Interserve sees profits rise as it acquires Initial

Headline profits at Interserve rose by 7.7% last year while revenue grew by 12% to just under £2.2bn, as it claims its policy in construction of focusing on repeat business is paying off.

The release of the full-year results came on the same day the company agreed to pay £250m to buy facilities business Initial Facilities from a subsidiary of Rentokil.

The company says the acquisition, which has been partly financed by a £75m share placing, will put it among the UK’s top three support service providers by revenue.

The headline pre-tax profit figure excludes a one-off gain of £114.9m in 2012 from the disposal of most of its PFI portfolio. Including this figure, pre-tax profit actually went down by 62.1% to £68.1m.

Within the company’s UK construction business, operating profit was 0.6% ahead of the 2012 figure at £14.7m, while revenue was up 8.8% at £802.2m. Margins remained within the expected range at 1.8%, while the order book remained stable at £1.0bn.

The company says it has benefited from diversification into select sectors such as energy from waste, with a £146m scheme currently underway in Glasgow, and a recently announced £15m joint venture with Babcock & Wilcox Vølund in Peterborough.

It says Paragon, the fit-out and refurbishment company it acquired in May, is thriving from being part of a larger group that gives it access to larger projects such as HM Courts and Tribunal Service.

The company’s ongoing relationship with Jaguar Land Rover will see it continuing to work on multi-million projects right through this year.

On the international market it is beginning to see the signs of an upturn in the United Arab Emirates and Qatar, although the £5.1m it spent in exiting its business in India – a country “where results and future prospects did not meet expectations” – has been included as an exceptional item in this year’s figures.

Chief executive Adrian Ringrose said the construction division had remained “resilient”.

He said: “2013 has been another good year for the business, and despite challenging conditions in many of our markets, we delivered substantial growth in both revenue and headline profit, and made important strategic progress.”

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