How did Mayflower run off the road?
Bus company's collapse, with a hole in its accounts, will test newly beefed-up government watchdog, says Clayton Hirst
Sunday 04 April 2004
Mayflower's former directors are lying low after the collapse of the bus company over revelations of a hole in its accounts. But John Simpson, the former chief executive, David Donnelly, the finance director, and former prime minister John Major, who sat on the company's audit com- mittee during the period when the irregularities occurred, are expected to be called in for questioning by the Government's accountancy watchdog.
Mayflower will be one of the first major cases for the Financial Reporting Review Panel (FRRP), after its powers were beefed up by the Government as part of the post-Enron reforms. Chaired by Bill Knight, a former senior partner at City lawyers Simmons & Simmons, the FRRP is expected to look at whether Mayflower's annual reports were kosher. Mayflower admitted last week that irregularities in the accounts of its TransBus division, spanning three to four years, could see the company's net debt increase by up to £20m. This was enough to push the company into administration on 31 March.
If the FRRP discovers any problems with Mayflower's 2000, 2001 and 2002 annual reports then it will pass on its findings to the Department of Trade and Industry and the Financial Services Authority, as well as the Serious Fraud Office if it suspects any deliberate wrongdoing.
The FRRP's findings will also be of interest to investors who signed up to Mayflower's £64m rights issue in May 2002. The shares are now essentially worthless. Mr Simpson and Mr Donnelly declined to comment, but some in the City are concerned that Mayflower may have misled shareholders when it issued the shares. "If the accounting issue was rolling for a number of years then you have to ask whether the markets were misled," said one City analyst.
Mayflower's prospectus said that the rights issue was required to reduce debt. But it also pointed to the 2001 annual report as evidence of "strong cash generation" and it insisted that the group was "comfortably within its banking facilities". There is now a question mark over this statement.
Neither Mayflower nor its administrator, Deloitte, were prepared to comment in detail on the accounting irregularity. But Mayflower has admitted that it overstated the amount of money its customers owed it in its TransBus division.
This would have an impact on Mayflower's debt. It is understood that the company had taken out a so-called "invoice discounting facility" with HSBC. This was to provide TransBus with cash if a customer was slow in paying. Therefore, if Mayflower had overstated the amount it was owed and had used the facility to tide it over, then there is an obvious gap in its accounts.
Mayflower doesn't break down TransBus's trade debtors (money that the division is owed by customers) in its annual report. However, according to the individual TransBus accounts filed at Companies House, the figure was £4.88m in 2001 and £155,000 in 2002. The company has delayed the publication of its 2003 annual report.
TransBus is 30 per cent owned by Henlys, another bus company. It is understood to have learnt about the accounting irregularities on Monday when Mayflower made an announcement to the London Stock Exchange.
The spotlight is also likely to shine on Mayflower's auditors. Andersen, the accountancy firm brought down by the Enron scandal, audited both Mayflower's and TransBus's figures until April 2002. It was replaced by PricewaterhouseCoopers, but the firm refuses to say whether or not it re-audited the 2001 accounts.
None of Mayflower's directors were prepared to talk about the affair. When asked for a comment, Mr Major's PA said that he would not talk because he resigned from the company in March 2003.
But with the FRRP probe expected to examine the company's financial affairs over the last four years, he will have to be more forthcoming when dealing with the Government's accountancy watchdog.
Liam Neeson's Downton dreams
Thriller is set in the secret world of British espionage
Bomber jacket worn by Mary Berry sells out within an hour
Much-loved cartoon character returns - without Sir David Jason
Actress to appear in second series of the hugely popular crime drama
- 1 Thailand beach murders: Thai PM suggests 'attractive' female tourists cannot expect to be safe wearing bikinis
- 2 Scottish independence: Five reasons Salmond is secretly hoping for a 'No' vote
- 3 Isis plan to 'behead random member of the public' in Sydney thwarted by Australian police
- 4 Scottish independence: Andy Murray backs Yes campaign in eleventh hour decision
- 5 Have you heard about the film Singapore has banned its people from watching? Well, you have now
Thailand beach murders: Thai PM suggests 'attractive' female tourists cannot expect to be safe wearing bikinis
Scottish independence referendum live: Latest news as Scotland votes Yes or No
Scottish independence: Final opinion polls show undecided voters could swing result either way
Scottish independence: Almost half of No voters have felt 'personally threatened' by the Yes campaign
Isis plan to 'behead random member of the public' in Sydney thwarted by Australian police
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence referendum: A nation divided against itself
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
iJobs Money & Business
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...
To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...
Up to £90,000 + benefits: Saxton Leigh: Credit Risk Audit Manager required to ...