McAlpine finds accounting errors, shares slump

LONDON - British support services firm Alfred McAlpine Plc said on Monday it had found accounting errors at its slate business that would hit profits in 2006 and 2007, wiping up to a fifth off its market value.

By (Reuters)

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Published: Mon 26 Feb 2007, 5:18 PM

Last updated: Sat 4 Apr 2015, 8:30 PM

The company, which helps to design, build, manage and maintain buildings, said it had suspended two senior managers from the slate business pending further investigation.

‘An internal investigation by Alfred McAlpine’s internal audit team has uncovered a systematic misrepresentation of production volumes and sales for a number of years by a number of senior managers at the slate subsidiary,’ the firm said in a statement.

‘The board believes that the behaviour and collusion of the managers responsible has been entirely deliberate and involves the possibility of fraud,’ it added.

McAlpine said the accounting errors would cut pretax profit at its slate business in 2006 by around 13 million pounds ($25.4 million), prior to any restructuring or impairment charges that might be needed. It also forecast an increased pretax loss for the slate business in 2007.

Bridgewell Securities analyst Howard Seymour cut his 2006 pretax profit forecast for McAlpine by 30 percent to 30 million pounds from 43 million, and expected to reduce his 2007 number by around 15 million pounds to 32 million.

‘Uncertainty is obviously going to be the key driver of the share price today, and management credibility must clearly also take a major knock,’ he wrote in a research note.

At 1015 GMT, McAlpine shares were down 18 percent at 502 pence, off a low of 496 pence and valuing the business at about 515 million pounds.

The slate unit, which accounted for 3 percent of group sales in 2005, had reported double-digit growth both in profit and sales in 2004 and 2005.

McAlpine said it was appointing independent accountants to conduct a detailed investigation of its slate business and was delaying publication of its 2006 results because of this.

It expects to announce the results by April 30 at the latest.

Altium Securities said the costs of the investigation were likely to be substantial, given that building and maintenance firm Interserve had incurred 8 million pounds in fees for accountants and lawyers last year as part of a review related to its own accounting errors.

McAlpine said its three core businesses -- business services, infrastructure services and project services -- were all continuing to trade strongly.

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