Interserve benefits in the age of austerity

The company said its results were boosted by winning a £150m contract to design, build, finance and maintain two new divisional headquarters for West Yorkshire Police in Leeds and Normanton.

It will also build and maintain the police force’s custody suites and a training facility.

Interserve will maintain the facilities for 25 years once they are built, providing everything from furniture to pest control.

In May it bought Leeds-based training and development firm Business Employment Services Training (Best) for up to £18.25m.

This acquisition included Government contracts to get the long-term unemployed in South and West Yorkshire back into work.

Interserve’s chief executive Adrian Ringrose said: “The work programme is starting to earn its spurs. Of all the return to work schemes this is looking the most successful. We don’t earn money unless we get people back into work.”

Interserve also has a 10-year tie-up with Leeds Council to manage, build and refurbish schools under the £290m Building Schools for the Future programme.

Fourteen schools have been built under the contract.

The company will carry out maintenance, security, caretaking and cleaning at these schools for the next 25 years. Interserve said pre-tax profits for the six months to June 30 rose eight per cent to £32.6m thanks to strong growth in support services.

During these tough economic times more companies are choosing to outsource work in order to save costs.

“When clients want to spend less. We can help them spend it in the best ways. The austere environment creates a structural opportunity for us,” said Mr Ringrose.

“Where we do most of our business is making buildings work well.

“We can offer a one-stop shop. We take the mess off people’s hands and we’re good at getting the best from supply chains.”

The company, which cleans Sainsbury’s supermarkets, said its medium-term outlook is positive and over the first half of the year it won projects worth £1.4bn.

Revenues rose 2.8 per cent to £1.21bn.

Interserve’s UK support services business, which includes building maintenance and security, reported an 11.5 per cent rise in revenues to £572.1m.

“We have delivered a good set of results against a backdrop of continuing mixed market conditions,” said Mr Ringrose.

“Support services generated strong growth accompanied by a robust performance from construction and a continuing recovery in equipment services.” The support service division’s contribution to total operating profit at £19.6m was 23.3 per cent greater than the first half of 2011.

The division gets 65 per cent of its revenues from the public sector and 35 per cent from the private sector.

Its biggest customers include the Ministry of Defence, DEFRA, the Foreign and Commonwealth Office, Sainsbury’s, Prudential and Alliance Boots.

The division’s future workload rose from £4.5bn at the end of 2011 to £4.7bn with new work won from West Yorkshire Police, Alder Hey Children’s NHS Foundation Trust, National Grid, BPP, Sainsbury’s, Alliance Boots, William Hill and Ladbrokes.

Mr Ringrose said the main driver for UK revenues is the ongoing need for Government and businesses to increase efficiencies and maximise effectiveness in difficult economic conditions.

“Our Government clients in particular need to deliver significant fiscal improvements in the face of rising demand from a growing and ageing population,” he said.

Interserve said its construction division performed well in challenging market conditions with a modest 0.3 per cent increase in revenues to £366.2m.

As expected in a struggling market, margins fell leading to a 27 cent fall in operating profits to £7.3m.

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