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Shares in Interserve have taken a hefty knock after the services and construction group revealed that costs from a troublesome ‘energy from waste’ plant in Glasgow were spiralling.

In a statement on Monday, the company said its earlier estimate of a £70m hit is “no longer adequate”. Try £160m instead. Shares fell 22 per cent.

The company said it expects a “lengthy period of litigation” to ensue from its EfW business, from which it withdrew late last year.

It has also warned on swelling debts:

Managing the challenges of exiting from these projects and of pursuing our entitlements to recoveries and claims from third parties remains the focus for the large, experienced team of commercial, operational and legal experts we have deployed and will remain an area of critical focus for the foreseeable future.

The adverse cash impact of the EfW business was substantially offset in 2016 by tight control of working capital throughout the rest of the Group, resulting in year end net debt at the previously announced £270-£280m level. However the cash outflow on the EfW contracts has had a significant negative impact on our average net debt, which was £390m during 2016, and which is anticipated to be approximately £450m in 2017.

Copyright The Financial Times Limited 2017. All rights reserved.
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