Interserve’s woes continued today after it issued another profit warning and said that it may breach its banking covenants, which sent shares plunging more than 30 per cent.
The support services group, which worked on huge construction projects such as Wembley stadium, said it now expected operating profit in the second half to be 50 per cent lower than last year.
It blamed rising staff costs, squeezed margins and poor performance at its justice and construction businesses.
The group also said it had to set aside another £35million in provisions due to contract slippages on a number of energy-from-waste contracts, on top of the £160million put forward last year.
In light of all these problems Interserve, which started talks with lenders last month after warning on profits, said that there was a ‘realistic prospect’ that they will not be able to meet its lenders’ debt tests.
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To shore up its financial position, Interserve said it would roll out a plan to improve margins.
‘As previously announced, we are engaged in constructive and ongoing discussions with our lenders,’ the group said in a statement.
‘We have engaged a financial advisor to assist us in these discussions, as well as looking at options to maximise the short and medium term cash generation from the business.’
Interserve has to set aside another £35million in provisions due to contract slippages on a number of energy-from-waste contracts
Shares in Interserve were down 33.5 per cent, or 30.12p, to 59.88 in morning trading.
Chief executive Debbie White said: ‘Despite our challenges, Interserve has a strong client base and many strengths as an organisation and I believe there is considerable potential for business improvement across the company.
‘My team will focus on improving our margin performance in UK support services and ensuring good contract selection in UK construction, while reducing our cost base across the company.’
Interserve’s order book stands at £7.4billion, boosted by contract wins at the Department for Work and Pensions, Durham University and the Department for Transport.