Support services company Interserve has delivered a fresh profit warning as housebuilding and contracting group Galliford Try revealed profits down 57% due to losses on its two biggest construction projects.
In a trading update released this morning, Interserve warned that costs from its problem energy-from-waste contracts will “significantly exceed” £160m.
The firm was plunged into a £94m loss last year after making a £160m provision for exiting its waste business after revealing serious problems at its Glasgow Recycling and Renewable Energy project.
The latest profit warning comes as new chief executive Debbie White enters her second week at the helm of Interserve after taking over from former boss Adrian Ringrose.
Meanwhile, in its latest results Galliford Try reported £98.3m total exceptional costs for the year to 30 June 2017 to settle legacy contracts, which the group defines as those contracted in 2014 or earlier – 80% of which relates to two joint venture infrastructure projects.
The two problem projects were Queensferry Crossing and the Balmedie-Tipperty section on the Aberdeen Western Peripheral Route project.
The company said one of the projects was now largely complete, while the other project – which represents a larger proportion of the £98m costs – is due for completion in mid-2018.
Overall, these problem contracts caused a £90.6m pretax loss for the year to 30 June 2017 in the group’s construction division, with a £77.4m loss in its infrastructure arm and a £13.2m loss in its building arm.
This compares with a pretax profit of £13.9m a year earlier, and leaves Galliford Try’s construction division with a pretax margin of -5.9%.
Peter Truscott, chief executive of Galliford Try, said the refocused business was expected to return to 2% margin by 2021.
“We have put into place rigorous processes to ensure a more disciplined approach towards project selection,” he said.
“Today, we are focusing on lower-risk public and regulated sectors and two-stage negotiated work, rather than large infrastructure projects on fixed-price, all-risk contracts which these legacy projects were. As these challenging contracts draw closer to completion, we are encouraged by the performance of our new contracts.”
