The Serious Fraud Office (SFO) is investigating the events surrounding the admission of the Worthington Nicholls Group on to the Alternative Investment Market (AIM) amid allegations of accounting irregularities.
The move was confirmed by a SFO spokesperson who said: “The SFO, in partnership with Cheshire police, has begun investigating Worthington Nicholls Group.” She refused to reveal the names of the people under investigation.
H&V News understands that the SFO, along with a team of investigators from Cheshire police’s Economic Crime Unit, conducted a number of dawn raids on premises in Cheshire last week. A number of computers and files were seized, but no arrests were made.
A Cheshire police spokesperson said: “On June 18, the Serious Fraud squad, with assistance from Cheshire police, conducted searches at three addresses in the Poynton area of Cheshire as part of an inquiry into the Worthington Nicholls Group. A number of interviews were also carried out in relation to the investigation.”
Worthington Nicholls listed on AIM in June 2006. One month earlier, the heating, ventilating and air conditioning business – along with its nominated adviser and broker, Blue Oar Securities – raised £20 million from investors on the back of promises of the firm’s future profitability.
But following a series of profit warnings and a collapse in the share price to 6p from its 190p April high, investors began to express disquiet with the group’s performance, believing the company’s trading position had been mis-stated.
In December last year, Mike Stoddart, an analyst with stockbroker Daniel Stewart & Company, urged the SFO and the Financial Services Authority to investigate Mark Worthington, Alistair Stoddart, Christopher Neilson, David Levis and Stephen Mulligan over financial irregularities.
The five men were directors of the firm before being ousted by rebel shareholder Simon Beart in November last year.
Earlier this year, in an explosive interview with H&V News on the same day that the group reported a £42.1 million pre-tax loss, new chief executive Simon Beart confessed to passing a dossier on the “revenue recognition scandal” to the SFO.
He also revealed that Managed Support Services (MSS), the re-named firm, was “strengthening” its legal case against the former directors with a view to seeking “retribution” for shareholder losses.
The news of the criminal investigation was revealed on the same day MSS announced its preliminary results for the six months ended March 31 2008.
MSS said turnover was £16.4m, £6.6m of which is represented by companies that are either closed or in the process of being closed. Turnover for the four remaining businesses – Woods Environmental, Classic, EPS and Woods Facilities – was £9.8m. The adjusted operating loss was £3.98m, while the pre-tax losses were £8.9m.
Commenting on the results in a statement, Simon Beart said: “The results for the six-month period show further substantial losses. The major part of the trading losses were incurred prior to the changes in the senior executive team.
“Trading losses were running at approximately £1m a month before the departure of the entire senior executive team. The substantial exceptional costs reflect the further closures and redundancies undertaken in February and March of this year.”