Dramatic twist in Iceland probe

AN investigation into retailer Iceland, now part of Big Food Group, has taken a dramatic new turn, Financial Mail has established. The Serious Fraud Office is examining company accounts from three years ago to see if they overstated Iceland's real profitability.

A file on the way the company was run was handed to the SFO in the spring. The material came from Department of Trade and Industry inspectors who had been asked to look into suspicions of insider dealing.

The DTI probe was ordered after former Iceland chairman Malcolm Walker offloaded a stake worth £13.5m in December 2000 when the company's share price was riding high - one month before a profits warning sent it tumbling.

Now it has emerged that the investigation has been broadened far beyond the insider-dealing allegations.

The fraud-busters are looking at papers concerning the company's finances before new management was installed in early 2001. They are concentrating on Iceland's results for the first half of 2000, and whether investors were given a true picture.

The profits announcement was delivered to investors in September 2000. It covered the 26 weeks to 1 July - Iceland's last six months as a separate company before it merged with cash-and-carry operator Booker - and there was no indication of problems.

Walker, who had run the company during the half-year, told investors that Iceland had 'maintained a robust performance' with a £39.5m operating surplus and pre-tax profits of £32.1m.

Six months later, Iceland's management - headed by new chief executive Bill Grimsey after Walker's departure over his share sale - gave figures for the second half and the full 12 months of 2000. These showed second-half operating losses for Iceland, excluding Booker, of about £13m.

BFG and the Serious Fraud Office declined to comment.