Interserve is to focus on projects under £10m as departing chief executive Adrian Ringrose announced the group had returned to profit.
In the first half of 2017 Interserve made a pretax profit of £24.9m on revenues of £1.65bn. For the same period last year it lost £33.8m on £1.63bn revenues, due to difficulties building waste-to-energy centres. It has now quit that industry.
Interserve continues to lose money in its UK construction activities, making an operating loss of £2m for the first half (2016 H1: £4.5m profit) on revenues of £536.2m (2016 H1: £468.3m).
The loss was attributed to “the continuation of a long period of challenging market conditions, coupled with areas of underperformance in operational delivery on a small number of contracts”.
In a statement the firm said it had now “refined our risk appetite in new work that we take on” and its construction workload is set to decline in the years ahead, with support services and facilities management continuing to grow in prominence within the Interserve portfolio.
The firm said: “The continuation of a long period of challenging market conditions, coupled with areas of underperformance in operational delivery on a small number of contracts, resulted in a £2m net loss for the UK Construction business.”
It added: “The substantial majority of our UK construction activity is now focused on projects with an average value of less than £10m, constructing a range of buildings and infrastructure, plus selective larger contracts within our core competences.”
Its UK construction business is forecast to return to profitability in the second half of this year.
Interserve is now tightening up its construction bidding procedures and has made “further management, systems, procedural and other organisational changes across the division to enhance our financial and commercial controls and reporting”.
The firm said: “In our exited energy from waste business we are making progress on all projects. Overall we continue to believe the provision taken in 2016 remains appropriate, although significant risks and uncertainties remain.
“Despite the increased political and macro-economic uncertainty following the UK’s EU referendum and recent general election, our outlook for the current year remains unchanged.”
