News of deal comes as firm posts 68% fall in full-year profit, with group revenue up 8% to £2.6bn

Interserve PodSolve East Leeds Academy standardised school design

Interserve has struck a deal to buy Rentokil’s facility services business for £250m, in a move that would make the construction group one of the UK’s top three facilities maintenance firms by turnover.

The deal was announced as Interserve reported its full-year results this week, with pre-tax profit falling 62% to £68m, down from £180m the previous year.

Excluding £13m in finance costs and exceptional items related to asset disposals, pre-tax profit rose to £81m.

Interserve said it would fund the takeover of Rentokil’s Initial Facilities, which is conditional on shareholder approval, with a £70m share placing, equivalent to around 10% of existing shares, and debt.

Initial Facilities employs around 25,000 people across the UK, Ireland and Spain and posted £542m in revenue last year.

Adrian Ringrose, Interserve chief executive said: “We believe that this acquisition will deliver significant strategic progress in growing one of our core businesses.

“The breadth and fit of the services we will now be able to offer, added to the advantages of increased scale and potential synergies, will create a compelling proposition, leaving us well placed for future growth.”

Interserve said it would hold a general meeting for shareholder to vote on the takeover on 17 March.

In its results for the year to 31 December 2013, Interserve posted group revenue, including share of joint ventures, of £2.6bn, up 8% from £2.4bn in 2012.

Excluding £13m in finance costs and exceptional items related to asset disposals, pre-tax profit rose to £81m.

The firm’s UK construction business posted revenue of £802m, up from £737m in 2012, with operating profit of £14.7m, up marginally on £14.6m the previous year.

This gave the UK construction business an operating margin of 1.8%, down slightly on 2% last year.

Internationally construction posted revenue of £216m, up from £202m, with an operating profit of £13.1m, down from £14.3m the previous year, and an operating margin of 5.1%.

The firm said its construction businesses, in both the UK and the Middle East, “have performed well, showing continued resilience in the face of difficult economic conditions”.

“UK construction again performed well, showing continued resilience amid challenging market conditions.

“Against a backdrop of subdued major infrastructure activity, our strategy of nurturing repeat business on key accounts and selectively diversifying into new sectors yielded increased revenue.”

The firm said its future workload remained stable at £1bn (2012: £900m), with the firm benefitting from “a mixture of new and existing frameworks, and from selective opportunities in the private sector”.

The firm’s UK support services business reported revenue of £1.2bn, up from £1.1bn in 2012, with an operating profit up 26% to £56m, up from £44.3m.