Iceland faces a stinging rebuke

THE City's all-powerful watchdog, the Financial Services Authority, is set to deliver a stinging rebuke to food retailer Iceland for withholding crucial information from investors as the company's fortunes were going into a nosedive.

Iceland has been under investigation since last summer and a report is expected to be published in the next few weeks. The inquiry - by the UK Listing Authority, which now falls under the umbrella of the FSA - has been looking at whether Iceland misled shareholders between September 2000 and January 2001, when business performance was faltering after years of strong growth.

A new management team moved in at Iceland in January 2001 and the company has since changed its name to Big Food Group. City insiders say that the UKLA has yet to draft its conclusions about the way Iceland was run at the time. But it is already clear that the company will be censured for holding back information from the City.

Iceland was chaired by Malcolm Walker throughout the time covered by the inquiry. He was ousted at the end of January 2001 when Iceland issued a profits warning - little more than a month after he had sold £13.5 million worth of shares in the company.

The report threatens to be acutely embarrassing for Stuart Rose, who took over as Iceland's chief executive in June 2000 when the company merged with Booker, and who stayed until November 2000.

Rose left to become chief executive of Arcadia, where he has presided over a business recovery and a five-fold increase in the share price.

The UKLA, which has a wideranging brief to oversee the conduct of quoted companies, has focused on three statements put out by Iceland.

The first, giving interim results for the half-year to the end of July, was released on September 5, 2000, when Rose had already been chief executive for more than two months. In it, Walker said Iceland was making 'good progress' and that the company felt ' confidence and enthusiasm'.

The second was made on December 13, when Walker was hosting a visit for City analysts to Iceland's HQ in Deeside, North Wales.

The statement, drafted by Charterhouse, one of Iceland's brokers, said: 'Iceland's management remain positive on the group's future prospects, and are confident that all the expected benefits of the merger with Booker are real and achievable.'

It subsequently emerged that even as the upbeat statement was being published, Charterhouse was selling part of Walker's Iceland share stake.

The third statement, while Walker was still chairman and just after the appointment of Bill Grimsey as chief executive, was made on 22 January, 2001. Iceland admitted that underlying sales through its frozen food shops had nosedived in December, falling 5.5%.

Walker was on holiday in the Maldives at the time. A few days later, he flew back to England and resigned. It was only after his resignation that Iceland issued a full-blooded profits warning in which it said that profits for the year - which had been expected to be around £135 million - would in fact be less than half that.

Iceland confirmed in its last annual report that the UKLA was looking into the company's disclosure of information.

'We do not wish to add to that at this stage,' said Iceland this weekend. The FSA declined to comment.