Support services group Interserve (IRV) has been struggling for some time with ever-increasing provisions against its energy-from-waste business, climbing debt levels and (well-founded) scepticism from investors over the prospects of the outsourcing sector. It is hardly surprising, then, that investors were cheered by signs of a turnaround this week, when the group announced operating profit for 2018 was expected to be ahead of market expectations.
Performance in 2017 is expected to be in line with the picture outlined in its October trading statement: front-half weighted, with second-half performance broadly flat on the same period in 2016. The group did, however, give more details on its 'Fit for Growth' programme, an efficiency initiative management expects to contribute at least £40m-£50m to operating profit by 2020. In 2018, the initiative is expected to contribute £15m.
Expected net debt for 2017 is £513m, following costs related to the exit from energy-from-waste and exceptional items, and should peak during the first half of this year. The figure was up on some analysts’ estimates. Numis had been forecasting levels of £508m, although it welcomed the update, saying the clarification of benefits from the Fit for Growth programme gave investors “the first tangible signs of remedial actions taken by the new management team”.
