Shares in Interserve fell 7% on 23 November after the contractor said debts this year would be higher than previously expected, reigniting doubts about the financial health of the firm
Having previously said debts would be around £575m to £600m, Interserve has revealed its debts would actually stand closer to £625m and £650m. Following this announcement, Interserve share price dipped below 32p last week for the first time.
The drop was prompted by an update from waste-to-product manufacturer Renewi, which said Interserve had missed a deadline on a joint venture in Derby that aims to produce energy from waste. The update provoked speculation that Interserve may have to set aside more money to compensate for delays.
In a trading update for the first nine months of the year, Interserve chief executive Debbie White said the firm was focused on reducing debts, sorting its finances and exiting its energy from waste business.
White said: “The board remains focused on positioning the group for long-term, sustainable success. To this end we will announce a deleveraging plan for the group early in 2019.
“Interserve has significant opportunities as a best-in-class partner to the public and private sector, and we are working with all stakeholders to put in place the right standards, services, governance and financing to deliver a stronger future for Interserve’s customers and our 74,000 people.”
The company said it was expecting a “significant” improvement in operating profit in 2018, in line with previous expectations.
Despite this, investors were not reassured. In early trading after the update, shares slid to just 32p, the lowest level since 1984.
Russ Mould, investment director at AJ Bell said: “Chief executive Debbie White and her team are clearly doing their best to steady the ship at Interserve but the admission that net debt will end the year higher than expected, not helped by how the cash inflow from the troubled energy from waste business will be lower than hoped, means the company has yet to reassure shareholders and potential investors about the key issues that face it.”
