11 Jan 2007

Interserve Plc, the services, maintenance and building group, today provides an update on 2006 trading in advance of announcing its preliminary results on 12 March 2007.

The Group has continued to trade strongly, in line with expectations.  Our key markets in the UK and Middle East have remained buoyant, with new contracts secured and preferred bidder appointments totalling over £1.8 billion.

Each of the Group's three main divisions has made strong progress in the year, compensating for losses in Industrial Services which, in advance of realising the benefits of restructuring, have continued at a similar level to the previous year.  The acquisition, in July 2006, of MacLellan Group plc was a significant development for the Group. Trading at MacLellan has continued in line with our expectations, and the integration programme, through which we expect to achieve annualised cost savings of approximately £3 million, is progressing well.

PFI continues to be a growing part of our business. The Group's total committed and invested equity in PFI projects has increased significantly in the year through our success in achieving financial close on two projects and our selection for the final stages of negotiations on a further five.

Results for 2006 will also include the impact of a number of exceptional items: first, one-off costs of around £4 million associated with achieving synergies through the integration of MacLellan, particularly related to closure of the central head office and support function rationalisation; second, professional costs consequential upon the investigation of accounting misstatements in Industrial Services, which amounted to some £8 million at the year end.  Third, set against these costs, an exceptional gain of £1 million realised on the disposal of a PFI asset in January 2006.  Additionally, in concluding the strategic and operational review of Industrial Services, the Group will be reviewing the carrying value of goodwill in that business, the outcome of which will be reflected in the full year results.

The Group continues to be successful in securing work in each of its chosen markets and is operating in favourable market conditions.  This strong base, together with the new opportunities afforded through the acquisition of MacLellan, position the Group well to deliver continued progress through 2007 and beyond.