Fears over the financial position at Interserve were confirmed this morning as the Board admitted to “a realistic prospect” of the group breaching its financial covenants with lending banks.

Shares at the construction and support services firm plunged by almost 30% after yet another profit warning was issued after trading in the third quarter deteriorated.

Interserve, which admitted last week that it was in talks with its lenders, has now revealed it is looking at options to “maximise the short and medium term cash generation from the business”.

It has also made an extra £35 million of provision for exiting the energy from waste sector, bringing the total set aside for the move to £195m.

Interserve’s contract to build a recycling and renewable energy plant in Glasgow was terminated by Viridor following extensive delays.

In a trading statement today, Interserve said that third quarter trading had slowed from that reported in the first half.

It said: “In UK support services, this was driven by the continued employment cost pressures in the business, the cost of contract mobilisations, margin deterioration driven by a cost base which has not been flexible enough and contract performance in the justice business.

“Our UK construction business has seen further deterioration in operating profit as challenging market conditions and cost pressures as well as operational delivery issues have continued to impact performance.”

On a positive note, equipment services business RMD Kwikform is “performing well” and the international support services business has “started to improve versus the first half performance and in international construction we have maintained a stable performance”.

The firm said: “We now expect operating profit for the overall group in the second half to be approximately half the level of that which was reported in the second half of last year.”

The board’s trading statement added: “We now believe there is a realistic prospect that we will not meet the net debt to EBITDA test contained in our financial covenants for 31st December 2017. As previously announced, we are engaged in constructive and ongoing discussions with our lenders. We have engaged a financial advisor to assist us in these discussions, as well as looking at options to maximise the short and medium term cash generation from the business.”

Debbie White, who started as chief executive on September 1, said there was “considerable potential for business improvement across the company”.

“My team will focus on improving our margin performance in UK support services and ensuring good contract selection in UK construction, while reducing our cost base across the company,” she added.