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Interserve targets new markets as profit falls 31%

10 Aug 10 Interserve's pre-tax profit has fallen 31% to £27.3m for the first six months of the year, compared to the £40m posted for the same period a year ago.

Interserve's pre-tax profit has fallen 31% to £27.3m for the first six months of the year, compared to the £40m posted for the same period a year ago.

Revenue was down fractionally at £945m (H1 2009: £951m).

The firm said its UK construction business is targeting new markets, including waste and retail, in response to shrinking workloads in its traditional markets such as education.

In its last full year results, the construction and support services group delivered profit before tax of £89m on turnover of £1.9bn.

Interserve's order book was also down for the first half of 2010, by 12%, at £5.7bn, compared to £6.5bn at the last year end. This comprises £4.5m of forward orders and £1.2bn relating to pipeline. The fall is due to “a reduction in the estimated value of pipeline in light of recent discussions with UK public sector clients, amounting to £600m”.

The firm secured £800m of new contract wins during the reporting period.

Interserve has cut its net debt to £53.1m (30 June 2010), compared to £85.1m a year ago.

The pension deficit rose slightly to £75.8m (31 December 2009: £68.6m).

Around half of the group's profits are currently derived from outside the UK

Operations

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Interserve's construction business, Project Services, delivered revenue of £381m, down 6.3% from the £406m reported a year ago. However, its profit contribution was up to £23.5m from £18.1m.

In the UK, over half of construction activity is generated via PFI and long-term framework contracts. Its UK order book has remained broadly the same as the year-end position, at around £1.2bn.

The firm said it is “actively targeting new sectors, including waste and retail, to offset some of the potential shortfall in work from our traditional segments such as education and custodial”.

It believes it is “well placed to participate in any replacement programme” for the axed Building Schools for the Future scheme. The firm was named preferred bidder for the £150m St Helens BSF, a project subsequently cancelled.

Interserve's Support Services division reported an increase in revenue to £538m, from £504m a year ago. Pre-tax profit climbed to £10.7m (H1 2009: £8.9m).

The group's Equipment Services business, RMD Kwikform, suffered a fall in revenue, which dipped to £68.4m from £80.4m, and profit, which plunged to £7.7m from £20.4m. Interserve said it "was not able to replace several large hire contracts that helped deliver a record 2009 result”.

Outlook

Chief executive Adrian Ringrose said: "Trading in the half-year was in line with the Board's expectations. Project Services delivered an excellent result, Support Services is making good progress based on moving performance in several key public sector contracts to planned levels of profitability and Equipment Services, after an exceptional 2009, performed creditably in a challenging environment.

“Uncertainties persist in our markets, but we remain confident that the second half will show a significant uplift on the first half and that we have a strong international platform from which to sustain long-term growth at attractive margins."

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