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UPDATE 1-UK's Interserve in talks with banks after profit warning
October 16, 2017 / 7:41 AM / a month ago

UPDATE 1-UK's Interserve in talks with banks after profit warning

(Adds details, background)

Oct 16 (Reuters) - British support services and construction company Interserve Plc said it was in talks with its banks to provide clarity on its current trading after warning on profits last month.

Shares in the company were down 3.2 percent in morning trading, after falling as much as 8.6 percent earlier. They have lost almost 70 percent of their value this year.

The statement follows a Sky News report on Sunday that Interserve's lenders, including HSBC and Royal Bank of Scotland, have hired EY as an adviser last week.(bit.ly/2gdwqFN)

HSBC, RBS and EY could not immediately be reached for a comment.

The company said that work was under way to “provide greater clarity” on Interserve’s current trading and waste-from-energy provision.

In its half-year results published in August, Interserve said net debt stood at 387.5 million pounds ($515.7 million) as of June, 2017.

Interserve cut its full year profit and revenue forecast in September due to disappointing trading in its domestic market in the previous two months and higher costs to wind down its waste-to-energy business.

Interserve decided to exit the business in August 2016, after struggling with cost overruns and delays in a Glasgow contract. The company in February more than doubled its expected charge to 160 million pounds after a review.

Interserve said in September that “complexities of completion” meant final costs associated with its exit from the waste-to-energy business would exceed the 160 million pound provision.

Many companies trying to generate energy from waste have seen costs escalating after being forced to make expensive design changes.

Interserve also named Mark Whiteling, a former head of finance at engineering supplies group Premier Farnell, as its new finance chief in September. The company had appointed Debbie White as chief executive in March.

Companies such as Mitie, Capita and Carillion have also been hit over the past year by rising labour costs and as unplanned changes have escalated costs on past contracts.

Carillion made its second profit warning this year in September and said it may need to sell shares to shore up its balance sheet, while Mitie said it may cut up to 480 jobs and warned of higher turnaround costs.

Last week, Capita picked turnaround specialist Jonathan Lewis as its new chief executive, with a remit to overhaul the British outsourcing firm after a string of profit warnings. ($1 = 0.7526 pounds) (Reporting by Arathy S Nair and Parikshit Mishra in Bengaluru; Editing by Louise Heavens/Keith Weir)

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