Torex investigated by Serious Fraud Office and police

THE TIMES 31^st Jan 07

Nick Hasell

The controversy surrounding Torex Retail, the software developer whose shares were suspended last week, deepened yesterday as the Serious Fraud Office (SFO) and the City of London Police announced that they had begun an investigation into the AIM-listed company.

The SFO said in a statement that it had conducted a search on Monday evening at a residential address in Oxfordshire. Yesterday it made a search at a second residential address in Oxfordshire and at a third home, in Warwickshire.

The SFO said that no arrests had been made. A spokesman said: “This is a very recent matter. It has arisen in response to allegations that have been reported to us. The strength of those allegations were sufficient for the director to authorise an investigation.”

Neither Neil Mitchell, the recently appointed chief executive of Torex, nor Marcus Leek, its finance director, who joined last year, is thought to be involved in the SFO investigation. Attention focused instead on Christopher Moore, the former chief executive of Torex Retail, who now serves as its chairman.

Mr Moore, who flew back from Japan last week to attend a crisis board meeting at Torex, founded Smart Terminals, the forerunner of the present business, in 1989. That company was sold to iSoft, the healthcare software provider, in 2003, before the retail operations were spun off and floated on AIM in their present form in early 2004.

The investigation is understood to have been triggered by events at Torex that pre-date last week’s profit warning, which came only eight days after its announcement of contract wins and a month after it said that trading remained in line with market guidance.

The inability of the company to quantify the extent by which its 2006 profits have missed City forecasts prompted the company to take the unusual step of requesting a suspension in its shares. The severity of the profit warning has prompted the London Stock Exchange to launch its own investigation. Torex Retail has previously drawn criticism for the way in which it has taken provisions in its accounts. The frequency with which it has booked provisions and exceptional items has made it difficult for analysts to discern the level of underlying cash profits it is generating.

In the trading update last week Torex revealed that borrowings were £23 million higher than forecast. Torex’s banks, led by Royal Bank of Scotland, have called in KPMG to review the company’s cash position. The company’s management has appointed Deloitte to look at Torex Retail’s performance and finances