Interserve interims impress as Initial integrates and indicates upside

Interim results were ahead of expectations at Interserve, the support services and construction group, as organic growth was bolstered by the smooth integration of £250m acquisition Initial.Revenue rose 28.7% to £1.37bn, helping profits before tax and exceptional items jump 36.4% to £50.2m and underlying earnings rise 28.5% to 27.5p. Organic growth contributed 9.1% in revenue and 14.5% in earnings per share.The interim dividend was lifted 10.3% to 7.5p The FTSE 250-listed company secured £2bn of new contracts in the period to swell future workload up to £7.5bn from £6.4bn six months before.Chief executive Adrian Ringrose said it was a very good period for Interserve thanks to "robust" performances from our UK support services and construction businesses and "excellent" results in equipment services.Equipment services grew revenue 8.7%, with a higher proportion of hire revenues and stronger pricing leading to significant profit growth across most markets and profit contribution increasing by 64.7% and margins above expectations.Ringrose said the integration of Initial Facilities was "progressing smoothly" and trading in line with management expectations after its acquisition in March, with anticipated synergies with the rest of the UK support services business remaining on track but no sign yet of a much-anticipated new London Underground contract. He added: "Market conditions in international construction and support services continue to be highly competitive, although we are now starting to see signs of improving demand."Although the contribution to total profits increased 33.3%, international support services margins tightened to 4.3%, mostly due to an expected change in the business mix following a previous acquisition and from continued competitive trading conditions. Future workload in the unit declined 9% to £49m. International construction started to see signs of recovery in Middle East construction markets, with revenue growth of 3% and future workload up 14.1% to £227m, but no profit growth due mostly to timing of contracts and to continued competitive trading conditions.Broker Liberum said the results were encouraging, ahead of expectations and indicated upside pressure was building for the full year.Shares in the company were up 1.7% to 623.32p at 08.23 on Wednesday.OH