Mitie eyeing Interserve amid bid interest in support services arm

The boss of outsourcing giant Mitie has said the group would eye possible bid opportunities for Interserve’s support services division after its troubled rival fell into the hands of its lenders.

Speaking to the Press Association, chief executive Phil Bentley played down reports from earlier this year that the group was plotting to swoop on the division just hours after its pre-pack administration.

But he said Mitie would “look at” any Interserve takeover opportunities that may arise.

He said: “If something came out the back of the scrum, we might pick the ball up and run with it.

“They are in our sector and of course we’d look at it if something came out which was interesting,” he added.

Interserve fell into administration in March, with lenders seizing control of the company.

It had been reported that Mitie was drawing up plans for a £100 million approach for the firm’s support services arm, but that Interserve’s new owners put a higher price on the division.

While Interserve, which employs 45,000 in the UK, avoided a Carillion-style collapse, it dealt a further blow to the reputation of the under-pressure outsourcing industry.

Carillion’s shadow also loomed large over construction firm Kier on Monday after its shares tanked to a new low on a raft of warnings over profits and costs of its restructuring.

But Mitie is braced for a possible boost from the woes at its rivals, with the group already in the running for government contracts previously out of reach.

Some of these are contracts held by Interserve that the firm is not able to re-bid for, Mr Bentley added.

He said: “It’s too early to call at the moment, but there are some big government contracts coming up that we’re on the framework for… and we didn’t used to be on these frameworks.”

The former boss of British Gas and Cable & Wireless Communications said the outsourcing sector has been in need of a shake-up for some time.

“This sector generally has had low barriers to entry… any man and dog could get into the sector,” he said.

On Thursday, Mitie posted a better-than-expected 6% rise in annual underlying earnings to £88.2 million for the year to March 31.

Shares jumped higher as the result came in higher than feared after Mitie had warned over earnings and falling orders in March.

Mr Bentley also set out details on the second leg of his overhaul at the group, dubbed Project Forte, which will focus on Mitie’s engineering services business, employing around 8,400 staff.

The two-year programme will deliver run-rate savings of about £30 million by March 2021.

This is on top of the £45 million-a-year cost savings made under the first stage of the restructure, which was launched in June 2017 after a string of profit warnings and amid a torrid time for the outsourcing sector.