Interserve has taken a £70m hit on its contract to build Viridor’s Glasgow energy-from-waste plant, it revealed in a trading update today.
The group said its expectations for the UK construction division had been ”significantly adversely impacted by a further deterioration” in the deal.
Problems relate to the design, procurement and installation of the gasification plant, together with ”continuing challenges with the supply chain” that will result in further cost overruns and delays.
Construction News reported last week that workers had gone on a two-day strike at the plant over a long-running pay dispute.
Interserve said: ”The board anticipates a £70m exceptional contract provision to be taken in the first half of 2016, resulting in a similar level of cash outflow spread across 2016 and 2017. We will be pursuing every opportunity to mitigate this situation.”
Interserve said that net debt was likely to be around ”£35m higher than previously guided” at the half-year and year end.
City analyst Liberum put out a ‘sell’ note on Interserve this morning, warning that its expected increase in net debt increased the urgency of a sale of RMD Kwikform and ”also makes the prospect of capital returns or acquisitions less likely”.
Interserve revealed that Steven Dance, RMD Kwikform’s managing director, will retire with Ian Hayes set to succeed him.
Elsewhere, Interserve said trading in support services was “robust and in line with expectations”, while equipment services “continues to have good momentum across its international markets”.
Trading in the building and fit-out segments of UK construction “remains healthy”, Interserve said.
- This article originally appeared in sister title, Construction News