Fraud office investigates software firm Torex

Click to follow
The Independent Online

The Serious Fraud Office has launched an investigation into the beleaguered retail software developer Torex Retail, raiding three houses in relation to the inquiry.

The SFO has acted quickly to gather evidence from a number of residences related to its investigation into the company. It is working with the City of London Police's fraud unit.

A spokesman for the SFO said that the investigation was a response to "allegations that have been brought to us recently" but has refused to comment further.

The SFO said it searched one residential address in Oxfordshire on Monday before raiding another house in the county and a third residence in Warwickshire yesterday.

It said no arrests have been made and declined to comment on the identity of the individuals under investigation.

The SFO's investigators arelikely to have removed computers and relevant documents from the residences to investigate the case.

The organisation gave no indication as to how long its inquiry will take.

Torex Retail hit the headlines last Friday when the AIM-listed company suspended its shares after issuing an unexpected profit warning and launching an investigation into its accounts.

The guidance came only eight days after it issued an upbeat statement where it detailed a number of new contract wins but also alluded to contract slippage that prompted analysts to downgrade forecasts.

The company has drafted in KPMG and Deloitte & Touche to investigate the accounts.

Neil Mitchell, the chief executive, and Marcus Leek, the finance director, have been at loggerheads with Torex Retail's board since the trading statement was issued.

The two executives look set to exit the company, which is a developer of electronic point-of-sales systems, after less than a year at the helm.

Torex Retail is based in Witney, Oxfordshire. According to records filed with Companies House, a number of the company's executives have Oxfordshire addresses. Torex Retail declined to comment on the situation.

Torex Retail was split out of its parent company Torex after it merged with the rival healthcare technology developer iSoft in 2003. In an attempt to transform the small technology company into a world-leading electronic point-of-sales systems provider, Torex Retail went on an ambitious spending spree, investing £400m on acquisitions.

The company listed its shares on the Alternative Investment Market in 2004.

Meanwhile iSoft has suffered an alarming collapse in value over the past year after it launched a formal independent investigation into accounting irregularities last summer. The software company had been the darling of the sector before it issued a string of profit warnings and restated its accounts.

Under the leadership of former BAE Systems chief executive John Weston, iSoft is in the process of evaluating proposals to sell the company to a deep-pocketed rival. A number of companies have expressed an interest.

While the iSoft situation soured sentiment toward the UK tech industry, analysts fear that the Torex Retail situation could prove more damaging to the sector.

Lorne Daniel, an analyst at Arden Partners, said: "This looks like it will be worse than iSoft. Neither the AIM nor the software and services sector really needs another in the line of AIT [which crashed dramatically in 2002], iSoft and now Torex Retail."