Monday 16 July 2018

Interserve bags DWP contract after profit warning

The five-year contract will see the company provide facilities management services for the Department for Work and Pensions (DWP).

DWP
DWP

By Ravender Sembhy, Press Association City Editor

Troubled outsourcing and construction group Interserve has won a £227 million Government contract, a day after issuing a profit warning that saw its shares plunge.

The five-year contract will see the company provide facilities management services for the Department for Work and Pensions (DWP).

Interserve will provide the department with mechanical, electrical and building maintenance, as well as cleaning, catering, waste disposal, removal and “secure destruction of confidential waste” services across 700 buildings.

Boss Debbie White hailed the contract, but she has bigger issues to worry about following a profit warning and an announcement on Thursday in which Interserve said it could breach its banking covenants.

Group operating profit is now expected to be 50% lower than it was in the second half of last year, as the services arm grappled with escalating staff costs, squeezed margins and a flagging performance from its justice business.

Its construction unit also endured a triple-whammy hit, with profits coming under pressure from added costs, tough trading conditions and “operational delivery issues”.

Interserve, which has a workforce of around 80,000 and gross revenues of £3.6 billion, said it may not hit its earnings to net debt test in its financial covenants and had hired a financial adviser to help talks with its lenders.

Following the announcement, shares tanked over 30% on Thursday.

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