In July Interserve won a £15m contract to remodel the Neonatal Intensive Care Unit at Liverpool Women’s NHS Foundation Trust (Rodhullandemu/Creative Commons/CC BY-SA 4.0)

More stock jitters as Interserve warns of higher debt

23 November 2018 | By GCR Staff 1 Comment

Shares in UK construction and services group Interserve took another hit today after the company said its large debt pile could be up to £75m higher than previously forecast by the year’s end.

In a Third Quarter Update yesterday, Interserve said year-end net debt would be in the range of £625m-£650m, up from the prediction of £575m-£600m made in its 2018 half-year results.

Interserve’s net debt has risen steeply in the last two years, from £274m in 2016 to £502.6m at end of 2017, according to its annual reports.

The company blamed extra cash outflows on its energy from waste schemes, and on an “increase in receivables” in certain Middle Eastern markets.

Chief executive Debbie White said the group’s long-term sustainability depended on wrapping up its loss-making energy from waste schemes, and dealing with its debt.

Toward that end, she said a “deleveraging plan” would be unveiled early next year.

Shares in the group fell more than 8% in early trading today before recovering some ground.

Its share price plunged to a 30-year low earlier this month after it emerged that it had missed a deadline for handing over a £145m waste-to-energy plant in Derby, England.

The group has been struggling, posting a £6m loss before tax in the first half of this year. To ensure liquidity, in April this year Interserve negotiated £834m worth of borrowing facilities from its lenders.

Yesterday’s update sought to paint a positive overall picture, however.

It said its international construction business was anticipated to have a stronger second half than its first half “as we conclude several contracts”, although the international order book, particularly in Qatar, “continues to be lower than expected at this time of the year”.

The company said it had secured “a number of good contract wins in the period, particularly in the UAE where a strengthened oil price provides a more favourable backdrop for this competitive market”.

In August Interserve merged its UK and international construction businesses to standardise operational delivery.

“Overall the Group has continued to trade in-line with management’s expectations during the first nine months of the year,” the company said. “The implementation of the Group’s strategy and the Fit for Growth transformation programme remain on track and the Group expects a significant operating profit improvement in 2018, in line with management's expectations.”

Image: In July Interserve won a £15m contract to remodel the Neonatal Intensive Care Unit at Liverpool Women’s NHS Foundation Trust (Rodhullandemu/Creative Commons/CC BY-SA 4.0)