014 asking for a meeting in the next three months.

An email was read to the court in which Mr Abboud was reported to have said: “I hope we have enough money in the bank.”

Mr Abboud was forced to ­defend the company’s inventory levels and stock management practices a number of times after they were heavily criticised by former executive director Bill Wavish.

Mr Wavish told the hearing that he believed the stock levels were at least $100m too high.

“Obsolete stock is a constant part of doing business,” he said.

“The key part of retail in moving obsolete stock is through sales. On a day-to-day basis there is a focus on obsolete stock, and that’s no different to anywhere else that had stocktake sales. We had stocktake sales and the objective was to maximum the clearance of that stock.”

But Mr Abboud said he believed his strategy was a better proposal and stock aged over 12 months was valued at $33m in a $300m portfolio.

“It was worth only 10 per cent, in the retail business that’s considered a good result,” he said.

Mr Abboud defended the retail chain’s stock levels, which had also been questioned by the company’s board.

Lawyers acting for Ferrier Hodgson, the receivers, asked Mr Abboud why he supported the board’s decision to declare a 7c dividend to shareholders for the 2015 interim result when the cash could have been used to provide for the company’s growing numbers of lenders and potential creditors. “I thought we were in a good position. We had just had a good six months, we were in a position to be able to pay out a dividend,” he said.

Mr Abboud said the company’s accounts from May 2015 that showed a cut in net debt from $110m in that month to just $40m one month later could be attributed to seasonal factors.

Mr Abboud appeared to be in good spirits while sitting in the courtroom and had lunch with his lawyer in a nearby cafe.

The hearing had been told this week that the company kept its cash rebate records on a whiteboard in its office to “celebrate its wins” and encourage underperforming sales teams to improve.

It was also told that Dick Smith’s top management — including Mr Abboud — had courted HSBC and NAB bankers to become the retail group’s lenders.