Group says “market conditions” force move in construction division

Contracting and support services giant Interserve is to target new sectors for construction work in order to avoid potentially “challenging” market conditions.

The firm said it was looking to expand into energy and retail in order to “to mitigate to some extent challenging near-term market conditions.”

However the admission came as it issued a trading update saying it had hit expectations, and secured £500m of work in the UK and Middle East. The new contracts include construction of the £57m Sandwell Building Schools for the Future programme, and the £26m Yardley Green hospital in Birmingham under Procure 21.

In addition it has won a £30m fit-out job in Dubai for the Sofitel Resort Palm Jumeirah hotel, and numerous other projects in Doha and Oman.

The company said it secured over £1.5 billion of new work in 2010, contributing to a future workload of over £5 billion, of which around £1.5 billion relates to 2011. It said trading was stronger in the second half of the year, and that it had managed to improve margins in support services, despite government pressure to cut the price of government contracts.

It said it expected trading in 2011 to be “stable” compared to 2010.