Construction and support services firm Interserve has forecast better-than-expected 2018 profit, but said net debts will hit an estimated £513M.
Shares rose 20% to 119p this morning after the update on the 2017 year end and expectations for 2018 was released. The firm said 2017 performance is in line with expectations outlined in October last year and 2018 operating profit is expected to be ahead of current market expectations.
The company said it is making progress on its three-year ‘Fit for Growth’ rescue plan, which aims to increase efficiency, simplify the business and improve the procurement process, and it is expected to add between £40M to £50M to operating profit by 2020.
The £513M net debt figure relates to exiting the Energy from Waste business and is expected to peak in the first half of the 2018 financial year. Interserve issued a profit warning in September when it said the costs of exiting the energy from waste business were significantly more than anticipated.
The news comes as rival Carillion prepares for a crunch meeting with investors today where it hopes to secure financial support.
Interserve chief executive Debbie White said: “The new management team, and the board, have been working to stabilise the business and provide a sound foundation to continue to serve our customers effectively, underpin our future growth and to restore shareholder value.
“This work has focused on managing the balance sheet, conducting a thorough assessment of the contract portfolio, and introducing new management disciplines, processes and cost controls under the ‘Fit for Growth’ programme.”
The management team is reviewing the group’s contract portfolio and non-trading balance sheet items. Testing of the group’s end-of-year covenant position has been delayed to 31 March.