Just over a year after the collapse of leading contactors Carillion another multinational support services and construction company, Interserve, is struggling for survival.
Interserve is UK based, and had revenue of £3.25 billion in 2017 and a workforce of more than 75,000 people worldwide. 70% of its turnover is from UK government projects and contracts, including support services in NHS hospitals and social care.
Interserve Healthcare provides staff for both NHS and nursing/care home facilities; it also provides complex care both in a home and community based setting. It operates through a network of 26 branches and works with CCGs, Social Services, private and NHS hospitals, nursing homes and learning disability establishments as well as delivering care to private clients in their own homes.
However like Carillion, Interserve’s dividends to shareholders grew faster than its actual profits and by 2017 it was reporting a loss of £254m, more than double the 2016 loss of £102m.
To cover dividend payments and losses Interserve borrowed heavily, with long term debts of £807m in 2018: interest charges are rising on these debts and the firm also owes its pension scheme £48m. Despite ministerial assurances in January 2018 that Interserve was “not another Carillion” it’s clear that no lessons have been learned from that collapse. The company’s survival after a bail-out deal earlier this month that involves cutting its debts from over £600m to £275m by issuing new shares. It hangs on the willingness of banks to prop it up, and hold on to shares that will generate little if any return.
Interserve retains a portfolio of low margin contracts and continuing losses. How long can that continue?
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