Interserve profits drop 36% yet orders hit peak levels

Interserve, the construction and facilities services company, yesterday said its order book had reached record levels despite a fall off in maintenance expenditure by its customers over the past year.

Mike Bottjer, the chairman of the company, also said rising pension and insurance costs had hit its results in the first half of the year, contributing to a 36 per cent fall in pre-tax profits.

But he said the company had undergone management restructuring and was now on track for growth.

"Our forward order book now stands at a record level, which represents a significant future revenue stream and is a strong indicator that we are well positioned for long-term growth," said Mr Bottjer, who split his role as executive chairman to take on a chief executive, Adrian Ringrose.

"We are now seeing an improving trading environment and the board remains very positive as to the long-term prospects for the group."

The company's Shares leapt more than 5 per cent on news that Interserve is sitting on contracts worth up to £3.9bn, and closed up 12p at 249.5p.

Mr Bottjer said Interserve had won £700m of contracts in the first half of the year and he increased the company's dividend by 5 per cent to 4.2p a share.

Interserve's chairman also revealed that the company had been chosen by the NHS to be one of 12 companies that will be used for building projects worth a total of £7bn over five years.

After a review of its pension fund, Interserve has begun contributing to its scheme and took a £4.2m charge in the first half of the year.

Increased insurance and national insurance costs also led to a £2m hit, and the company's scaffolding division, which is being closed, contributed to another £2m loss. Profits before tax fell 36 per cent to £15.8m.

Sales in the first half of the year were down 2 per cent to £545m, as companies in the private sector reined back on building projects and maintenance budgets, but Mr Bottjer said there were now signs that its services were now in increasing demand.

Two-thirds of the company's workload comes from public sector contracts, where demand for its services has been growing as the Government outsources the maintenance, investment and management of roads, schools and hospitals to private companies.