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Interserve trades in line with expectations

Interserve is trading in line with expectations backed by “excellent cash generation”, the firm announced today.

In a trading update ahead of Interserve’s annual results for the year to 31 December 2009 the firm said strong performances from the group’s international construction and equipment services businesses, combined with stability in the UK public and utilities sectors, have offset challenging market conditions in the UK private sector.

But Interserve will be making a £30 million impairment charge in its results due to the restructuring costs and lost goodwill in its specialist services division.

The group continues to take action to reduce its cost base where necessary and retains its focus on cash generation in what is expected to remain a difficult economic environment.

Interserve said it is continuing to perform well having won new contracts across a range of sectors with a combined value of over £350 million, including awards in both the UK and Middle East, since last November.

Major wins include a £70 million contract to design and construct a young offenders institution at Glen Parva in Leicestershire for the Ministry of Justice and a £60 million job for Thames Water to construct new facilities and upgrade existing works at their Riverside sludge digestion plant.

During the second half of 2009 Interserve achieved much in improving the funding position and limiting the potential future volatility of the Interserve Pension Scheme.

A number of actions have been completed in the period:

  • The closure of the defined benefit scheme to future accrual for all non-passport members from the end of 2009.
  • The implementation of a new investment strategy, designed to reduce investment risk through greater asset diversification and matching of inflation and interest volatility with scheme liabilities.
  • The transfer of 13 PFI investments from the Group to the scheme, thereby reducing the funding shortfall by £61.5 million, as outlined above.

The trading update said: “The work-winning in the period has contributed to a healthy future workload that contains £1.7 billion of work for 2010.

“With the strong revenue visibility afforded by this workload, a balanced business mix, and the ability to explore and develop new markets the board continues to believe that the group is well placed to deliver resilient near-term performance and sustain long-term growth.”

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