Despite Net Debt of approx. £513m some investors see hope for the Group.
Construction giant Interserve (LON: IRV) shares jumped this morning off the back of Management's Trading Update, outlining its full-year performance and 2018 expectations.
The Group had a rollercoaster year in 2017, issuing a number of profit warnings, including two in as many months, whilst winning a handful of major contracts with Universities as well as on Government frameworks.
Management said its 2017 performance is "in-line with expectations", while its Fit for Growth programme outlined in its October Trading Update is "expected to deliver £40m-£50m benefit by 2020."
Fit for Growth is:
"...focused on increasing the Group's organisational efficiency, improving Group-wide procurement processes and ensuring greater standardisation and simplification across the business."
And is expected to have an:
"...in-year impact in 2018 estimated to be £15m. As a result of the 'Fit for Growth' initiatives, the Group's operating profit for 2018 is now expected to be ahead of current market expectations."
Debbie White, Interserve's Chief Executive, said:
"The new management team, and the Board, have been working to stabilise the business and provide a sound foundation to continue to serve our customers effectively, underpin our future growth and to restore shareholder value. This work has focused on managing the balance sheet, conducting a thorough assessment of the contract portfolio, and introducing new management disciplines, processes and cost controls under the 'Fit for Growth' programme."
The Group has, however, accumulated a mass of debt, approx. £513m from costs associated with its failed Energy from Waste scheme.
Rival Carillion had a similar year in 2017 after it announced in July a £845m hole in its contracts, causing a 70% share price drop in just three days.
Despite its debt position, some investors feel its new Management can turn the Group around, with shares jumping over 20% to 120p in early morning trading.
IRV trades on a forecasts earnings multiple of just 3x and has a current Market Cap of £145m.