Interserve’s ‘Fit for Growth’ turnaround programme is paying dividends as the firm said it expects that its 2018 operating profit will be ahead of current market expectations.

A three-year programme launched by the new management team in October 2017, ‘Fit for Growth’ is focused on increasing the group’s organisational efficiency, improving group-wide procurement processes and ensuring greater standardisation and simplification across the business.

Interserve said its management are confident that the cost savings and management actions identified will contribute at least £40-50 million to group operating profit by 2020, with the in-year impact in 2018 estimated to be £15m.

The firm has been suffering from problem waste-to-energy contracts and, following a series of profit warnings in which the Board admitted to “a realistic prospect” of the group breaching its financial covenants with lending banks, it secured additional short-term funding to ease off its immediate financial troubles last month until March 31 at least.

In order to establish a strong foundation from which the group can move forward, Interserve said its new management team has been engaged in a comprehensive review of the group’s contract portfolio and a thorough review of the group’s non-trading balance sheet items.

“This work is progressing well and the outcomes will be announced alongside a presentation of the group’s longer term strategy for value creation at the time of the group’s 2017 annual results presentation,” it added.

Chief executive Debbie White said: “The new management team, and the board, have been working to stabilise the business and provide a sound foundation to continue to serve our customers effectively, underpin our future growth and to restore shareholder value. This work has focused on managing the balance sheet, conducting a thorough assessment of the contract portfolio, and introducing new management disciplines, processes and cost controls under the ‘Fit for Growth’ programme.”