27th Feb 2019 10:10
LONDON (Alliance News) - Interserve PLC on Wednesday said cost reductions under its Fit for Growth restructuring plan helped to narrow its loss in 2018, and urged shareholders to vote in favour of a deleveraging plan that will avoid a default in existing financing arrangements.
The construction and equipment services company said its loss narrowed in 2018 to GBP111.3 million from GBP244.4 million reported a year earlier, despite revenue dropping 11% to GBP2.90 billion from GBP3.25 billion.
Operating profit increased 9.7% to GBP92.7 million, driven by cost savings and increased margins.
Net debt grew to GBP631.2 million and was within the expected range of GBP625 million to GBP650 million, as revised in November by Interserve. This was driven by outflows from Interserve's UK Construction and from Energy from Waste businesses, as well as non-underlying charges and delayed payments for some Middle East projects.
"The Fit for Growth programme is delivering material cost savings and a simpler and more effective business structure," said Chief Executive Debbie White.
Following the strategic review in 2018, the company said it has completed the streamlining of its divisional structure from more than 40 to three divisions in December 2018.
Separately, Interserve said it will launch a fully underwritten share placing and open offer under the deleveraging plan, which is pending shareholders approval at a general meeting on March 15.
The plan is a consensual restructuring of Interserve, which is "urgently" required to provide sufficient liquidity, cash and bonding facilities to allow the company to service short-term obligations and secure a stable platform, it said.
Interserve said it plans to raise GBP435.2 million through a placing and open offer of 2.84 billion shares at a price of 15.3p each. The issue price represents a 26% discount to the closing price of 20.7p on Tuesday. Interserve currently has 150 million shares in issue and a market capitalisation of GBP28 million, meaning current shareholders will own just 5% of the company after the dilution of the share issue.
Interserve shares were trading 8.7% lower on Wednesday at 18.90 pence a share. The stock is down 67% in the past 12 months.
The company said any cash proceeds from the placing and open offer will be used to repay the senior cash facilities, which include USPP notes and senior revolving credit facilities.
USPP notes comprise of three series of New York-law governed loan notes.
In addition, under the deleveraging plan, the lenders will provide a GBP110 million of new liquidity through the provision of a new debt facility with a maturity of 2022.
"The group remains over-leveraged and the successful implementation of the deleveraging plan is critical to our future, as it will ensure that Interserve has a competitive financial structure for its future growth," explained White.
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