Interserve likely to breach banking covenants

Aaron Morby 11 months ago
Share

Crisis-hit Interserve is battling for survival after warning this morning it is now set to breach its bank loan covenants.

Incoming chief executive White launches contract review

In another profit warning Interserve said that increasing cost pressures have hit both its construction and support services divisions leading to a cash crunch.

The embattled firm also said the cost of exiting loss-making energy from waste contracts has soared by a further £35m above the £160m provided last year.

It warned that operating profit for the second half of the year would slump to half that reported last year.

The latest warning saw shares slump 38% to 55p in early trading, valuing the company at just £80m.

Interserve said: “Taking all of these factors into account, we now believe there is a realistic prospect that we will not meet the net debt to EBITDA test contained in our financial covenants for 31st December 2017.

“As previously announced, we are engaged in constructive and ongoing discussions with our lenders.

“We have engaged a financial advisor to assist us in these discussions, as well as looking at options to maximise the short and medium term cash generation from the business.”

Interserve chief executive Debbie White said the company was launching a group wide performance improvement plan, Fit for Growth, aimed at improving margin performance to industry norms.

She said: “As part of this, we have initiated a series of work streams to address our operating model and the cost base of our operations, as well as ensuring that we are operating in market segments which are both profitable and offer opportunity for growth.

“We have also initiated a comprehensive contract review across both the support services and construction businesses.”

The deterioration in trading at UK support services was driven by rising employment costs, cost of contract mobilisations, and falling margins driven by a cost base which was not flexible enough and contract performance in the justice business.

The UK construction business was hit by challenging market conditions and cost pressures as well as operational delivery problems.

The RMD Kwikform arm continued to perform well while international construction maintained a stable performance.

White added: “Despite our challenges, Interserve has a strong client base and many strengths as an organisation and I believe there is considerable potential for business improvement across the company.

“My team will focus on improving our margin performance in UK support services and ensuring good contract selection in UK construction, while reducing our cost base across the company”.

Latest news

Willmott homes arm fined £1.25m over gas blunder

Court hears how residents were put at risk of carbon monoxide poisoning
2 days ago

Eggborough gas-fired power station gains consent

Work could start by summer next year at North Yorkshire site
1 day ago

£100m Aberdeen Broadford Works village plan approved

Demolition work to start at historic former textile factory site
1 day ago

Go-ahead for £160m Leeds Monk Bridge scheme

McAlpine is on board as preferred contractor for the project
2 days ago

Opinion: Safety fines are getting out of control

We need more effective ways to improve safety than ever higher penalties
2 days ago

Shake-up for £2.9bn MoD hard FM contracts

Post-Carillion bid race for MoD estate and housing regional FM contracts
2 days ago

Wates set to start on £53m Portsmouth sports centre

Contractor understood to have won contract race for new university complex
3 days ago

Lack of skilled roofers prompts Marley new launch

Easy to install roofing roll compensates for lack of skilled workers
2 days ago

Caddick takes workforce plastic-free

Workers given aluminium drinks bottles in bid to bin single-use plastics
2 days ago

Wates wins 7th Leeds Wellington Place job

Work will start of £35m 4 Wellington Place project next month
3 days ago

Kier targets £50m disposals to cut £375m debt

Firm sets out debt reduction plan in robust year-end results
3 days ago

Betting Spy: Spurs to shrug off recent troubles

Tottenham can kick-start a win treble with Leicester and Crystal Palace
2 days ago

Keltbray concrete structures boss exits

Keltbray Structures MD Gordon Dunne on gardening leave
3 days ago

141 jobs axed as M&E specialist George Birchall fails

Larger FM business George Birchall Service avoids administration
3 days ago

Morgan Sindall bags £384m London scheme first phase

Hackney scheme includes an academy, leisure centre and six blocks of flats
3 days ago

Mace confirms £180m Olympic Park East Village deal

Firm will fine-tune its 'rising factory' method on the No6 East Village project
3 days ago

Contractor trials mixed reality headsets on school site

BIM and Microsoft HoloLens used to check M&E work
4 days ago

PM pledges extra £2bn for housing associations over 10 years

Longterm funding will be made available from 2022-2029
4 days ago

Jacobs to lead Edinburgh city centre transformation plan

Team will set out plan for historic overhaul of streets and public space
4 days ago

Costain and Galliford Try fined £2.8m after worker loses toes

Massive fine after accident at Cheshire water treatment works
4 days ago

Boost your online presence – join the new Enquirer Directory

New site for suppliers and buyers will showcase their products, services and latest stories
5 months ago

Van Elle shareholders stage AGM revolt

Shareholders block board's ability to issue new shares for acquisitions
4 days ago

£100m Bristol sports arena plan at Ashton Gate stadium

Sports and convention centre will be attached to Lansdown Stand
4 days ago

Balfour Beatty raises £43m from hospital stake sale

Balfour sells 50% stake in Fife Hospital PPP
4 days ago

Kier offloads pensions unit for £3.5m

Third party pension management business administers half of all police pension
5 days ago

Willmott Dixon clinches £38m Winchester sports centre

Work to start in Spring 2019 on major leisure and sports complex
4 days ago

Architect TP Bennett reaches record turnover

Manchester office grows on back of city building boom
4 days ago

Brexit migration plan would “cripple construction”

Industry pleas ignored over need for steady flow of low-skilled site workers
5 days ago

Wates wins £16m Stockport college revamp

Work is due to start in the early new year on Wellington Road Campus
4 days ago

Balfour Beatty pioneers plastic pylons in Scotland

140 composite poles installed by new helicopter crane in just five days
5 days ago

Contractor services