City watch: 11 October 2006 - Interserve, John Laing

Interserve share price rockets

Interserve’s share price shot skywards in September, rising by more than 34%. The first surge of 20% came within minutes of Interserve’s interim results being unveiled. Before that, there were concerns that the accounting shenanigans might be widespread and that more than just the group’s industrial services division would be affected.

But all was well as Interserve’s £5m external forensic investigation had drawn a line in the sand. “For the City, a lot of risk was put to rest,” said Geoff Allum, analyst with stockbroker KBC Peel Hunt.

Then the next day Bob Morton, the former chairman of MacLellan, said he was no longer aiming to sue for £7m. That news pushed Interserve’s share price even higher.

The Industrial Services debacle had shaken confidence in Interserve. When it announced its 2005 annual results, the division was declared to have made a profit of £6.3m. But that figure has now been restated to a £5.4m loss. That’s £11.7m-worth of profit falsification washed away by the forensic trawl.

John Laing’s name set to disappear in a burst of glory

John Laing’s share price, like that of Interserve, jumped by a staggering 34% during September. In Laing’s case, the surge was triggered by a 340p bid from Henderson, a London-based fund manager. Once it goes through, Laing’s name will disappear from the Stock Exchange.

Over the past few years, the path taken by Laing’s top two – Adrian Ewer and Andy Friend – has transformed the fortunes of the group that was once near to collapse into a vibrant player in the provision of public infrastructure. Laing has been particularly active – and successful – in PFI work.

Laing’s PFI equity portfolio alone is worth £420m. Henderson’s bid values the group at £800m.

Hot topics for October

• Carillion’s due diligence prior to buying Mowlem looks to have been less and less thorough. Talk is that further provisions have come close to the surface. Any idea how big they might be?
  
• For the past three to six months Alfred McAlpine is reported to have been securing work by undercutting the prices of its competitors, particularly in civil engineering. What might be the reason for that?

If you’re in the know, e-mail john.leitch@rbi.co.uk

[Contract Journal, 11 October 2006, p 12]