Interserve tanks as it ups energy-from-waste provision
Shares in Interserve tanked on Monday after the construction and support services group said exiting the energy-from-waste markets was likely to cost £160m, up from a previous provision of £70m.
Following a detailed review of operational performance and due to the impact of an expected lengthy period of litigation, the company has now concluded that the £70m announced back in May last year is no longer adequate to reflect the incurred and anticipated losses associated with the Glasgow Recycling & Renewable Energy project.
Interserve said it has continued to undertake a detailed review of operational developments on the other contracts in its exited EfW business, including the impact of the entering into administration by its principal gasification subcontractor, Energos, together with the likelihood and timing of potential recoveries and claims from third parties.
“We expect to complete substantially the construction and commissioning of the projects during 2017, although our contractual obligations in respect of warranties, and the resolution of claims will continue for a period thereafter.”
Interserve expects further cash outflows of around £60m during 2017 as the income statement charge is utilised.
The adverse cash impact of the EfW business was substantially offset in 2016 by tight control of working capital throughout the rest of the group, resulting in year-end net debt at the previously announced £270-£280m level.
However, Interserve said the cash outflow on the EfW contracts has had a significant negative impact on its average net debt, which was £390m last year and is expected to be around £450m this year.
As a result, the group has expanded its debt capacity by an additional £66m of committed facilities, and extended in duration by approximately two and a half years to a weighted average expiry of July 2021.
It now has a committed debt facility of £573m, which it reckons is adequate to meet all of its existing and anticipated future commitments.
At 0817 GMT, the shares were down 19% to 272.75p.