Shares in Interserve (LON:IRV) plummeted on Thursday, after the company issued a second profit warning after a poor trading performance in the third quarter.
The construction and support services company operating profit in the second half would be about half that of last year.
It has also made an additional £35 million provision for abandoning the energy-from-waste market, bringing funds set aside for exiting such contracts to £195 million.
Back in February, Interserve’s contract to build a recycling and renewable energy plant in Glasgow was rescinded by Viridor after considerable delays to the project.
Whilst initially costs relating to the contract had been estimated to be around £70 million, but that amount has tripled after a plethora of problems since August.
As a result of increased financial troubles, the company also warned that of a “realistic prospect” it will breach its banking agreements.
The disappointing results were attributed to “continued employment cost pressures in the business”, alongside “margin deterioration driven by a cost base which has not been flexible enough”.
On Thursday Chief Executive Debbie White, launched a turnaround initiative called ‘Fit for Growth’, tasked with improving margins and increasing the company’s competitiveness within the market. This will include the development of cost reduction strategies, which have yet to be clarified.
White commented:
“Despite our challenges, Interserve has a strong client base and many strengths as an organisation and I believe there is considerable potential for business improvement across the company”.
Interserve is a UK-based multinational support and construction company, with a workforce of over 80,000 globally. The company headquarters are located in Reading, Berkshire.
The company originated in 1884 under a different operating name, before later establishing itself in its present form, re-listing on the London Stock Exchange as of 2000.
Shares in the company have dipped significantly amid the second profit warning. Shares in Interserve are currently trading down 25.81 percent as of 13.31PM (GMT).