Interserve has posted a £94.1M pre-tax loss following a ‘challenging’ year for the company, including its costly exit from the Energy from Waste (EfW) market.
Chairman Glyn Barker said 2016 had been a ‘challenging’ year for the business, but remained positive by saying it had had ‘solid’ results in its core businesses. Revenue was steady at £3.24bn for the 2016 financial year, compared to £3.20bn in 2015. It also has more than £7bn of work lined up for this year.
But it said that its good performance had been overshadowed by the serious challenges and costs posed by the legacy of its participation in the Energy from Waste (EfW) business and the escalation in the costs of exiting that sector.
In November the company was served notice of termination on its Glasgow Recycling and Renewable Energy project. However, it said that a previous estimate of £70M for the cost of covering the exit was now no longer adequate and raised the provision to £160M.
It attributed the additional costs to a predicted lengthy period of litigation, contracts beset with problems, failures in its supply chain and complex technical issues.
It also said that its UK construction business had delivered a disappointing performance with a £3.1M loss. It blamed a loss in the division on challenging market conditions coupled with pockets of underperformance in operational delivery in a number of contracts.
The firm remained positive however saying that it expected to see continued positive momentum in Equipment Services as it invested in growth markets, new technologies and different products.
Interserve chief executive Adrian Ringrose said: “2016 was a mixed year for the Group. We delivered a strong cash performance and the majority of our businesses performed well despite political and economic uncertainties, together with the impact of the National Living Wage in the UK. However, the performance of our UK Construction business was disappointing, and we are focussing our efforts on improving and re-shaping this business.”
He added: ”Managing the challenges of exiting from the Energy from Waste sector remains a significant priority. As previously announced, we have increased the exceptional provision for exiting this market and the associated contracts to £160 million. We expect to complete substantially all of the construction and commissioning of the projects during 2017, although our contractual obligations in respect of warranties, and the resolution of claims will continue for a period thereafter.”
The report said that after announcing in November last year Ringrose would be leaving the company, a selection process was nearing its conclusion and an announcement on a replacement could be expected shortly.