NMC Health PLC (LON:NMC) is being investigated by the City watchdog after an independent review of the troubled Middle East hospital operator's finances uncovered “potential discrepancies” in bank statements, together with supply chain financing arrangements that had not been approved by the board.
Earlier on Thursday, shares in the FTSE 100-listed group were suspended after it said overnight that it had sacked its chief executive, sent its finance chief on extended sick leave and suspended an unidentified member of the treasury team for obstructing an independent investigation.
The Adu Dhabi-based group said on Thursday afternoon that it had been told by the UK's Financial Conduct Authority that a formal enforcement investigation had begun.
NMC appointed external lawyers and a firm set up by former FBI director Louis Freeh to carry out a review in December, after short-seller Muddy Waters put out a report that voiced concerns about the company's financial statements and reports emerged that the company was looking to raise off-balance-sheet finance to help speed it expansion.
In a statement issued after market close on Wednesday, the company said the review had so far uncovered a series of "supply chain financing arrangements" had been in place since 2018 and “are understood to have been used” by entities controlled by founder BR Shetty and fellow major shareholder Khalifa Bin Butti, but had not been disclosed to or approved by the board.
With US$335mln of credit drawn down as of the end of December, the review has found that funds were used to pay suppliers to companies owned by Shetty and Khaleefa Bin Butti, but with NMC used as the guarantor.
In looking to reconcile NMC's cash balances and net debt, the review has also identified “potential discrepancies and inconsistencies” in bank statements and ledger entries, which are being further investigated by lawyers and independent directors.
Bonfire of the boardroom
But with immediate effect, the company said in the statement issued overnight, chief executive Prasanth Manghat, who was CFO from 2009 until being promoted to the top job in 2017, has been sacked and CFO Prashanth Shenoy has been granted "extended sick leave".
Chief operating offers Michael Davis has been appointed as interim CEO.
Earlier this month Shetty resigned as joint-chairman and Khalifa Bin Butti stepped down from his role as executive vice-chairman amid confusion over how much of the company major shareholders owned.
NMC said it does not expect to be able to publish its final results before the end of April 2020 and applied for the temporary suspension of its shares on Thursday.
“The company is focused on providing additional clarity to the market as to its financial position and to restoring its admission to trading,” it said.
Carson Block, boss of hedge fund Muddy Waters, which issued a report on NMC in December that voiced concerns about its financial statements, said on Wednesday evening: “At this point, the company’s announcements speak for themselves and seem to be even more damning than our initial report was.”
NMC's shares were suspended at a price of 1,000p, not long after the market opened.
--Adds FCA probe info--