Interserve, the international support services and construction group, has today announced a strong performance and headline profits up 10% with the publication of its half-year results for the six months ended 30 June 2011.
To date Interserve has announced over £1 billion of contract wins in 2011, with a £1.1 billion of workload for 2012, within a substantial total future workload of £5.4 billion. The company said it had the capability to double earnings per share over five years.
Chief Executive Adrian Ringrose commented:
"Interserve has performed well, delivering headline profit growth despite challenging market conditions. Support Services generated strong growth which, accompanied by a robust performance from Construction, more than offset the ongoing cyclical pressures in Equipment Services.
“Encouraged by the progress achieved in the first six months of the year and a growing bid portfolio, we maintain our guidance for 2011 and reiterate our belief that we have the capability to double earnings per share over five years.
“This confidence, underpinned by strong cash conversion, is reflected in the Board’s announcement of an increase in the interim dividend in line with our progressive dividend policy.”
The Support Services division in particular delivered a strong performance, growing profits by 76% year-on year as it continued to build on the turnaround that began in the second half of 2010. Interserve said its Construction division had delivered a robust performance and maintained above-trend margins though, as anticipated, increased competition in its key markets had resulted in its margin beginning to recede from the record level achieved in 2010.
The company said that while the UK construction market is likely to experience a softening in the near term, medium-term drivers remained positive as an increasing and ageing population puts additional pressure on the country’s infrastructure.
Interserve described its international reach as a major strength - its strategy includes the export of skills and capabilities to high-growth international markets. Around a third of Group profits are currently derived from outside the UK, predominantly from its established markets in the Middle East and Australia.
Interserve’s future workload at the end of the period stood at £5.4 billion, comprising £4.5 billion of forward orders and £0.9 billion relating to pipeline. Of this future workload, £0.9 billion relates to the rest of 2011 and £1.1 billion relates to 2012, providing it with visibility of over 55% of revenues for 2012.The future workload also includes share of work won by associates, joint ventures and joint arrangements. Forward orders are those for which Interserve has secured contracts in place, while pipeline covers contracts for which the company is currently in bilateral negotiations and on which final terms are being agreed.
First-half trading in Interserve’s Construction division, which delivers a broad range of buildings and infrastructure, was solid in both the UK and international segments, producing a divisional contribution to Total Operating Profit of £20.1 million (H1 2010: £23.5 million).
In the UK over half of the business’s activity is generated via long-term infrastructure and framework contracts which deliver a relatively predictable flow of work. The UK business’ future workload of around £1.1 billion has remained stable compared with the strong year-end position. Included within this workload is £0.3 billion of work scheduled for the second half of 2011 and a further £0.4 billion scheduled for delivery in 2012.
Improvement in already-strong position in UK water sector
Interserve said that in infrastructure it has improved its already strong position in the water utility segment via places on framework contracts with Northumbrian Water, Veolia Water and South East Water. The company is now actively targeting a broad range of sectors, including energy, waste and retail, to offset some of the potential shortfall in work in the coming years from its traditional public sector segments.
In Qatar, Interserve’s most important international market, the company has secured new contracts in both services and construction activities. Interserve is continuing to expand its senior management team in the country and is developing new business streams, including a specialist interior fit-out operation and a joint venture that is marketing an environmentally-friendly wastewater treatment solution. Interserve said that Qatar will play a key role in the Group’s medium-term growth ambitions.
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