Rise driven by energy from waste exit but 2018 operating profit set to be ahead of expectations
Interserve has revealed that its net debt for 2017 will hit 拢513m and is only likely to grow further over the coming months.
In a trading update issued to the city this morning, the embattled contractor said the year-end figure reflects the 鈥渟ignificant outflow in the year relating to energy from waste, a normalisation of trading terms with our supply chain and exceptional costs鈥�.
It expects net debt to peak in the first half of this year due to a 鈥減hasing of cashflows relating to energy from waste costs, exceptional costs relating to restructuring actions and the current refinancing activity鈥�, while anticipating future cashflows from energy from waste will be broadly neutral,
Last year the firm revealed that the cost of exiting energy from waste contracts will be close to 拢200m, having risen several times over the previous months.
It added discussions with its lenders are ongoing with a further announcement regarding its longer-term funding arrangements made in due course. In December, it revealed that it had secured 拢180m in additional short-term funding and reached agreements with its lenders to defer loan repayments until the end of March.
Interserve said its new management team has been overseeing a 鈥渃omprehensive review鈥� of the group鈥檚 contract portfolio and a 鈥渢horough review鈥� of its non-trading balance sheets, work of which is 鈥減rogressing well鈥�, with the outcomes announced alongside a presentation of its longer term strategy for value creation when it announces its 2017 financial results.
It added progress is being made with its three-year 鈥楩it for Growth鈥� programme, which was launched last autumn with the promise of a return to industry norm margins and cutting costs with as many as 200 jobs among back-office staff, mid-management and corporate functions set to go.
The firm is confident this will contribute at least 拢40m-拢50m to operating profit by 2020, estimated to be 拢15m this year. As a result of these incentives, it expects this year鈥檚 operating profit to be ahead of current market expectations.
Debbie White, who took over from Adrian Ringrose as chief executive in September, said: 鈥淭he new management team, and the Board, have been working to stabilise the business and provide a sound foundation to continue to serve our customers effectively, underpin our future growth and to restore shareholder value.
鈥淭his work has focused on managing the balance sheet, conducting a thorough assessment of the contract portfolio, and introducing new management disciplines, processes and cost controls under the 鈥楩it for Growth鈥� programme.鈥�
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