Interserve sees 12pc rise in half-year profits but headwinds expected with higher minimum wage

Adrian Ringrose,  CEO of Interserve
Adrian Ringrose, CEO of Interserve
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Support services and construction firm Interserve posted a 12 per cent rise in half-year profit and said it was confident of future growth as demand in its main markets continued to strengthen.

However the company identified the recently announced higher minimum wage in Britain as a headwind.

From 2016, it said it would impact margins in its support services business, whose activities include providing care for people in their own homes, by about £10m to £15m and then recede over the following years as it was priced in to contracts.

Adrian Ringrose, chief executive of Interserve, said: “We have made good progress in the first half of the year in markets that offer both opportunities and challenges. We have delivered volume growth across the board, and strong profit performances in our Support Services, Equipment Services and International Construction businesses.

“Market conditions in UK Construction have remained challenging although demand continues to strengthen and the expanded future workload is encouraging.

“Our focus on providing high quality services for both new and existing clients resulted in strong work winning during the period, with our future workload rising 11 per cent over the 12 months to June to stand at a record £8.3 billion.

“We expect the premium to the National Minimum Wage announced in the recent Budget to have an initial adverse impact on margins in the UK Support Services segment of £10-15m in 2016, receding over the next few years thereafter as the change is priced in to relevant contracts.

“However, demand in our main markets continues to strengthen, our financial position remains strong which, together with our growing future workload, underpins the Board’s confidence in our positive outlook and the increase in the interim dividend to 7.9 pence.”

Interserve reported headline total operating profit of £60.3m in the six months ended June 30. Analysts expect the company to post annual operating profit of £130m according to Thomson Reuters data.

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