FSA rebukes Iceland chain for misleading market

Iceland, the frozen food retailer that recently changed its name to Big Food Group, was dealt a stinging rebuke by the City regulator yesterday for breaking stock market rules and misleading investors.

The Financial Services Authority criticised Iceland for "two very serious breaches of listing rules" between December 2000 and January 2001. The watchdog had been investigating the company since Malcolm Walker, its founder, dramatically quit as chairman in January 2001 after selling shares worth £13.5m in the company just weeks before two profit warnings.

The FSA said it was moved to "publicly name and shame" Iceland for failing to reveal a collapse in sales at the back end of 2000. It said the company had also mislead the market about the cost-cutting benefits from its merger with Booker, the cash and carry chain.

A spokesman for the watchdog said "public censure was the most serious sanction available under the old regime". Under an extension to its authority last December, the FSA can now impose an "unlimited fine" for any company that breaks its rule.

The FSA investigation also threw into question an internal memo written by Mr Walker in October 2000 in which he admitted that sales had "fallen off a cliff". The former Iceland chairman, who is the subject of a separate Department of Trade and Industry investigation that could result in criminal charges, had previously claimed that he had still believed the group would hit its profit forecast.

But the regulator said it had unearthed information within the company that showed, as early as before Christmas, that profit before one-off costs was 52 per cent below budget. It also said that Iceland's management had known that savings from the Booker merger were likely to be at least 25 per cent below market expectations.

Yet in a statement on 13 December, Iceland said it remained "positive on its future prospects and confident that all the expected benefits of the merger with Booker were real and achievable".

Big Food Group, which has been under new management led by Bill Grimsey since January 2001, said yesterday that it had fully co-operated with the FSA inquiry. "They have tightened up all their reporting procedures and have put [the incident] behind them," a spokesman said.

Shares in the struggling Big Food Group fell 2.5p to 102.5p.