Interserve Regulatory News (IRV)

16 Nov 2009 07:00

16 November 2009

INTERIM MANAGEMENT STATEMENT

Interserve Plc, the services, maintenance and building group, issues its Interim Management Statement covering the period from 1 July 2009 to date.

Overall, trading is in line with the Board's expectations, benefitting from strong performances in the Group's Middle East construction and equipment services businesses, combined with ongoing stability in the public and utilities sectors in the UK. As highlighted in the half-year results, the private sector outsourced services markets in the UK remain very competitive, but Interserve has continued to strengthen its focus on selected long-term contracts where we have the opportunity to add significant value.

Facilities Management

Demand for facilities management services remains strong in the public and utilities sectors. In the last year the business has been highly successful in winning a number of notable public sector outsourcing contracts, the mobilisation of which has necessitated significant investment in operating costs and infrastructure. Elsewhere, we continue to be adversely affected by challenging market conditions in the private sector, with both volumes and margins remaining under pressure. As indicated at the time of the half-year results the business is implementing cost-reduction programmes across the division; these programmes have been extended, which will further impact results in the short term.

Specialist Services

As previously indicated, market conditions are challenging; however, the action taken earlier in the year to restructure the cost base is on course to contribute to an improved second-half performance.

Project Services

The Group's businesses in the Middle East have continued to deliver strong results across a region that continues to offer an attractive pipeline of opportunities. The UK has performed well, based on high levels of activity in the public and utilities sectors where we benefit from secure work streams emanating from the framework agreements that are a feature of these sectors.

Equipment Services

The Middle East is the primary driver of an excellent overall performance, with Australasia also delivering a robust contribution to the divisional total. Elsewhere market conditions remain tough, mitigated by the cost-reduction actions already implemented.

PFI Investments

The Group has continued to develop its PFI portfolio since the end of June, reaching financial close on the Sandwell BSF project, which increases the current portfolio size to 34 signed contracts (of which 22 are operational).The pipeline of opportunities remains encouraging.

Financial position

Strong cash generation has led to further improvement in the net debt position of the Group as compared to 30 June 2009 (when net debt stood at 85.1 million). This reflects continued focus on reducing capital expenditure, primarily within the equipment services business, and an improved working capital position, including a favourable contribution from advance payments.

With committed facilities in place of 250 million, expiring in or after 2011, the Group retains a resilient balance sheet.

We continue to make progress towards agreement of the funding position and deficit recovery of the Interserve Pension Scheme. As previously noted, the process is unlikely to be completed before the end of the year.

OFT Fine

In September the Group was fined in relation to the investigation by the Office of Fair Trading into the construction sector. Accordingly, the Group's 2009 results will include an exceptional charge of 11.6m, which will be paid before the end of the year.

Outlook

The Group will continue to execute its strategy of developing and maintaining long-term client relationships, building a well-balanced business mix and exploring new markets and models.

Since the end of June Interserve has continued to win significant new contracts in both the private and public sectors in the UK and overseas markets, which have helped maintain the Group's future workload at the record 6.7 billion level reported at the half-year (including its share of the Middle East associates future workload). With the strong revenue visibility afforded by this future workload and a broad range of high-quality opportunities in its markets the Board believes that the Group's operations are well placed to deliver robust near-term performance and future growth.

An electronic copy of this Interim Management Statement will be available to download from the Company's website, www.interserve.com.

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For further information please contact:

Adrian Ringrose, Chief Executive 0118 932 0123 Tim Jones, Group Finance Director 0118 932 0123 Matt Jones, Head of Investor Relations 0118 960 2280 Elizabeth Morley / Tom Roberts 020 7379 5151 Maitland

About Interserve

Interserve's vision is to be the Trusted Partner of all our stakeholders. We are a services, maintenance and building group operating in the public and private sectors in the UK and internationally. We offer advice, design, construction and facilities management services for society's infrastructure and provide a range of plant and equipment in specialist fields. Interserve is based in the UK and is a FTSE 250 company. It has revenue of 1.8 billion and a workforce of 50,000 people worldwide. Website: www.interserve.com.