FTSE 250 company first to move from Big Four firm to mid-tier rival since regulatory audit changes
FTSE 250 COMPANY Interserve has announced it will drop its Big Four auditor Deloitte for fifth-largest firm Grant Thornton.
This is the first time that a FTSE 350 company has swapped its Big Four auditor to a non-Big Four auditor since the introduction of UK and EU rules at the end of last year, which require large companies to put their audit out to tender on a regular basis.
The international support services and construction business Interserve, announced today it had concluded its formal tender process for a statutory audit contract.
“Following the now completed audit of the group’s accounts for the year 31 December 2013, Grant Thornton will be appointed as Interserve’s statutory auditor,” a statement said.
The decision will be subject to shareholder approval at its AGM on 13 May 2014.
An Interserve spokesman said that Deloitte had been the company’s auditor for the last 15 years.
Anne Fahy, chair of Interserve’s audit committee said: “We thank Deloitte for their significant contribution as Interserve’s auditors over many years and we look forward to working with Grant Thornton UK going forward.”
Scott Barnes, CEO, Grant Thornton said: “Following a competitive tender process, we are delighted to be proposed as auditor to Interserve. The appointment is recognition of our proven track record in working with large, dynamic, complex organisations. It is also testament to Interserve’s innovative approach as they lead the way in stimulating change in the audit market.”
Interserve reported a gross revenue of £3.1bn, with profit after tax of £55m and a workforce of more than 75,0000 worldwide in its annual report for the year ended 31 December 2013. The latest results also showed that operating profit had increased 11% to £86.7m.
Last month the company announced it would acquire a subsidiary of Rentokil, Initial Facilities, for a cash consideration of £250m. The deal will be funded through a new bank facility together with net proceeds of placing more than 12 million new ordinary shares, representing 9.99% of Interserve’s current share capital.
In an interview with Financial Director, Interserve group finance director Tim Haywood (pictured) said that in 2010 the company had promised it would double earnings per share by 2015.
Haywood was also keen to tackle the pension deficit at the company and said during the interview that, “when investors are looking at us, one of the negatives that they look at is your pension situation”.
In December 2011 the pension defict was £150m, with Haywood insisting he would rid the company of that deficit by 2019.
He has made in-roads to that effect with the defict now standing at £5.9m for the year ended 31 December 2013, a drop from £77.8m in 2012.
Haywood was heavily involved in setting an agreement with the trustee of its pension scheme to transfer the assets from its investment in the government’s Private Finance Initiative (PFI). Interserve transferred £55m from its PFI portfolio in recent years to reduce the deficit.
The company also realised £174m from the PFI portfolio, and invested £67m into acquiring businesses in growth markets, such as frontline services, oil and gas, and then transferred £55m to the pension scheme.
Its UK clients include the BBC, British Airways, The Metropolitan Police, HMRC, John Lewis and Alliance Boots.
According to the latest Accountancy Age Top 50+50 table Deloitte had a fee income of £2.3bn, with £663m attributed to audit services. While Grant Thornton had a fee income of £460m, £124.1m attributed to its audit service line.