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Thursday 22 March 2018

Interserve shares plunge on reports of Government concerns over financial health

The FTSE 250 firm was down more than 14% in morning trading on the London Stock Exchange.

Shares in outsourcing giant Interserve have plunged (PA)
Shares in outsourcing giant Interserve have plunged (PA)

By Ben Woods, Press Association Chief City Correspondent

Shares in Interserve have plunged amid reports that the Government is keeping a close eye on the outsourcing giant’s financial health following Carillion’s collapse.

The FTSE 250 firm was down more than 14% in morning trading on the London Stock Exchange after the Financial Times reported that the Cabinet Office had pulled together a team to watch over Interserve, which employs 80,000 staff worldwide.

The move follows a warning by the group in September over its results after being hit by disappointing trading in July and August.

PA Graphics

It was followed by an even gloomier update in October when it issued a profit warning and said it may breach its banking covenants as it grappled with escalating staff costs, squeezed margins and a flagging performance from its justice business.

The Government remains on high alert after Carillion filed for liquidation on Monday, putting 20,000 UK jobs at risk.

Neil Wilson, ETX Capital’s senior market analyst, said: “Interserve has had its problems for sure, but it’s no Carillion.

“Its latest update showed improvement and the news will do no good for sentiment given there may be some twitchiness among investors in the sector following Carillion’s collapse.

“The FT report suggests that Interserve is being monitored by the Government. While one official says ministers are ‘very worried’, another said there is ‘no comparison’ with Carillion –  mixed messages but hardly likely to engender confidence.”

Despite flagging financial troubles towards the end of last year, Interserve has landed a number of hefty wins, including an extension on facility management services at the BBC worth £140 million and a £227 million Government contract to provide similar services for the Department for Work and Pensions.

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