Rupert Lewin was flying high. His company, Aero Inventory, had just signed a deal that would transform the business and confirm its reputation as one of the hottest stocks on AIM.

The former equity analyst had taken a gamble 13 years ago, investing £50,000 on a hunch that airlines, like pretty much every other sector, would switch to outsourcing.

When a leading Canadian aircraft maintenance company outsourced its spare parts division to Lewin it proved that his vision was paying off.

It wasn’t a glamorous business, but he was certain he could make a handsome return by persuading airlines to hand over the fiddly business of sourcing and delivering everything from nuts and bolts to drinks trolleys and air-conditioning filters.

In the Canadian deal — with Montreal-based Aero Technical Support & Services (Acts), whose customers include Air Canada and Jet Blue — Aero Inventory stood to ring up sales worth an estimated $1.2 billion (£726m) over a decade.

With the option of two five-year extensions, it was a big step towards cracking North America for the company, which is based in New Barnet, Hertfordshire.

“Alongside Acts we now have the perfect opportunity to promote our business model to the largest market in the world,” said Lewin.

That was in late 2007. Just two years on, Aero Inventory has crashed to earth.

A financial review, carried out as it prepared to step up from AIM to a full listing, last week revealed a black hole in its accounts. It asked for its shares to be suspended and admitted it would have to restate two years’ figures. Even worse, because it could not deliver accounts to its lenders, it would breach one of its loan covenants.

Investors knew it had been suffering from growing pains, but nobody expected the company, which had a market value of £140m at suspension, to drop such a bombshell. Now they fear that last week’s disclosure could be just the tip of the iceberg. Hugh Bevan, Aero Inventory’s finance director for the past seven years, is expected to confirm his departure shortly.

Deloitte, the company’s auditor of five years, has been sidelined. Ernst & Young, which was already working on its elevation to the main market, has been drafted in to comb through the accounts and clear up the mess.

Aero Inventory insists the oversight wasn’t down to fraud or theft and that only one contract was involved.

In simple terms, the company had accounted for too much stock bought as part of the Acts deal. Some of it, thought to be worth tens of millions of pounds, had already been sold back to the client. A warehouse in Winnipeg, Canada, was emptier than expected.

“If it is what they say it is, then it’s not a big problem,” said one shareholder. “If it is just that you have a cashflow implication, that’s fine. We will also expect them to look over every contract and if there are no other examples then it’s not the end of the world. It’s still a good business model.”

Nigel McCorkell, Aero Inventory’s chairman, agrees. “Any uncertainty is concerning for the company and shareholders,” he said. “I think in the circumstances the board would be remiss if it had not satisfied itself that there were no problems elsewhere.”

Lewin had always been a numbers man. His early career was spent as a research analyst at long-forgotten City firms such as Scott, Goff, Hancock and Moy, Vandervell. After moving to the Robert Fleming merchant bank, where he became head of corporate broking, Lewin moved into industry, buying Hibbert & Richards for £50,000 in 1994.

The company traced its roots to supplying parts to watch makers but had long since moved into industrial fasteners used in the aerospace sector.

Lewin spotted that cash-strapped airlines were eyeing parts outsourcing as another way of saving money. Low-cost carriers such as Easyjet and Ryanair had never owned their parts supply chain.

He offered to buy their inventory of parts and sell them back to the airline as and when they needed them under long-term contracts. When it came to buying new parts, Aero Inventory hoped to take advantage of economies of scale.

Lewin renamed the company Aero Inventory and floated it on AIM in 2000. He surrounded himself with people who had worked at Flemings. Bevan had been based in Hong Kong advising clients on fundraisings. Roger Davis, a non-executive director, had spent 10 years at the bank, while Laurence Heyworth had ended up as head of European capital markets in a 20-year career.

Heyworth was Aero Inventory’s chairman at flotation, then spent three years as an executive director, only to leave to set up another company and then rejoin in a non-executive capacity three years later.

“I can’t deny there was a relationship between the four people in question, but I certainly don’t believe it in some way influenced the business negatively,” said McCorkell.

It was a good business — but capital intensive. The company was regularly tapping investors for cash so it could afford to buy out future clients.

Through its “parts central” database, Aero Inventory could source 500,000 spare parts from 1,500 suppliers to customers such as the Australian flag carrier Qantas, which it signed up in a $1.6 billion deal in 2006.

By 2008, business was booming. Aero Inventory agreed a new $500m lending facility, arranged by Lloyds, in June 2008. Its success attracted bid interest from Bridgepoint, the private-equity group, but a deal was not consummated. To top it all, Lewin was named chief executive of the year at the FT/Investors Chronicle AIM awards.

Times soon became tougher. Talks over a $2.5 billion contract with United Airlines collapsed in March this year when the airline tried to drive too hard a bargain. Without the expected earnings boost, shareholders began to worry.

Half-year results showed the company was carrying stock worth $752m on its balance sheet and debt was up to $467m. Both figures were higher than expected, particularly for a firm with a market value of £89m.

Lewin and his team resolved to win back the faith of investors and focus on boosting cashflow. It looks as though he has left it too late.

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