The facilities management contractor Interserve reported a ‘difficult’ 2017 in its annual results for the year to December 2017.
Chairman Glyn Barker described the firm’s financial performance as ‘extremely poor’ and said it was no consolation that competitors had similar issues. He said: “When executed well, there are huge benefits to society from a strong and efficient outsourcing industry, bringing enhanced efficiency, predictable performance and quality to the client. It is to be hoped that events over the last year or so will encourage the necessary changes in approach from all participants in this market.”
The company reported poor performance in its support services and construction arms with continued good growth in equipment services (engineering). Its revenue was ‘stable’ at £3.25 billion and net debt near doubled to £502.6m.
The FM firm has made a ‘strategic review’ and reviewed its major contracts. It pointed to contract wins with new and existing clients including the Ministry of Defence, Ministry of Justice, Department of Work and Pensions, Network Rail, BBC, Jumeirah Group (Dubai), Liwa Plastics (Oman) and Doha Festival City (Qatar).
Debbie White, Interserve’s Chief Executive, described 2017 as a difficult and ‘extremely challenging year’, but also a year of significant progress. She said: “As a new management team, we have stabilised the business and taken the first actions to establish a solid foundation from which we can both serve our customers effectively and underpin improved future operational and financial performance. This work has focused on refinancing, conducting a thorough assessment of the contract portfolio, and introducing new management disciplines, processes and cost controls under the ‘Fit for Growth’ programme. We are confident that the cost savings and management actions identified will contribute at least £40-50 million to Group operating profit by 2020, with the 2018 benefit estimated to be £15 million.
“The refinancing we recently agreed with our lenders is a major step in securing a firm financial platform to underpin the Group’s future. Of course there is much still to do. However, we are encouraged by the support from our lenders and the new facilities will allow us to execute our business plan, focus on delivering a good service for customers, drive improved operational and financial performance.”
In the UK, as expected, operating profit was ‘negatively impacted by regulatory-driven costs’ including the National Minimum Living Wage increases (introduced in April 2016) and the Apprenticeship Levy. The company says that it remains ‘a key strategic supplier to UK Government’; its clients include the Ministry of Defence, and the Department for Work and Pensions; and Network Rail (including stations in London, Reading and Bristol). In a contract extension, the firm won a £140m contract with the BBC to continue providing facilities services until 2023. This latest four-year extension to the account, first awarded in 2014, includes cleaning, portering and security at 150 of the broadcaster’s sites including MediaCityUK in Salford and Broadcasting House in Portland Place, London.
Comment
For Labour, Jon Trickett, West Yorkshire MP and Shadow Minister for the Cabinet Office, said: “Interserve’s results are the latest in a series of warnings about the risks of outsourcing. After Carillion’s collapse, and Capita’s results last week, the Tories need to sit up and take action. The Government has been utterly dogmatic about outsourcing and has been blind to its failures.
“Labour in government will introduce a presumption in favour of in-house provision of public services.”
