Interserve draws line ahead of profit probe
Building services firm to write down US $48.4 million on its 2005
Support services and building firm, Interserve, has drawn a line under accounting irregularities that came to light in July.
According to a company statement, the irregularities – which dated back several years – showed that its Industrial Services Division had over-stated profits by US $48.4 million (£25.9 million).
Six senior managers within the division were immediately suspended and an interim management team was appointed.
The publication of the company’s interim results was postponed pending an investigation by KPMG and law firm Linklaters.
Interserve said that the $48.4 million would be written down from its 2005 results.
“The investigatory work to date has confirmed that controls in Industrial Services were repeatedly evaded over several years in what appears to have been a concerted effort by certain divisional managers to over-state divisional results,” said the company in a statement.
“The financial aspects of the investigation are substantially complete, which has enabled the board to quantify accurately the adjustment necessary in the light of the mis-statements.
The investigation has found no evidence of any such irregularities in the accounts of our other divisions.
”According to interim results, the Industrial Services Division had been under-performing since early 2005 due to costs relating to certain contracts.
Re-stated results for the first half of 2005 showed a loss of $2.8 million, while losses for the same period in 2006 reached $2.05 million.
“The board is concerned that the deliberate nature of these evasions enabled them to go undetected for so long despite audit scrutiny and a number of changes have been implemented to safeguard against similar evasions taking place in future,” said the statement.
Despite the findings, pre-tax profits for the six months to June 2006 rose to $43.2 million from a re-stated $26.3 million in 2005.