Mayflower reveals £20m 'black hole'

BUS builder Mayflower was thrown into deeper crisis today after it admitted a £20m black hole in its accounts and announced the departures of its chairman, City financier Rupert Hambro, and flamboyant chief executive John Simpson.

The company said it had found accounting irregularities at its Trans-Bus division that would push its debts towards £200m against a £160m emergency facility negotiated with its bankers, led by Credit Suisse First Boston, just before Christmas.

News of the black hole put serious questions marks against the future of Mayflower, sending its shares crashing to a new low, down 30% or 2 3/4p to 6 1/2p, valuing the company's equity at only £22m.

Mayflower until last year counted former Prime Minister John Major among its directors, paying him £116,000 a year to sit on its board as a non-executive. He resigned because of the pressure of his international speaking engagements.

The black hole will put the spotlight firmly on Mayflower's accounting arrangements. The much-delayed 2003 accounts have been put back further and will not now be published until next month as auditor PricewaterhouseCoopers have yet to finish its investigations.

Mayflower's audit committee, which is supposed to oversee the group's accounting, is chaired by Christopher Chambers, a former senior director of CSFB, which also acts as Mayflower's stockbroker. Until the former Premier's resignation the audit committee also included Major, who is also a senior adviser to CSFB.

PwC took on the auditing of Mayflower in 2002 after the demise of previous auditor Andersen, the accounting firm at the centre of the Enron scandal in the US.

Mayflower said today that Simpson, its founder and driving force, will leave the company when the 2003 accounts are published. Finance director David Donnelly and joint managing director John Fleming are also going.

Hambro, the co-architect of Mayflower acting as Simpson's City connection, will also quit as chairman as soon as a successor is found.

As revealed by the London Evening Standard last month, Mayflower has been forced to shake up its management after a rebellion by City shareholders who were aghast at a February profit warning detailing the extent of problems which had hitherto not been reported.

Simpson will be replaced by Alan Jamieson, a former head of PwC's insolvency department who, it had been revealed, was secretly brought in as 'chief restructuring officer'.

In a statement Mayflower said: 'The irregularities relate principally to delays in passing on payments from customers to one of the group's finance providers.'

TransBus customers include all London's red bus operators.

The statement added: 'Mayflower continues to be in discussions with its principal lenders about renewed financing arrangements.'

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