Interserve quits energy from waste sector after £34m loss in profits
Interserve is to pull out of the energy from waste business after a £70 million hit on a Glasgow project contributed to a half-year loss in profits.
Announcing its half-year results for the six months ended 30 June 2016 this morning, the contractor reported a half-year group pre-tax loss of £33.8m, down from a £33.7m profit 12 months earlier.
Back in May Interserve revealed it would have to write off £70m on a £146m contract with Viridor for the Glasgow Recycling & Renewable Energy Centre, citing issues relating to the design, procurement and installation of the gasification plant.
The ‘exited business’ currently includes six contracts with aggregate whole-life revenues of £430m that were entered into between mid-2012 and early 2015.
Trading across the rest of Interserve’s divisions and regions remained “good” as revenue rose 2.4 per cent to £1.63bn with headline operating profit, excluding energy contracts, ahead a similar amount at £62.9m.
The UK Support Services business, which now accounts for most of the earnings, has won £1bn of new work in the past six months, including a five-year contract to support the US Air Force bases in the UK, worth £230m over the term.
Trading in UK building and fit-out areas remains “good” while the international business has grown by 17 per cent in construction and by 43 per cent in support services.
Chief executive Adrian Ringrose 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.
“We are taking action to exit the Energy from Waste sector. Our assessment of the aggregate impact of exiting this sector is in line with the £70m exceptional charge we announced in May.
“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 our prospects and a further increase in the interim dividend.”
The strategic review of the equipment services division, which incorporates RMD Kwikform, continues and is expected to be concluded later this year.