Interserve shares rocket after decision to close energy-from-waste business

The FTSE-250 company’s share price soared following proposals to stop building plants that generate energy from ‘green bin’ residual waste in the group’s financial results presentation on Wednesday (10 August).

Cost over-runs and delays with the Recycling and Renewable Energy Centre in Glasgow were cited as the main reasons for the ditching these renewable energy operations, with the Scottish gasification project reportedly landing the company a £70m charge on a £146m contract.

The company announced that, despite a revenue increase of 2.4% across its other departments, an £88m operation loss on the firm’s energy-from-waste project has led to a £33.8m pre-tax loss for the first half of 2016. The firm confirmed that it will complete all current contracts, but will subsequently exit from the energy-from-waste business altogether.

Interserve Chief Executive Adrian Ringrose commented: “Trading in the first half of the year, across the vast majority of our divisions and our regions, has been good, in markets that offer both opportunities and challenges. We delivered a strong cash performance and grew revenue and Headline operating profit.

“We are taking action to exit the energy-from-waste sector. Our assessment of the aggregate impact of exiting this sector is in line with the £70m exceptional charge we announced in May.”

Mainstreaming sustainability

Construction of the £154m Glasgow Recycling and Renewable Energy Centre began in 2013 with the site expected to commence operation in 2016. The site, owned by Viridor, will produce enough energy to power the equivalent of 22,000 households and heat the equivalent of 8,000 homes, delivering a saving to Glasgow of 90,000 tonnes of CO2 every year.

This so-far unproductive energy venture represents a minor blip in an otherwise successful environmental approach by Interserve, with the construction firm proving that sustainability and profitability can go hand-in-hand for business in recent years.

The company’s most recent annual CSR report highlights a 19% reduction in carbon intensity during the last financial year, despite accelerating efforts to expand the business. Strong progress has been made in many elements in the group’s sustainability drive – construction waste has fallen by 21%, and fuel consumption was slashed by 10% across its international operations against a 2013 baseline.

Speaking to edie about the ‘secrets to success’ for Interserve’s resilient sustainability performance, the company’s head of sustainability and finance director Tim Haywood said: “For Interserve, it’s all about mainstreaming sustainability and getting the agenda expressed in a language that ordinary business people can understand.

“As soon as people realise that sustainability is a common agenda that reduces both risks and costs, they see that the business becomes more resilient, which is what all businesses should want to do.”

Low-carbon construction

Interserve’s proactive sustainability agenda reflects a growing realisation within the construction industry of the economic gains available from investing and placing sustainability “at the heart” of operations.

Another construction firm that has been championing low-carbon business is Wolverhampton-based Carillion, which revealed an additional £33.8m to its overall profits in its latest CSR report thanks to an increased focus on sustainable business practices

Meanwhile, UK construction material manufacturer Saint-Gobain recently announced it had made a total saving of £165,000 and experienced an 11% fall in energy demand across its 20 sites in the UK and Ireland, after turning to demand-respons to power down its factories at peak energy periods.

And property developer Berkeley Homes recently unveiled a new sustainable housing design concept, which outperforms traditional terraced housing by reducing up to 25% off utility bills. The company has also embarked upon a new, two-year plan to deliver a 10% reduction in carbon emissions per person.

Last month, UK construction firms welcomed the release of PAS 2080, a new framework for reducing carbon emissions when delivering infrastructure projects, which could mark a “key step-change” in supply chain sustainability. The release of PAS 2080 came shortly after  research from marketing services business TomTom Telematics which revealed that 75% of construction firms now operate a low-carbon or carbon reduction strategy.

George Ogleby