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FCA investigates Interserve over insider information
The City watchdog's enforcement division has launched an investigation into Interserve's handling of inside information and its disclosures to the market over its troublesome exit from the energy-from-waste business.
Interserve revealed on Friday that the Financial Conduct Authority had referred it for investigation over the "handling of inside information and its market disclosures in relation to its exited energy from waste business during the period from 15 July 2016 to 20 February 2017". The share price on 15 July 2016 was 277.25p and by
The company said it will co-operate fully with the investigation and will update the market on the outcome in due course.
Prior to July 2016 a trading update in early May 2016 noted that expectations for its UK construction division were "significantly adversely impacted by a further deterioration in our Glasgow energy from waste contract", resulting in "further cost overruns and delays", likely to lead to a £70m exceptional contract provision to be taken in the first half of 2016.
"Our balance sheet remains robust," the May 2016 announcement read, though the £70m cash impact was expected to leave net debt "around £35m higher than previously guided".
Half-year results in August 2016 saw the then-FTSE 250 company announce the decision had been taken to exit this area of the business, which at the time represented six contracts. This August announcement sent its shares up 12%.
November 2016 saw a trading update reveal progress on the exit from EFW "in line with previous guidance, although significant risks still remain" as management warned of a change in the "cash profile" of work on these contracts amid attempts to minimise risks by accelerating supply chain payments, which was expected to see year-end net debt at previously guided levels of £300-320m.
After being served notice of termination on its Glasgow EFW project in November, directors came back in February with a warning that exiting EFW was likely to cost £160m, up from £70m, following a detailed review of operational performance and due to the impact of an expected lengthy period of litigation. This saw the shares lose around a quarter of their value and end up not far from where they were in July 2016.
Then the next big update was last September, when Interserve issued a profit warning that said the "timing and complexities" of exiting from EFW contracts was likely to be a lot higher than the £160m initially expected. In February last year Interserve upped its estimate on the cost of exiting the energy from waste business from £70m to £160m.
The shares have since lost around two thirds of their value, and on Friday were down 6% to 72.3p.