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Tue April 13 2021

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Interserve rebrand sheds the ghost of Carillion

2 Mar There is more to Interserve's rebranding than a simple change of name. Phil Bishop reports.

Door to a new future
Door to a new future

Interserve Construction and Interserve Engineering Services have rebranded as Tilbury Douglas Construction and Tilbury Douglas Engineering.

For younger readers, or those with short memories, Tilbury Douglas was what the company was called before it was renamed Interserve in 2001.

Tilbury Douglas was a traditional construction contractor operating in a high-risk, cyclical market. Then at the end of 2000 came the opportunistic purchase of Building & Property, a building maintenance business that had been part of the government’s Property Services Agency.

From this starting point, Tilbury Douglas began to change into a company focused on support services, such as cleaning schools and hospitals, where revenues seemed assured from a client – the state – that would never fail. The name Interserve was adopted in 2001 to emphasise the ‘service’ aspect of the company’s new identity and to camouflage its construction roots.

It was much the same journey that Carillion made – Tarmac the construction company became Carillion the support services company, also following the acquisition of another part of the privatised Property Services Agency.

Like Carillion, Interserve revenues grew on the back of the outsourced building maintenance work – including mopping floors and standing guard as well as maintaining the fabric of the structure – often with 25-year contracts embedded in Private Finance Initiative schemes. Guaranteed revenue stream, easy money...what could go wrong?

In Carillion’s case, plenty, it soon transpired. With blurred vision, it dropped the ball and lost the expertise necessary to manage some of the more complex construction projects that it took on.

The architect of Interserve was the wunderkind Adrian Ringrose, a politics graduate with zero construction experience, who joined the company in 2000 and three years later, aged 35, became chief executive. He stayed in the job for 14 years, until 2017, overseeing turnover growth from around £1bn to £3bn thanks to contracts of decreasing relevance to construction, culminating in probation services.

But like Carillion, Interserve also found that it was no longer as smart at construction as it once had been. In the space of a few years it lost more than £200m building waste-to-energy incinerators.

With support services as their cash cows and their main profit centres, it looked like both Carillion and Interserve might quit construction altogether. But then the Cameron-Osborne austerity years slowed the public sector gravy train. Companies with long term commitments faced rising costs in the shape of the rising national minimum wage and inescapable contract terms. It was not just the hybrid construction/FM contractors that began to struggle, the whole outsourcing sector did – Serco, Mitie, Capita etc.

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Interserve lost £94m before tax in 2016 and followed it up with a £244m pre-tax loss in 2017.

When Carillion finally fell into liquidation in January 2018 there was much speculation that Interserve, with its similar exposure, would be next. In March 2019 Interserve fell into administration, but re-emerged in a pre-pack deal under the private ownership of its lending banks and de-listed from the London Stock Exchange. It represented a triumph, of sorts, for Debbie White, who had inherited the mess left behind by Ringrose. As chief executive for 18 months, she prevented Interserve following Carillion down the plughole. Then, with the restructuring complete, she moved on.

The new owners sent for Alan Lovell, described on these pages as a specialist in basket-case construction companies, chief executive at various past times of Conder, Costain and Jarvis and briefly (after it was all far too late) a non-executive director of Carillion.

As Debbie White had come from a support services background (13 years with Sodexo), it always seemed feasible that Interserve’s construction interests would be sold to save the facilities management business. But this was not to be, and under Lovell’s guidance, Interserve has returned firmly to its construction roots.  Interserve Support Services was sold to Mitie in 2020 for £190m, comprising £120m in cash and a £70m of Mitie shares (17.5% of the total).

All the while there has been another leg to the Interserve stool, as yet unmentioned here: the highly-profitable RMD Kwikform, the old RM Douglas scaffolding and formwork business.

In 2016, when things first started turning south, Adrian Ringrose put RMD Kwikform up for sale to raise cash. But although it was by now firmly a non-core business, RMD was making annual profits of more than £40m on £200m turnover – a 20% margin. The core business of facilities management was making only 5% on its £2bn turnover. RMD was more valuable to Interserve than to anyone else and so the sale was cancelled. In 2019, as part of the group restructuring RMD provided a handy place to dump £350m of the group's £650m debt to spread the burden and share the pain. That year RMD Kwikform saw its revenue dip 11% to £165m and operating profit shrink 59% to £15.9m.

However, RMD Kwikform has always appeared as a bit of a spare wheel and rumours of its disposal keep arising. Most recently there were whispers of the Bedouin French billionaire Mohed Altrad adding it to his empire, although that rumour was firmly dismissed by all concerned.

Changing the company’s name from Interserve back to Tilbury Douglas serves the purposes of cleansing the brand. Interserve had become not toxic exactly, but certainly damaged, and forever destined to be mentioned in conversations about Carillion.

Tilbury Douglas can be that perfectly pure construction contractor that it seemed Interserve never really wanted to be.

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