Pre-tax losses at Interserve widened to £244.4m in 2017 on broadly flat revenue, in what chairman Glyn Barker labelled an “extremely poor” year for the group’s financial performance.
Interserve’s revenue increased 0.2% during the year to £3.25bn, up from £3.24bn in 2016.
Its pre-tax losses increased to £244.4m, up from a loss of £94.1m the previous year.
Meanwhile, year-end debt at the firm has also ballooned from £274.4m in 2016 to £502.6m in 2017.
The business made a headline profit of £52.4m but was dragged into a loss by a series of write-downs and impairments, including a £60m impairment against goodwill, a £16.7m write-down against IT development costs, £42.4m worth of write-downs in relation to existing contracts as part of a contract review, and £43.7m worth of additional provisions against loss-making or onerous contracts.
Interserve’s UK construction business slipped from a £25m profit in 2016 to a £19.4m loss in 2017, while profits in its support services division more than halved to £41.7m.
Its international construction arm made a £19.2m profit, up from £16.9m, while profit from its equipment services division increased from £48.6m to £54m.
Losses in its energy from waste division narrowed from £160m to £35m.
The company has a future workload of £7.6bn.
Debbie White, who joined the business six months ago to replace former chief executive Adrian Ringrose said it had been a “difficult” year but also pointed to progress.
“As a new management team, we have stabilised the business and taken the first actions to establish a solid foundation from which we can both serve our customers effectively and underpin improved future operational and financial performance.
“This work has focused on refinancing, conducting a thorough assessment of the contract portfolio, and introducing new management disciplines, processes and cost controls under the ‘Fit for Growth’ programme. We are confident that the cost savings and management actions identified will contribute at least £40-50m to group operating profit by 2020, with the 2018 benefit estimated to be £15m.”
Chairman Glyn Barker blamed an inefficient operating model and excessive costs for an “extremely poor” financial performance in 2017, with the group exposed to weaknesses in the UK performance of its support services and construction businesses.
He said: “In the last sixteen months Interserve has suffered unprecedented levels of disruption and faced a number of significant challenges.
“The company was affected by general market headwinds and external events, however much of this resulted from self-inflicted mistakes of the past. The resulting stress and uncertainty have led to anxiety amongst our staff, suppliers and customers and significant loss of value for our shareholders from the fall in our share price.
“The changes in our executive team, the completion of our debt restructuring and the commencement of the ‘Fit for Growth’ programme are the first steps along the road to restoring stability, future financial success and underlying resilience in Interserve and to rebuilding trust with all our stakeholders.”
Last week, Interserve announced that it has signed a refinancing deal with its lenders for a new £196.6m cash facility plus bonding facilities of up to £94.5m.
The facilities will mature on 30 September 2021.
