10 Jan 2018 07:00
10 January 2018
UPDATE ON 2017 YEAR END AND EXPECTATIONS FOR 2018
· 2017 performance in-line with expectations outlined in October update
· 'Fit for Growth' programme expected to deliver £40m-£50m benefit by 2020
· 2018 operating profit expected to be ahead of current market expectations
· Constructive discussions with lenders over longer-term funding are progressing
Interserve ('the Group') provides the following update ahead of the announcement of its 2017 full year results.
Overall 2017 trading performance before exceptional items is consistent with the trends outlined in the October market update and in-line with market expectations.
As previously announced, testing of the Group's year-end covenant position has been deferred until 31st March 2018. The Group anticipates that net debt at year-end 2017 will be circa £513m, reflecting the significant outflow in the year relating to Energy from Waste, a normalisation of trading terms with our supply chain and exceptional costs. Whilst we anticipate that future cashflows from energy from waste will be broadly neutral, we expect net debt to peak in the first half of FY18 due to the phasing of cashflows relating to energy from waste costs which have already been provided, exceptional costs relating to restructuring actions and the current refinancing activity. Discussions with the Group's lenders are progressing and a further announcement with regards to its longer-term funding arrangements will be made in due course.
In order to establish a strong foundation from which the Group can move forward, the new management team has been engaged in a comprehensive review of the Group's contract portfolio and a thorough review of the Group's non-trading balance sheet items. This work is progressing well and the outcomes will be announced alongside a presentation of the Group's longer term strategy for value creation at the time of the Group's 2017 annual results presentation.
The Group is making good progress with 'Fit for Growth', the three-year programme launched by the new management team in October 2017. 'Fit for Growth' is focused on increasing the Group's organisational efficiency, improving Group-wide procurement processes and ensuring greater standardisation and simplification across the business. Management are confident that the cost savings and management actions identified will contribute at least £40-50m to Group operating profit by 2020, with the in-year impact in 2018 estimated to be £15m. As a result of the 'Fit for Growth' initiatives, the Group's operating profit for 2018 is now expected to be ahead of current market expectations. A full update on the programme will be provided as part of the 2017 annual results presentation.
Debbie White, Interserve's Chief Executive, said:
"The new management team, and the Board, have been working to stabilise the business and provide a sound foundation to continue to serve our customers effectively, underpin our future growth and to restore shareholder value. This work has focused on managing the balance sheet, conducting a thorough assessment of the contract portfolio, and introducing new management disciplines, processes and cost controls under the 'Fit for Growth' programme."
Ends
For further information please contact:
Robin O'Kelly, Director of Communications +44 (0) 7786 702526
Rhys Jones, Head of PR, Interserve +44 (0) 7909 605336
Michael Kinirons, CNC Communications +44 (0) 203 219 8816
This announcement contains inside information
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About Interserve
Interserve is one of the world's foremost support services and construction companies. Our vision is to redefine the future for people and places. Everything we do is shaped by our core values. We are a leader in innovative and sustainable outcomes for our clients and a great place to work for our people. We offer advice, design, construction, equipment, facilities management and frontline public services. We are headquartered in the UK and listed in the FTSE. We have gross revenues of £3.7 billion and a workforce of circa 80,000 people worldwide.
www.interserve.com
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