February 21, 2018 / 4:00 PM / 24 days ago

Britain's Interserve exits power business as part of restructuring

Feb 21 (Reuters) - British contractor Interserve, which is in talks with its bankers to secure funding after issuing two profit warnings last year, has decided to close its power business as part of an operational restructuring of its industrial unit.

Outsourcers such as Interserve have been the focus of investor attention since competitor Carillion entered liquidation in January, putting 43,000 jobs at risk.

Interserve, which employs about 80,000 people worldwide, is a major player in the outsourcing industry, managing facilities including washrooms and waste management at most of Britain’s busiest rail stations and some government departments.

Interserve said it had decided to exit its small power business, which performs tasks such as maintaining electricity towers or installing underground cable for energy companies.

“After careful consideration we have decided to close down our power business, as we look to consolidate and centralise our industrial portfolio,” a company spokesperson said in an e-mail.

“We are undergoing an operational restructure within our industrial division.”

Last year, revenue for the power business was about 15 million pounds out of group revenue of 3.3 billion pounds ($4.61 billion).

The British contractor said it expected to complete all contracted power work and forecast that the bulk of the projects would be completed by June.

Interserve would run a consultation process until early April for the affected employees, it said, adding that it was working to try and redeploy as many affected people as possible within other parts of its business. A source familiar with the matter said the change would affect 70 people.

The group is also reviewing its contract portfolio and non-trading balance sheet items and is in talks with its lenders to try to secure long-term financing. Its current financing deal runs till March.

Interserve warned of lower annual earnings in September, sending its shares crashing by more than 50 percent. Another profit warning followed in October. However, Interserve said in January that 2018 operating profit would be ahead of forecasts.

Interserve’s problems have been exacerbated by cost overruns in its energy from waste business, which it has already announced plans to wind up. The group is looking to exit other non-core areas and Wednesday’s decision fits into that strategy.

Many British outsourcers such as Capita, Mitie and Interserve have struggled after taking on work at low prices for long-running fixed-rate contracts following the financial crisis. ($1 = 0.7157 pounds) (Reporting by Esha Vaish in Bengaluru; Editing by Adrian Croft)

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