10 May 2010 07:00
10 May 2010
INTERIM MANAGEMENT STATEMENT
Interserve, the international services, maintenance and building group, is holding its Annual General Meeting at 11:30 a.m. today and also issues its Interim Management Statement covering the period from 1 January 2010 to date.
Overall, the business is performing in line with the Board's expectations, although as anticipated in the annual results announcement trading during 2010 to date remains challenging in Support Services and Equipment Services, such that the second half weighting of profits will be more pronounced than usual.
Support Services
Revenues continue to grow as the business benefits from the contracts it has won in the last eighteen months. However, as previously indicated, a number of the newer public sector contracts continue to be impacted by significant mobilisation and transition costs. Contract cost reduction opportunities are in the process of being realised and the Group remains confident that these contracts will deliver their full potential over the contract life. Private sector facilities management contracts are progressing to plan. Nonetheless elsewhere within the sector, including the access business, conditions remain very competitive. The above factors are affecting performance so far in 2010.
Market conditions remain difficult for Specialist Services and are continuing to impact the operating performance of the business.
Project Services
The Group's associate businesses in the Middle East have maintained their strong performance into 2010, despite lower activity levels in Dubai. The region's workload has risen from the year end, benefitting in particular from the award of around £150 million of work in Qatar to date. Recent contract wins encompass both construction and services activities, including a three-year services contract with Maersk Oil Qatar for the supply of manpower and equipment to onshore and offshore facilities, worth around £20 million, and further substation construction awards in Qatar worth around £25 million.
The UK business continues to perform well, delivering progress versus the prior year as activity levels in the public and utilities sectors remain healthy. The business has increased its future workload against an already strong year end position, giving it good revenue visibility for the remainder of this year and into 2011 and leaving it well-positioned as we anticipate a period of restraint on public sector capital spending.
Equipment Services
As previously indicated, the division's performance to date, while in line with the Board's expectations, is significantly below what was an exceptionally strong level last year, when a number of major projects in the UAE helped deliver a record first half operating result. The Middle East remains the largest regional market for this division, and the recent entry into Saudi Arabia is developing to plan. Australasia is performing well, buoyed by activity in the mining market, but elsewhere market conditions remain tough.
Financial position
Further tight control of capital expenditure and working capital has led to a broadly stable net debt position compared to that reported as at 31 December 2009 (£37.3 million). The working capital position continues to benefit from a favourable contribution from advance payments, which is likely to reverse over the coming year.
The Group is pleased to have recently renewed its committed debt facilities of £250 million until October 2013.
Outlook
Our principal markets offer exciting prospects, and we believe that our business model of concentrating on long-term client relationships in our core sectors of expertise is a key strength, given the visibility of future workload it brings. A healthy future workload in excess of £6 billion (including the Group's share of Middle East associates) affords the Group excellent visibility of around 90 per cent and 70 per cent of 2010 and 2011 anticipated1 revenues respectively.
The Group continues to benefit from its strong international exposure to markets with attractive growth prospects which offer opportunities to expand both service offering and geographical footprint.
Given the risks in the external environment, the rest of 2010 will be challenging, with more pronounced seasonality as noted above. However, the Board remains confident that the Group has a strong base from which to sustain long-term growth at attractive margins.
An electronic copy of this Interim Management Statement will be available to download from the Company's website, www.interserve.com.
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 020 7379 5151MaitlandAbout Interserve
Interserve's vision is to be the Trusted Partner of all our stakeholders. We are one of the world's foremost support services and construction companies, 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. It has revenue of £1.9 billion and a workforce of 50,000 people worldwide.
Footnote
1. Based on 2010 consensus revenues of £1.92bn, 2011 consensus revenues of £ 1.91bn.
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