FTSE 250 company Interserve is the latest outsourcer to come under financial scrutiny following the collapse of Carillion earlier this year, and has been forced to issue a statement quelling rumours of potential difficulties after its share price slumped by up to 30%
In the statement, the company said: ‘Interserve notes recent press commentary surrounding the group and the movement in its share price.
‘Interserve confirms that the implementation of the group’s strategy and the Fit for Growth transformation programme remains on track and the group continues to expect a significant operating profit improvement in 2018, in line with management’s expectations.’
The company delivers construction, equipment and facilities management services, and is a major supplier to the UK government. It has gross revenues of £3.7bn and a workforce of circa 75,000 people worldwide.
Interserve’s auditor since 2014 is Grant Thornton, which was paid an audit fee of £1.1m last year, according to the 2017 annual report.
The report described 2017 as ‘another difficult year for our UK construction business due to the ongoing period of challenging market conditions and continued pockets of underperformance in operational delivery in a number of contracts, which resulted in a net loss result for the division.’
It went on to note: ‘Despite disappointing results in 2017, considerable work has been done to return the construction business in the UK to a stable platform and this will continue through 2018.
‘We are working to improve organisational structure and capability and we expect to improve our performance. Our focus remains on quality contracts, targeting profits and not revenue and we will restructure the cost base accordingly; the division is likely to face working capital challenges as we create efficiencies in the model, but we will manage these accordingly.’
Interserve also said that in the final quarter of 2017 the business conducted a contract review and balance sheet review. As part of this review the business identified the need for significant balance sheet write-downs principally in relation to work-in-progress and receivables. The majority of the value of these write-downs related to UK construction.
The company negotiated a rescue deal with its lenders in March 2018, following a breach in its banking terms last year. However, Interserve recorded a £6m loss for the first half of the year, while net debt increased to £645m.
The collapse of Carillion cost UK taxpayers £148m according to an estimate from the National Audit Office (NAO), while MPs accused the outsourcer of ‘hoodwinking’ the government with its published accounts and challenged the Big Four over potential conflicts of interest.
Report by Pat Sweet
