9 Jan 2004

Interserve Plc today provides an update on Group trading in advance of the preliminary announcement of its full year results on 10 March 2004.

Mike Bottjer, Chairman, said: "2003 has been a year of change and transition for the Group in which a number of key issues have been addressed. We emerge, in accordance with our succession plans, with a substantially changed senior management team.  We are also in a stronger position to deliver long-term earnings growth through tighter operational focus as a result of the actions announced during the year and the continued application of our strategy as an integrated services provider.

"Our record forward order book and an improving trading environment give us confidence for the future."

The Group trades through five principal Divisions, each of which is making encouraging progress:

• Facilities Services has continued to trade well, a position enhanced following the recent extension to the Metropolitan Police Contract. 
• Activity and performance in Industrial Services has improved and enquiry levels are strong.  The programme to exit the Townwork Tube & Fitting business is proceeding to plan. 
• Project Services, both in the UK and the Middle East, has shown continued progress, with key wins in NHS Procure 21, Highways Agency Early Contractor Involvement schemes, and the Mall of the Emirates project in Dubai.  Exit plans for Rail and latterly Westpile are proceeding to plan.
• Equipment Services has performed well in the Middle East and Australasia, providing balance to the relatively quiet UK market.  Market conditions in the Far East continue to show signs of improvement.
• The Group now has 20 PFI/PPP investments (2002: 15), increasing the total amount invested and committed to £35 million (2002: £29 million).  In addition there are 2 further projects at the preferred bidder stage, with a strong pipeline of future opportunities in all sectors.

Other Items Affecting 2003 Results:

The negotiations for the potential transfer of the Group's housing maintenance contract with Liverpool City Council to a third party and the quantification of the Group's retained pension obligations are expected to conclude in the near future.  At that time a further announcement will be made.

A change has been made to the Group's accounting policy relating to profits made on property disposals.  Such profits have previously been reported within operating profit on the basis that a trade in property activities was being conducted.  The Board believes that, as such a trade is no longer being conducted, a change in accounting policy will provide a clearer reflection of trading performance from the Group's continuing activities.  The impact on the 2003 results will be to report an exceptional profit from property disposals in the year of £2.7 million (2002: £2.5 million), with a corresponding decrease in operating profit.

Before taking into account the impact of the above items, Group trading continues to be broadly in line with expectations.