We suggested here last week that there was likely to be more bad news for shareholders in heating systems group Worthington Nicholls, and thus it has proved.
Late on Friday, after the market closed, the company's new board under chief executive Simon Beart said it needed to write down its net assets to the tune of £15.9m. This is £9.4m more than initial estimates by the previous directors, and follows a review of the company's accounts by KPMG. And instead of breaking even for the year, the company is likely to make a loss. Previous chief executive Mark Worthington is leaving the company, and acting chairman Alastair Stoddart has resigned.
This morning, Worthington's shares returned from suspension and slumped 20% to 14p.
In a bleak note on the news, analysts at Daniel Stewart set a 6p target price, and suggested some kind of legal action against the former directors was a distinct possibility.
The broker said: "Until we have more clarity on the group's true financial position we do not feel comfortable publishing a profit forecast. The group's most recent financial period was loss-making but the new board is taking action to cut costs.
"Our new target price is equal to the pro-forma net cash position of 6p. The difference between this figure and the pre-suspension price of 17p represents a rather expensive (£9.9m) call option on the ability of Simon Beart and his team. The scale of the mess helps explain why they have not bought any shares in Worthington Nicholls.
"As a result of Friday's revelations we consider it almost inevitable that shareholders will initiate legal actions against the old board and their advisors."
