Investors panicked after Amey warned the City on Monday that its cash flow and results for the first half of the year had been hit by delays to the signing of the London Underground public–private partnership deals.
Uncertainty following the warning, coupled with concerns about the accounting policies of support services firms and how they treat bid costs, had a knock-on effect on other companies' share prices: Jarvis, Capita, Interserve and Atkins were all affected.
But Amey was hardest hit, suffering a 40% drop in its share price during the early part of this week to reach a three year-low of 88p. Earlier in the year it had been trading at more than 410p.
City sources said Amey's problems were putting pressure on chief executive Brian Staples and other senior board members. Others pointed out that the drop in share price could leave the group open to a takeover bid.
Shares in support services firms have been declining since May, but the intensity of this week's drop caught executives and analysts by surprise.
Some felt the City was over-reacting to Amey's warning. "This is a company-specific problem but investors are treating it as a sector-wide problem," said one analyst. "So everyone is getting a hammering whether they deserve it or not."
It is a company-specific problem but investors are treating it as a sector-wide problem
The chief executive of a support services firm, who asked not to be named, said: "The problem with support services is that the City has suddenly turned on some. They are like sheep."
A spokesperson for Interserve said the support services sector was suffering more than the rest of the stock market. He said: "To the uneducated, the closest thing we have to the bad accounting practices of the US is PFI, so there are some unwarranted concerns. We sit here, we know our figures are sound, but we still watch the share price going down."
Not all support services firms were hit: Peterhouse's share price remained relatively static. Chairman David Jackson said: "I am quite happy with our share price. We have no accounting issues."
Amey's statement on Monday said the group had performed well in the first half of the year. However, it added that the half-year results, due on 10 September, would be affected by "the delays in financial completion on London Underground and a high level of bid activity and new contract mobilisation".
Amey is part of the Tubelines consortium, which has won the contract to upgrade the Jubilee, Northern and Piccadilly lines. The firm is expected to receive a £12-18m payment, mostly relating to bid costs, when the deal is finally completed. It was due to be finalised by the end of this month, but Tube sources indicate that it will be at least two months before Tubelines takes over.
The announcement reawakened City fears about Amey's cash generation, investment in long-term contracts and debt levels. It also follows a change in Amey's accounting policy in March, which turned an expected £50m-plus profit for last year into an £18m loss.