Construction and outsourced services group Interserve saw losses more than doubled last year but after completing a refinancing is feeling stable and looking to return to growth.
While revenues were flat at £3.25bn, the Berkshire-based group saw pre-tax losses widen 159% to £244.4m, not helped a £86.1m write down, while a balance sheet review resulted in non-cash goodwill and asset write downs of £76.7m. Underlying earnings per share plummeted 65% to 29p.
Interserve's net debt increased 83% to £502.6m, driven by cash outflows from its difficult exit from the energy-from-waste market, charges from its operational and balance sheet review, plus a change to a "more normalised" working capital position and foreign exchange
movements. Net debt is expected to rise to £650-680m in the second half, subject to the timing of asset disposals, but directors said it would improve to £620-630m by the end of 2018.
New chief executive Debbie White launched a "fit for growth" self-help plan to deliver an annual benefit of at least £40-50m to operating profits by 2020, £15m of which she anticipates to come in the current year.
Interserve, which warned back in October that erosion of profits was putting its banking terms at risk, signed a refinancing deal with its lenders, bond providers, and pension scheme trustees earlier last week in order to provide the firm with cash facilities of around £196m and bonding facilities of up to £94.5m to guarantee construction projects as part of total committed borrowing facilities of £834m through to September 2021.
White acknowledged that the refinancing has "come at a considerable cost", but said it created a platform to allow her to carry out the growth plans and "rebuild momentum" in underlying performance. The group has a future workload of £7.6bn, following key contract wins in the year including the Ministry of Defence, Ministry of Justice, Department of Work and Pensions, Network Rail, BBC in the UK and in the Middle East with Jumeirah Group, Liwa Plastics and Doha Festival City.
"2017 was a difficult year for Interserve," she said, putting it mildly, "but it was also a year of significant progress. As a new management team, we have stabilised the business and taken the first actions to establish a solid foundation from which we can both serve our customers effectively and underpin improved future operational and financial performance."
"This work has focused on refinancing, conducting a thorough assessment of the contract portfolio, and introducing new management disciplines, processes and cost controls under the 'Fit for Growth' programme. We are confident that the cost savings and management actions identified will contribute at least £40-50m to group operating profit by 2020, with the 2018 benefit estimated to be £15m," she added.
As of 0845 BST, shares
had lost 12.54% to 93.50p.