Interserve to axe problem business after half-year loss

Interserve is to close its troubled energy-from-waste business after racking up a £33.8m pre-tax loss in the first half to June.

A £72m loss on energy-from-waste contracts dragged the firm into the red. The previous year the firm had posted a £33.7m pre-tax profit for the period.

Interserve previously flagged in May that it was on course to make a £70m writedown in this set of results, but had attributed it to a single project, a delayed energy-from-waste project for client Viridor in Glasgow. In previous updates Interserve had flagged three loss-making energy-from-waste contracts to investors.

But now Interserve has taken the decision to quit the energy-from-waste sector altogether.

Interserve’s work in the sector currently comprises six contracts worth £430m that should all complete by next year. Interserve said the cost of closing out these contracts would be “substantially borne this year” and were covered by the £70m writedown announced in May.

The firm added: “Managing the challenges of exiting from these complex projects is a significant priority, as is ensuring our processes continue to improve given the lessons we have learned.”

Before exceptional costs, Interserve posted underlying pre-tax profit of £53.8m for the half-year, marginally up on £53.3m the previous year. Revenue edged up to £1.85bn, up from £1.8bn.

The firm said it won £1.9bn of new business over the period, including major contracts for the Defence Infrastructure Organisation, Home Office, JLL, Renfe, East Midlands Trains, Emaar (UAE), Majid Al Futtaim Group (UAE) and Hitachi (Qatar).

Adrian Ringrose, chief executive at Inteserve, said: “Trading in the first half of the year, across the vast majority of our divisions and our regions, has been good, in markets that offer both opportunities and challenges. We delivered a strong cash performance and grew revenue and headline operating profit.

“Despite the increased political and macro-economic uncertainty following the UK’s EU referendum, our outlook for the current year remains unchanged. This, together with our significantly improved cash flow and healthy future workload, underpins the Board’s confidence in ourprospects and a further increase in the interim dividend.”