Interserve is being investigated by the Financial Conduct Authority over the handling of inside information and its disclosures to the market relating to its energy-from-waste business.
The investigation covers the period from 15 July 2016 to 20 February 2017.
During this period the company announced it was exiting the EfW market in its half-year results for 2016 on 10 August.
This was followed in November 2016 by the termination of its contract on Viridor’s Glasgow EfW scheme.
The investigation’s scope also covers Interserve’s announcement on 20 February 2017 that the cost of exiting EfW had more than doubled.
Interserve said in a statement to the market this morning that it would “co-operate fully with the investigation and will update the market on the outcome in due course”.
Interserve’s share price fell around 5 per cent following this morning’s news.
CMC Markets analyst David Madden said this was “yet more bad news” for the company, which has seen its share price trend downwards since 2014.
However, he added that the damage may be limited: “Sometimes these investigations come to nothing.”
Mr Madden said market reaction had been muted this morning because the scope of the investigation was not yet clear.
“Until we know more there will be a bit of apprehension from investors, but [Interserve’s share price] probably won’t drop too much,” he said.
Interserve announced in August 2016 that it was to quit energy-from-waste jobs after problem contracts in the sector led to a £33.8m pre-tax loss in the first half of 2016.
At the time, Interserve said the financial impact from the contracts would be around the £70m mark, and that the six contracts involved were expected to be completed during 2017.
However, on 20 February 2017 Interserve revealed that the cost of exiting the EfW sector had more than doubled to £160m, admitting that £70m would no longer be adequate to cover the losses involved.
In its results for 2017 announced last week, chief executive Debbie White said that the six remaining EfW projects were now more than 95 per cent complete, adding that she expected to draw a line under EfW by the end of 2018.
Interserve posted a £244.4m pre-tax loss for the year as net debt increased from £387.5m to £502.6m.
Speaking to Construction News this week, Interserve Construction managing director Gordon Kew said the firm’s experiences in the EfW sector had taught the business to be more careful when assessing liabilities and risk.
“I think that when we get into an unbalanced contract where risk is passed onto a contractor but they don’t have that control over it, then you’re onto a rocky road,” he said.
The FCA said it would not comment on ongoing investigations.
More to follow…