Interserve announces interim pre-tax profit of £23m

Equipment Services might be the smallest of Interserve’s various operating divisions, but it has generated the biggest contribution to the group’s latest interim pre-tax profit figure – revealed this morning to be £23m. The figure is ahead of expectations.

The £56m of turnover in Equipment Services managed to generate an operating profit of £10m.

The group’s overall profit figure was a pleasant surprise, given the muddle of the past two months relating to the cooking of the books in one of Interserve’s much larger divisions – Industrial Services.

In August, Interserve set independent forensic investigators to work on its current and historic accounts.

Work to date has confirmed that controls, principally relating to revenue recognition in work-in-progress, were repeatedly evaded over several years in what Interserve says “appears to have been a concerted effort by certain divisional managers to over-state results”.

Interserve adds that the investigation is almost complete and that there is “no evidence of any such irregularities in the accounts of our other divisions.”

The group’s board admits to being “concerned that the deliberate nature of these evasions enabled them to go undetected for so long [five years] despite internal and external audit scrutiny.”

A number of senior managers from across the group have now been drafted in to provide leadership.

Interserve’s latest group financial figures had been delayed for three weeks. They cover the six months to 30 June.

Turnover was higher at £650m (figure for the comparable period last year: £600m). Pre-tax profit of £23m was well ahead of the previous figure of £14m.

Interserve’s future orderbook, already running to £4.9bn, has been boosted to £5.3bn as a result of the £116m acquisition of MacLellan Group two months ago.

[Revised 29 September 2006]