August 7, 2018 / 8:13 AM / 10 days ago

Interserve shares drop after posting loss on higher expenses

Aug 7 (Reuters) - Shares of Britain’s Interserve Plc dropped as much as 9 percent on Tuesday, as the construction and services company posted a loss in the first-half hurt by higher costs.

Interserve reported a loss before tax of 6 million pounds ($7.78 million), for the six months ended June 30, compared to a profit before tax of 24.9 million pounds last year.

Operating profit fell 30 percent to 40.1 million pounds in the latest half-year.

The company has been raising funds and selling some of its operations as part of a restructuring after it issued a profit warning in October. It warned in October that it may breach contracts because of a trading downturn.

During the latest six months, the company said net finance costs jumped over three-fold to 31.1 million pounds from 9.6 million pounds. Interserve attributed the increase to higher net debt, costs stemming from a 50 million-pound financing, and higher rates on its borrowings from the end of April.

However, Interserve reiterated that full-year operating profit would see a 15 million-pound benefit from cost cuts.

Outsourcers, including Interserve, have been facing deeper scrutiny from investors as Britain looks to toughen contract terms for the sector following the collapse of outsourcing group Carillion earlier this year.

Adding to the woes, Britain said last month that it would terminate contracts with private companies including Interserve from running probation services in England and Wales, admitting they have not delivered the expected benefits.

Interserve shares clawed back some of its early losses to trade down 5.3 percent at 0805 GMT.

$1 = 0.7716 pounds Reporting by Muvija M in Bengaluru; Editing by Bernard Orr

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