Interserve alerts to higher debt

Outsourcing firm Interserve has warned that its debt pile will be higher than previously forecast.

Thegroupsaidyesterdaythat year-end net debt is expected to be in the range of £625 million to £650m, up from earlier guidance of between £575m to £600m.

It is now exploring ways to bring fresh capital into the business as it looks to tackle its debt pile and put the company on a more secure financial footing. Interserve will work with advisers to look at all options for its financial structure.

The firm also told investors that its transformation programme remains on track, and signalled there will be a “significant” improvement in full-year profit.

In a third-quarter trading update, it noted that its socalled “Fit For Growth” turnaround strategy will deliver £15 million in cost savings in 2018.

Chief executive Debbie White said: “The board remains focused on positioning the group for long-term, sustainable success.

“This means continuing the operational progress we are making to put legacy issues behind us, particularly in closing out and exiting the Energy from Waste business.

“It also means reducing debt and putting a strong long-term capital structure in place. To this end we will announce a deleveraging plan for the group early in 2019.”

Russ Mould, AJ Bell investment director, said: “Chief executive Debbie White and her team are clearly doing their best to steady the ship at Interserve but the admission that net debt will end the year higher than expected, not helped by how the cash inflow from the troubled Energy from Waste business will be lower than hoped, means the company has yet to reassure shareholders and potential investors about the key issues that face it. It is encouraging to see management stick to its cost-reduction forecast for the year of £15m.”