11 Jan 2011 07:00
TRADING UPDATE £0.5bn OF CONTRACT WINS
Interserve, the international support services and construction group, today provides an update on trading in advance of its annual results announcement on 9 March 2011, including contract wins worth around £0.5 billion.
Highlights
* Strong second half, trading in line with expectations
* Further contract wins across key sectors and geographies
* Strong cash performance Trading Performance
Overall, trading is in line with the Board's expectations, delivering a stronger performance in the second half of the year as compared to the first half. Despite the near-term public sector spending environment the Group benefitted from good progress achieved in the Support Services margin enhancement programme and excellent trading in Project Services.
The Group secured over £1.5 billion of new work in 2010, contributing to a future workload of over £5 billion, of which around £1.5 billion relates to 2011.
Contract Wins
In recent months Interserve has won a number of contracts in the UK and across the Middle East with a combined value of around £0.5 billion, including:
* UK:
- School construction and facilities management contracts with St Helens
Council and Sandwell Metropolitan Borough Council, with a combined
whole-life value of around £170 million;
- Two major hospital development contracts in Birmingham and Cardiff worth
£55 million;
- Selection as one of the contractors on the £1.5 billion Northumbrian Water
framework contract;
- Private sector support services contracts across the commercial, industrial
and power sectors worth around £36 million (including contracts with
William Hill, BNY Mellon and Alstom);
* Middle East:
- Construction contracts in Doha in the education and commercial sectors
worth around £68 million;
- Three multi-year petrochemical services contracts in Qatar with RasGas,
Total and QVC, with a combined whole-life value of over £30 million;
- A fit-out contract at the Sofitel Resort Palm Jumeirah hotel in Dubai worth
around £30 million;
- Road improvement contracts in the northern emirates of the UAE worth around
£18 million;
- Construction contracts in Oman in the power and petrochemical sectors worth
£20 million;
- A three-year services contract with the UK Ministry of Defence at Musanah
air base near Muscat.
Support Services
Support Services has advanced significantly in the second half as compared to the first half due in large part to the good progress made in improving profitability in our outsourcing operations. Consequently, there has been a marked improvement in the division's operating margin during the second half.
We continue to engage in constructive discussions with the UK government on how we can support its cost-savings programme. As previously anticipated, whilst this process may result in some near-term volume pressure it is leading to a streamlining of procurement processes which, given the division's substantial future workload of around £4 billion (with £0.7 billion relating to 2011) and a healthy opportunity pipeline, is expected to drive growth in the coming years.
Project Services
The division has delivered excellent above-trend results, both in the UK and Middle East, as we executed the significant contract portfolio developed in recent years.
International future workload remains robust and recent contract awards in Qatar, the UAE and Oman help provide solid revenue visibility for 2011. Future workload in the UK amounts to some £1 billion, of which over £0.5 billion relates to 2011. We are continuing to target new sectors, such as energy and retail, in order to mitigate to some extent challenging near-term market conditions.
Equipment Services
The division has continued to experience cyclical weakness in infrastructure spending in most of its markets. In particular, there was a pronounced slowdown in work in the UAE as compared to the buoyant activity levels we experienced in 2009, although in recent weeks there have been encouraging signs of a pick-up in market activity in Abu Dhabi. Our Australian business has continued to trade well during 2010 and our new operation in Saudi Arabia, where the market opportunity remains exciting, is gaining momentum.
PFI Investments
Following the financial close of the St Helen's schools programme in December the Group now manages a portfolio of 21 financially-closed projects, of which 13 are operational. These assets represent a significant investment commitment of more than £50 million, around half of which has already been paid.
Financial Position
Cash conversion in the second half has been strong, resulting in a net debt position similar to 30 June 2010 (net debt: £53.1 million). This has been achieved even after allowing for acquisitions in the US and India in the second half, totalling some £27 million.
With committed facilities in place until late 2013 of £250 million, the Group has a strong financial position with significant capacity to drive further growth.
Outlook
We anticipate that trading conditions in 2011 will be stable compared with 2010. We expect our margin enhancement programme in Support Services to continue to deliver improving performance which, in combination with a resumption of growth in Equipment Services, should mitigate our expectations of tougher trading conditions for Project Services following its strong performance in 2010.
During 2010 the Group extended its already significant international reach, via investments in a construction business in India, a services company in Oman and an equipment services business in the USA and we now have operations in 30 countries. In the UK we expect substantial opportunities in the coming years as the government seeks to effect structural changes in public service delivery and social infrastructure investment.
Accordingly, despite the uncertainties around the near-term impact of changes to UK public expenditure plans, our substantial future workload; our international footprint and opportunities in UK outsourcing, continue to provide a platform for long-term growth at attractive margins.
An electronic copy of this Trading Update will be available to download from the Company's website, www.interserve.com.
- Ends -
For further information please contact:
Adrian Ringrose, Chief Executive 0118 932 0123 Tim Haywood, Group Finance Director 0118 932 0123 Matt Jones, Head of Investor Relations 0118 960 2280 Elizabeth Morley / Tom Eckersley 020 7379 5151 Maitland About 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. We are based in the UK, have revenue of £1.9 billion and a workforce of 50,000 people worldwide.
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