Outsourcing company Interserve saw shares almost halve this morning with an unexpected announcement that its outturn would be “significantly below previous forecasts”.
Shares were trading down 47% at 80.25 following the news. The company cited “disappointing” results in its support services and construction division as one of the reasons.
It was also expected to book a £160m charge in February from its exit from the energy-from-waste sector, but said that due to complexities of completion the final costs will significantly exceed this.
Latest outsourcer to run into trouble
Interserve is not the only outsourcing company to be blighted with problems this year. Rival contractor Carillion, one of the UK government’s biggest contractors, had a shock profit warning in July that it attributed to rising debts and an £845m hit on a number of contracts.
The chief executive of outsourcing company Capita also announced in March that he was stepping down following an announcement that profits had dropped by a third last year.
In addition, the Financial Conduct Authority last month launched an investigation into Mitie, the cleaning and pest control company, over the method it used to recognise revenues and the timing of a profit warning last year.
All three have had to content with rising labour costs as well as the impact of Government spending cuts and Brexit uncertainty on unplanned changes to contracts.
Reshaping the construction division
In August, then Interserve chief executive Adrian Ringrose promised that it would be “improving and re-shaping” the construction division in an attempt to get it back on track in the face of a £2m loss in the first six months of the year.
He said it would be a “smaller business in the next few years” as the company scaled back to focus on core markets due to tough market conditions.
Ringrose also added that the firm was not about to experience the same problems seen elsewhere in the sector as “compared to some, our problems are rather more narrowly defined and controllable.”
In the statement released today, Interserve said it continues to believe it will be able to operate within its banking covenants in 2017.
Headquartered in the UK, the international business has a current workforce in excess of 80,000 people worldwide. The latest profit warning comes just two weeks after new chief executive Debbie White took over.