Or as chief executive Adrian Ringrose put it: “We have commenced a strategic review of our Equipment Services business.”
Interserve’s UK construction business had a difficult year in 2015, only managing to break even thanks to loss-making power plant contracts. However, RMD Kwikform performed well, both at home and overseas.
The UK construction business suffered from price increases eroding margins on contracts, as well as what Mr Ringrose described as “some specific supply-chain failures, significantly impacting three of our energy-from-waste projects”.
However, these issues were partially offset by strong performance in the building and fit-out businesses, he said.
Overall, Interserve’s UK construction division generated £1,040.8m revenue in 2015, up 7% from £970.7m in 2014. It contributed just £100,000 to total group operating profit.
Equipment Services (RMD Kwikform) grew revenue 8% from £195.5m in 2014 to £211.0m in 2015. It contributed £41.9m to total operating profit, a 58% increase on 2014’s £26.6m.
RMD Kwikform opened new branches in India and the USA, grew in the Middle East, but downsized in weaker markets, such as Australia.
At group level, Interserve reported 10% growth in annual revenues to £3,204.6m (2014: £2,913.0m).and a 28% rise in pre-tax profit to £79.5m (2014: 61.9m).
Interserve’s support services operation is heading towards twice the size of its construction business, generating £1,834.4m in the UK and a further £224.3m overseas, making an operating profit of £100.4m.
With an operating margin of 5.0% in support services compared to zero percent in construction, it is little surprise that Interserve’s board continues to grow its focus on this part of the business.
Chief executive Adrian Ringrose said of the 2015 performance: “Over the last five years we have made substantial strategic progress creating a broader, stronger business. Our performance in 2015 was good, resulting in 12% operating profit growth in markets that continue to offer both opportunities and challenges. In light of the changing shape of our portfolio over the last few years, we have started a strategic review of our Equipment Services business (RMD Kwikform).”
He added: “Overall, we expect 2016 to be broadly steady compared to 2015 as underlying growth is restrained by the impact of a slower order intake following an election year and the impact of the National Living Wage. However, we expect to return to growth in 2017, underpinned by our strong positions in attractive markets."
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