Shares at Interserve have fallen sharply as the international support services and construction group announces a loss of £244 million for the year ended 31 December 2017 – “ a difficult year for the Group.”

While revenue remained stable at £3.25 billion and the future workload stands at £7.6 billion, operating profit was adversely impacted by poor performance in its Support Services and Construction divisions. A significant proportion of the Support Services business consists of high volume, and relatively low margin contracts.

Net debt increased to £502.6 million, driven by EnergyfromWaste cash outflows, non-underlying charges, a more normalised working capital position and foreign exchange movements.

The Group’s completed contract review and business review has resulted in a £86.1 million write down, of which over half will have no future cash impact.

Balance sheet review resulted in non-cash goodwill and asset write downs of £76.7 million

The Fit for Growth self-help plan which is now underway is expected to deliver at least £40-50 million annual benefit to Group operating profit by 2020 with £15 million benefit expected in 2018.

Key contract wins with new and existing clients including the Ministry of Defence, Ministry of Justice, Department of Work and Pensions, Network Rail, BBC, Jumeirah Group (Dubai), Liwa Plastics (Oman) and Doha Festival City (Qatar)

Describing Interserve’s 2017 financial results performance as "extremely poor", Debbie White, Interserve’s Chief Executive, said:

“2017 was a difficult year for Interserve, 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 £40-50 million to Group operating profit by 2020, with the 2018 benefit estimated to be £15 million.

“The refinancing we recently agreed with our lenders is a major step in securing a firm financial platform to underpin the Group’s future. Of course there is much still to do. However, we are encouraged by the support from our lenders and the new facilities will allow us to execute our business plan, focus on delivering a good service for customers, drive improved operational and financial performance.”

In a statement, Chairman Glyn Barker commented:

“In the last sixteen months Interserve has suffered unprecedented levels of disruption and faced a number of significant challenges. The Company was affected by general market headwinds and external events, however much of this resulted from self-inflicted mistakes of the past…. Overall the Group’s financial performance in 2017 was extremely poor with headline profit falling to £52.4 million. An inefficient operating model and excessive cost structure left the Group exposed to weaknesses in the UK performance of Support Services and Construction.”

“Success in our business requires discipline over the selection and pricing of bid opportunities, strong operational control over margin and cash generation, and an efficient, competitive cost infrastructure. It is clear to me that these disciplines have been inadequate in Interserve for a number of years.”

Interserve also reported underlying poor performance in its UK Construction business, with challenging market conditions and pockets of underperformance leading to a net loss for the year. The division has also historically suffered from poor decision making in project targeting and inadequate project control, reflected in the significant provisions we have made against a number of outstanding projects following the contract review.

By contrast, internationally, the Group delivered a strong performance in improving markets, stimulated by local development plans and the ongoing need for infrastructure development across the Middle East region.

During the year former Chief Executive Adrian Ringrose and Chief Financial Officer Tim Haywood both left the Board.