The government reassures on Interserve

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The government has said that it does not believe that any of its major suppliers are in a position similar to that of Carillion.

He commented after shares of construction and services company Interserve, has fallen amid reports that its financial health was under special Cabinet Office control.

The Firm said it has closely followed all of its “strategic suppliers”, and has been in regular discussions about their finances.

Interserve said it was to keep public servants informed.

Interserve shares dive on new warning

Carillion: Not only to hit problems

The company, which employs 80,000 people worldwide, has issued a profits warning in September, saying its benefits are likely to reduce by half, in part due to the large energy losses from the company’s waste.

This was followed by a second profits warning in October.

It said it expected net debt for 2017 to be approximately £513m, in part because of the problems of the energy from waste business, but also a “standardization of the terms of exchange with our supply chain and exceptional costs”.

However, it was expected that the debt would peak in the first half of 2018.

Interserve is involved in a three-year restructuring programme initiated by new management in October aimed at improving the efficiency of its procurement processes and the simplification of the company.Transformation Plan

On Wednesday, the Financial Times reported that the Office of the council of ministers was followed Interserve.

In response, Interserve said: “Last week, we announced that we expect our 2017 performance in line with expectations set out in the month of October and that our transformation plan is expected to deliver £ 40m-£50m benefit by 2020.”

He said he was waiting for his 2018 operating profit to be “ahead of current market expectations and we continue to have constructive discussions with the lenders, more funding, more long-term.”

“We are keeping the Firm closely informed of our progress, as planned,” he added.

As Carillion, Interserve involves the construction, as well as the cleaning, health care, probation and health care services.

The Cabinet Office said: “We monitor the financial health of all of our strategic suppliers, including Interserve.

“We are in regular discussions with all of these companies about their financial situation. We do not believe that one of our strategic suppliers, are in a comparable situation to Carillion.””Thin margins

Neil Wilson, senior market analyst at ETX Capital, said Interserve had had his problems ,”but it is not Carillion”.

He said last week update “showed improvement”, but added that the ” Wednesday report “not good for the feeling, since it may be some twitchiness among investors in the sector following Carillion’s collapse”.

“The comparisons with Carillion are too easy to do, of course – a variety of business operating on low margins. He is facing the pressure of employment and contract mobilization costs, and the margin deterioration from a base price that has not been flexible enough,” added Mr. Wilson.

However, he added: “The arithmetic doesn’t look anything like as bad as Carillion.”

He pointed out that Interserve had been awarded contracts in the past few months, including a £140 contract with the BBC to continue to provide services in the facilities and a £227 million contract from the Department of Work and Pensions.

Shares in Interserve has fallen sharply in early trading in London, but have subsequently rebounded to stand at about 1.5% less.