Firm’s UK construction business expected to “break even” rather than make a profit

Interserve’s UK construction arm is on course to “break even” after being hit by “three loss-making energy process contracts”, the firm said in a third quarter trading update today.

While the performance of its building and fit-out divisions is “encouraging”, the firm said its overall construction business’ results will be impacted by the three problem jobs that fall within its infrastructure division.

Interserve attributed the problem jobs to “sub-contractor insolvencies and the consequential impacts on project timing and costs”.

Overall Interserve said its results were still on course to meet market expectations due to good performances by its support services and equipment services businesses, making up for the construction problem jobs.

Stephen Rawlinson, analyst at Whitman Howard, said his firm had previously forecast that Interserve’s construction business was on course to make a £12m operating profit. He said that in light of today’s update the firm’s other divisions had a “big task to fill the £12m gap”.

Intersever said support services continues to perform well, including in UK frontline public services through the successful mobilisation of the Transforming Rehabilitation programme, while internationally, despite the downturn in oil price, demand for its critical operational support functions “continues to be strong with resilient margin performance.”

While its equipment services has “continued to deliver outstanding growth”, which the firm said was fuelled by strong demand and benefitting from the increased scale of the hire fleet in it has invested in in recent years.

Meanwhile the contractor has appointed Glyn Barker as its new chairman from next year.

Barker will join the board from 1 January 2016 and will then become chairman from 1 March, after current chairman Lord Blackwell retires from the board on 29 February.

Among other roles, Barker is a non-executive director of Aviva and Berkeley Group Holdings, and has significant experience advising FTSE 100 companies.

Commenting on Barker’s appointment, Interserve CEO Adrian Ringrose said: “I am delighted that Glyn has agreed to join the board. His experience in leading complex organisations and boards and of working closely with stakeholders will be a powerful asset for the company as it continues to grow.”

Current Interserve chairman Lord Blackwell said: “I am proud of the strong platform for future growth and development that the business has built in recent years and am delighted that Glyn will be succeeding me as chairman to guide the next stage of the company’s evolution.”