The outsourcing giant with 70,000 employees is “circling the drain.”
When UK construction giant Carillion collapsed in January, it shook the foundations of Britain’s outsourcing industry to its core, casting a harsh light on the high-growth, thinning-margin, poor cash-flow, high-debt business model that has come to dominate the sector. It was the country’s biggest corporate bankruptcy in years. But now another outsourcing firm may be about to follow Carillion’s doomed footsteps.
That firm’s name is Interserve. It employs over 70,000 people worldwide, with around 20,000 employees based in the UK. On Monday its shares plunged over 30% to 30 pence a piece, their lowest level in 30 years, before rebounding somewhat. They’re down 95% since April 2014.
The trigger this time was news that the company had missed yet another deadline for handing over a £145 million waste-to-energy plant in Derby, England. The plant was supposed to have started operating in March but didn’t. Then, on Monday, in its interim results for 2018-19, Interserve’s partner on the project, Renewi, revealed that Interserve had missed the “project long stop date” to get the plant working, which had been scheduled for the end of September....MUCH MORE
In failing to meet this latest deadline, Interserve now faces the prospect of having to pay liquidated damages. That could be a problem for a firm that keeps losing money while racking up ever increasing amounts of debt, and whose market cap, after years of uninterrupted decline, is a measly £58 million.
In late January, in the immediate wake of Carillion’s collapse, the government became so worried about Interserve that it assigned a team of officials to monitor its financial situation. With the company now preparing to ask investors for a fresh injection of capital, just months after the last one, those concerns were well founded.
Interserve has been plagued for years by compounding losses in its waste management division. But recently the problems spread to its core UK businesses, almost all of which are under-performing, as the company itself alerted in a profit warning in October 2017....
