Interserve pre-tax profits up 19%

Pre-tax profit rose 19% to £33.7mln on a 16% lift in revenue to £1.6bn.

The interim dividend was lifted by 5% to 7.9p and highlights over the period included key contract wins with both new and existing clients such a London Underground, MTR Crossrail, KeolisAmey Docklands and the Dubai Aviation City Corporation.

The group continues to perform strongly, but chief executive Adrian Ringrose admitted the premium for the new national wage announced by George Osborne in the Summer Budget would cost them between £10m and £15m extra next year in its support services division.

Interserve, which provides services ranging from cleaning trains to supplying probation services, said UK construction markets remained hard.

Interserve reiterated its guidance for the current financial year and is looking to make further progress in 2015.

Although performance levels have been positive, the report said that construction margins had not met medium-term expectations.

“Despite the earnings reduction, we believe the shares remain undervalued”, it said.

Interserve shares were down 4.3% in early afternoon trade on Wednesday to 598.50 pence, one of the worst performers in the FTSE 250. The group is working to build up the business, with a focus on delivering frontline services in the healthcare, welfare-to-work, skills and justice sectors.

Interserve, the activities of which range from the provision of care services for people in their own homes to building repairs at Britain’s historic Sandhurst military academy, said that margins in one part of its business would be squeezed by a hit of between 10 million pounds ($15.6 million) and 15 million pounds in 2016. The group said demand was stronger across the region, boosted by major projects such as Qatar’s Vision 2030 long-term development strategy and the United Arab Emirates’ plans for Expo 2020 event.