Interserve, the international support services and construction group, has said that its expectations for the UK construction division as a whole have been "significantly adversely impacted" by a further deterioration in its Glasgow energy from waste contract.
The comment comes in an update on current trading for the first four months of the year and revised guidance for full year 2016 performance published today.
The issues relate to the design, procurement and installation of the gasification plant, together with Interserve describes as “continuing challenges with the supply chain” that will result in further cost overruns and delays.
As a result the, Board is anticipating a £70 million exceptional contract provision to be taken in the first half of 2016, resulting in a similar level of cash outflow spread across 2016 and 2017. Interserve said it would be “pursuing every opportunity” to mitigate the situation. The International Construction business is performing as expected, maintaining good visibility of future workload.
Two days ago the group announced it been awarded a £46 million contract in joint venture with Doosan Enpure to upgrade the Horsley water treatment works in the Tyne Valley for Northumbrian Water.
Trading in Interserve’s Support Services division remains robust and in-line with expectations - notable in a strong period of work winning was the £230 million contract award to provide facilities services to the United States Air Force’s UK estate.
The group said its Equipment Services division is also continuing to have good momentum across its international markets, particularly the UK and Far East. Performance in the Middle East has been in line with expectations although some uncertainty remains. The strategic review of the Equipment Services division announced with Interserve’s preliminary results is proceeding to plan.
Interserve’s balance sheet remains robust. However, taking full account of the cash impact of the EfW contract provision, net debt is expected to be around £35m higher than previously guided at both the half year and the year end.
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