Torex executives face axe after software firm warns on profits

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The Independent Online

Torex Retail's chief executive and finance director look set to exit the software developer after the company issued a shock profit warning, suspended its shares and launched an investigation into its accounts yesterday.

Neil Mitchell, the chief executive, and Marcus Leek, the finance director, are believed to have been at loggerheads with the rest of Torex Retail's board since the company published a trading statement on 18 January. The statement detailed a number of new contract wins but also alluded to contract slippage which prompted some analysts to downgrade forecasts last week.

On Thursday Mr Leek informed a stunned board of directors that the company would miss forecasts for the year as a result of contract slippage. After a late-night phone call between the finance director and the rest of the board, the company took the decision to suspend its shares while its auditors determine the extent of the financial downgrade.

At this stage, the board said only that results would be "significantly below market expectations". The audit could take up to 10 days.

Lorne Daniel, an analyst at Arden Partners, said: "It is now clear that a number of significant projects have been delayed and it begs the question why the board were unaware of the second-half trading situation until the end of January."

The manner of the profit warning led one Torex Retail insider to describe Mr Mitchell's and Mr Leek's positions at the software developer as "untenable".

David Toms, an analyst at Numis Securities, said he suspects that profits will be at least £15m below his £49m forecast and that the company is likely to breach banking covenants as a results of its high debt levels.

A company spokesman said that the Torex Retail is not in breach of its banking covenants and that the board met its banks yesterday to assuage such fears. The company had been expected to cut its net debt to £180m over the past year but will instead report debt at around the £205m level. Its market capitalisation before the share suspension was £173m.

Mr Mitchell took over the chief executive role last September after Chris Moore split his role as chairman and chief executive of the company. Mr Mitchell said in November that he had completed a "diligent investigation of all aspects of the business" and that the company had a "solid business platform". Mr Leek joined Torex Retail last July from the Phones4U business, a privately held company.

Mr Moore could fill the chief executive role on an interim basis if Mr Mitchell leaves. Mr Moore previously ran the Torex business that was folded into iSoft three years ago. He then split out the retail business and led an acquisition programme that saw Torex Retail spend £400m snapping up its competitors in the retail point-of-sales systems market. He also led the listing of the company in 2004.

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