Interserve swings to first-half loss as it undergoes major restructuring

Interserve said the collapse of outsourcer Carillion earlier this year had a “significant impact” on the market

Interserve has reorganised the business to focus on core areas of business

Interserve PLC (LON:IRV) crashed into the red in the first half as the construction and support services company carried out a major overhaul of the business.

The group posted a pre-tax loss before tax of £6.0mln for the first six months of the year, compared to a profit of £24.9mln last year.

Under its so-called ‘Fit for Growth’ transformation programme, the company has been exiting non-core businesses and renegotiating onerous contracts.

It exited business in property development, energy from waste (EfW) projects and activities in the London construction market. 

Debt balloons 

The company also refinanced its loan facilities in April, leading net debt to rise to £614mln from £502.6mln

READ: Interserve faces regulatory probe into energy from waste exit

As part of its restructuring, Interserve has reorganised the business to focus on segments of government and defence, the private sector, communities and citizen services.

Restructuring costs came to £10.8mln for the period but the company expects to deliver £15mln in savings this year. 

“We believe that the benefit of the actions taken in the first half underpin our unchanged full-year expectations, as we make further progress with the implementation of the group's strategy and the Fit for Growth transformation programme,” said chief executive Debbie White.

First half revenues drop 

Revenue in the first half fell to £1.49bn from £1.64bn as major infrastructure projects in the UK were not repeated and a trade blockade in Qatar delayed a number of contract awards and created supply pressures.

Interserve said the collapse of outsourcer Carillion earlier this year had a “significant impact” on the market, particularly in the way the UK government considers using suppliers.

“We are working closely with the Cabinet Office in evolving the way the sector engages with the UK government,” White said.

Shares fell 3.5% to 69p in late morning trading.

Liberum left its rating on the stock at 'hold' and target price at 72p.

"We still see significant upside, albeit arguably 20% less after the grant of the warrants to the banks," it said.

"However, we also see significant risks on 4 factors; earnings, EfW contracts, net debt and the plans to address the over-indebtedness of the business."

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