Interserve has responded in a brief statement to recent press commentary regarding the construction and support services group’s financial position as its share prices tumbled to a 30-year low at the beginning of the week.
Concerns over the Group’s health were rife on Monday as shares fell more than 10 per cent to their lowest point since 1985, following an update from waste-to-product manufacturer Renewei, who said that Interserve had missed a deadline on a joint venture plant in Derby. By Tuesday shares were 1.7 per cent lower at 38.4 pence each.
Interserve has faced issues securing an exit from the loss making energy from waste plants, and with the missed deadline exposing the company to compensation payments, it fuelled speculation that the firm would be looking to investors for more money, requiring the issue of new shares in order to raise funds.
Last year saw Interserve issue a number of profit warnings which stated the company had been hit by continued employment cost pressures in the business, the cost of contract mobilisations, margin deterioration driven by a cost base which has not been flexible enough and contract performance in the justice business. As a result Interserve launched a group wide performance improvement plan, ‘Fit for Growth’, aimed at improving margin performance to industry norms.
But by May of this year, Interserve had reported on a difficult year for the Group, in its annual results for the year ended 31 December 2017. Overall, the Group’s financial performance in 2017 was “extremely poor” as headline profit fell to £52.4 million. An inefficient operating model and excessive cost structure were to blame for leaving the organisation exposed to weaknesses in the UK performance of support services and construction in addition to a further deterioration in energy from waste during the middle of the year.
Half year results for the Group published in August showed a £6 million pre-tax loss from a £24.9 million profit last year.
In a statement the company has said: “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.”