The Trusted Partner

Interserve Plc Half-year report 2009

The Trusted Partner

Registered Office Interserve Plc Interserve House Ruscombe Park Twyford Reading Berkshire RG10 9JU

T +44 (0)118 932 0123 F +44 (0)118 932 0206 [email protected] www.interserve.com

This half-year report was printed in the UK by Royle Print, using vegetable-based inks. The printer and paper mill are accredited both with ISO 14001 Environmental Management Systems and with the Forest Stewardship Council.

TT-COC-002228 WorldReginfo - 929f2902-f240-4d93-9ec3-e9be943ec96c Highlights Interim Management Report Unaudited half-year results for the six months ended 30 June 2009 Chairman’s statement

H1 2009 H1 2008 Change Board As noted in the 2008 annual report John Vyse retired on Revenue £951.2m £913.6m +4.1% 3 April 2009 and Nick Keegan retired at the Annual General • Meeting on 12 May 2009, whilst David Thorpe joined as a • Headline profit1 £39.3m £36.5m +7.7% new non-executive director on 1 January 2009. Prospects • Profit before tax £40.0m £33.7m +18.7% Our principal markets offer good prospects for sustained long-term growth, and we believe that our business model • Headline earnings per share2 23.1p 19.3p +19.7% of concentrating on long-term client relationships is a key strength, given the resilience and visibility of future workload it brings. • Basic earnings per share 24.2p 17.7p +36.7% Interserve performed well in the first half of the year. We benefited from our strategy of focusing on long-term, In the UK our outsourcing operations are based on • Net debt £85.1m £115.4m (26.3)% value-added client relationships and developing a balanced increasing the efficiency and quality of a broad range of business model. As a result, whilst those businesses services for our clients. Trading remains encouraging in • Interim dividend 5.5p 5.3p +3.8% exposed to the UK private sector suffered as their the public sector, where customers see outsourcing as a customers responded to the recession, our overall means of reducing cost and improving service delivery in 3 • Future workload £6.7bn £6.4bn +4.7% performance remained solid, boosted by strong trading in an uncertain economic environment. Many of our private the Middle East and a robust UK public sector result. sector clients, particularly those in manufacturing, retail and financial services, are being affected by the recession Although the macroeconomic environment has been and this is currently impacting both margins and activity challenging we are demonstrating our ability to manage levels in these segments. “The half-year was another period of growth and development for Interserve. Benefiting from our the business through the cycle, delivering strong cash conversion of over 100 per cent in the period, implementing long-term strategy we increased profits, reduced net debt and secured further contract wins with Our construction activities in the UK are focused primarily cost reduction programmes where necessary and winning on the health, education, custodial, defence and a whole-life value in excess of £1 billion that provide improved forward revenue visibility. As a result, new work with a whole-life value in excess of £1 billion infrastructure sectors. Notwithstanding the possibility of we remain confident in our prospects and expect to deliver robust near-term performance and sustain across all of our target sectors. In the longer term economic pressure on public sector finances, the UK has an ageing our long-term growth.” pressures are likely to add further momentum to the market social infrastructure on which demands are increasing that for bundled outsourcing solutions in both the public and will require significant investment to replace, upgrade private sectors. We continued to grow our international Adrian Ringrose and maintain the existing assets. Consequently, we are footprint and develop further opportunities in complementary confident that our long-term framework agreements will Chief Executive markets and services during the period. Our positioning in underpin a healthy pipeline of work for our operations. the Middle East, where we are engaged in construction, In the Middle East our history, diversity, management equipment hire and sale and, most recently, outsourced strength and local partnerships have enabled us to services, enables us to take advantage of the ongoing weather the current economic and fiscal challenges and opportunities in the region by growing existing markets we continue to take advantage of markets which we such as Qatar and by entering new ones such as Saudi expect will remain attractive. The region’s profits have Arabia, a market with significant potential for Interserve. grown significantly in recent years, and we are extending The Board recognises the economic impact on the Group our presence in many other international markets. of its accumulated pension obligations. During the year With our record future workload, balanced and significant steps are being taken to address this, as complementary operations in long-term growth markets, outlined in the Business Review. and the ability to explore and develop new markets the Dividend Board remains confident that the Group will maintain robust The Board has approved an increased interim dividend of near-term performance and sustain long-term growth. 1 Headline profit comprises profit before taxation of £40.0m (H1 2008: £33.7m) adjusted for the impact of (£2.5m) amortisation of intangible assets 5.5p (H1 2008: 5.3p), which will be paid on 26 October (H1 2008: (£2.5m)); (£0.2m) amortisation of intangible assets (associates) (H1 2008: £0.3m); and £3.4m exceptional items (H1 2008: £nil). 2009 to shareholders on the register at close of business on 2 Headline earnings per share are based on Headline profit as defined in note 1 above (see also note 6 to the interim financial statements) 25 September 2009. This reflects the Board’s confidence in 3 Future workload comprises contracted work plus work that has been settled and on which final terms are being agreed (principally PFI projects at the ability of the Group to deliver long-term growth. preferred bidder stage). It includes our share of work won by our Middle East associates. Lord Blackwell Chairman 11 August 2009

Interserve Plc Half-year report 2009 1 WorldReginfo - 929f2902-f240-4d93-9ec3-e9be943ec96c Highlights Interim Management Report Unaudited half-year results for the six months ended 30 June 2009 Chairman’s statement

Interserve Plc Half-year report 2009 1 WorldReginfo - 929f2902-f240-4d93-9ec3-e9be943ec96c Business review

Key Performance Indicators Given that our core skills and capabilities are transferable Our divisions are supported by a Group Services function H1 2009 H1 2008 Change across sectors and geographies, we expect more examples which provides a range of central services and Revenue £951.2m £913.6m +4.1% of such strategic developments to arise, underpinning our encompasses our PFI bidding activity. Group Services costs confidence in the Group’s future. in the half year were £8.0 million (H1 2008: £8.4 million). Headline earnings per share 23.1p 19.3p +19.7% Cash conversion4 128.5% 70.1% +58.4% pts The half year was another period of growth and Facilities Management provides a broad range of development for Interserve, with headline earnings per integrated services to the public and private sectors, Future workload £6.7bn £6.4bn +4.7% share rising 19.7 per cent to 23.1p (H1 2008: 19.3p) on predominantly in the UK, the vast majority of which we Annualised staff turnover5 7.4% 9.0% (1.6)% pts revenue of £951.2 million (H1 2008: £913.6 million). deliver ourselves. Annualised all-employee accident incidence rate per 100,000 workforce 366 455 (19.6)% Strong cash conversion of 128.5 per cent (H1 2008: 70.1 Results summary: per cent) resulted in a reduction in net debt at 30 June to H1 2009 H1 2008 Change Strategy grow into new markets and services where we can provide £85.1 million (31 December 2008: £109.2 million). Cash Revenue £435.0m £393.8m +10.5% Interserve’s vision is to be The Trusted Partner, bringing additional value to our existing clients. flow in the period was positively impacted by the actions Contribution to together all of our outsourcing capabilities to create we have taken to reduce capital expenditure, control Strategic progress: Total Operating Profit £12.3m £14.0m (12.1)% innovative solutions that support long-term customer working capital and realise value from the PFI portfolio. Margin 2.8% 3.6% (0.8)% pts relationships, offering rewarding careers for our staff and • After several years of strong profit growth from our Significant new contract wins across sectors such as underpinning sustained value creation for shareholders. international operations we are well-balanced health, education, local government, infrastructure and geographically, with the UK contributing approximately Results were impacted by deteriorating conditions in the Our strategic objectives for fulfilling this vision consist of custodial enabled our future workload to rise beyond 38 per cent of profits and international businesses private sector, where reduced volumes, especially in higher the following elements: the record level achieved at the end of 2008 to reach around 62 per cent (based on the proportion of total margin activities, combined with margin pressure across £6.7 billion (including our share of Middle East associates). Develop and maintain long-term client relationships: operating profit before Group Services). the board. Notwithstanding near-term trading pressures Our well-established client relationships have been Principal risks and uncertainties arising from the recession, outsourcing remains an •We successfully leveraged our project management cultivated over a long period of time and have withstood The principal risks and uncertainties which could have a attractive long-term growth market. Accordingly, we have skills and knowledge to secure integrated value-added previous business and economic cycles. As a result, around material impact upon the Group’s performance over the continued to develop our business infrastructure, and outsourcing contracts with major public sector and three-quarters of our revenues are derived from services remaining six months of the 2009 financial year, together results in the period have been further impacted by the private sector clients such as Defra and HSBC. These to the public and privatised sectors whose long-term with the mitigation strategies adopted, and which could investment made in our back-office systems to support are new long-term relationships that will provide good contracts and high level of repeat business confer strong cause the actual results to differ materially from those recent contract wins in the public sector and through the revenue visibility and future growth opportunities. visibility during uncertain economic periods. expected, have not changed significantly from those set mobilisation of three major government contracts, out on pages 26 and 27 of the Business Review included in incurring start-up costs. Strategic progress: Develop new markets and models: the Group’s 2008 annual report and financial statements. We have extensive sectoral and geographic reach in our This division generated around 75 per cent of its revenues • We established new long-term relationships during the existing businesses; however, our markets are constantly These risks and uncertainties may be summarised as: in the period from the public and privatised sectors period with Sandwell Council, NHS Scotland, Ealing evolving and we seek to develop into related skills, sectors (H1 2008: 70 per cent). Trading in these sectors remains Council and Derbyshire Council and extended existing • Market change and geographies as part of our growth strategy. encouraging, benefiting from long-term contracts in the relationships with the Highways Agency, United • Major contracts defence, health and government sectors, and we invested Utilities, the Ministry of Justice and Majid Al Futtaim. Strategic progress: in our back-office systems and in a new national customer This has helped us maintain strong revenue visibility, • Key people • Our successful and long-standing partnerships in the service centre during the period to support recent and such that we currently have coverage of 67 per cent Middle East are providing opportunities for our • Health & safety regime future contract wins. Four key clients are now being of anticipated 2010 revenues. Facilities Management business to win new work in the serviced from this customer service centre, which • Financial risks; and region, whilst our Equipment Services operation is currently manages over 9,000 calls a week, and we expect Build a well-balanced Group, active across the asset expanding its footprint to Saudi Arabia, a market with • Damage to reputation. others will join them progressively over time. life cycle: significant growth potential. The balanced nature of the Group’s businesses across the The remaining 25 per cent of the division serves our Segmental review asset life cycle enables us to select the best opportunities • Our contract with the Foreign and Commonwealth industrial and commercial clients, mainly in the Interserve’s divisions create and deliver integrated and whichever market or sector they are in. Our culture and Office has taken our facilities management (FM) automotive, retail, petrochemical, access and aviation single-service solutions that offer real benefits in meeting organisational flexibility allow us to transfer expertise capabilities into Europe. sectors. Many of our clients have been adversely impacted our clients’ outsourced service requirements. Increasingly across our activities. They also give us the potential to by the current economic climate and have responded by we operate across our divisional structure in multi- reducing demand, particularly for higher margin activities. disciplined teams to bring customers in various target We have taken appropriate cost reduction measures and 4 Cash conversion is calculated as the percentage of cash generated by operations of £37.9m (H1 2008: £19.5m) divided by the sum of: operating profit sectors the benefits of a fully integrated approach. of £30.4m (H1 2008: £25.3m); plus amortisation of intangible assets of £2.5m (H1 2008: £2.5m); less profit on disposal of property and investments shall continue to monitor the cost base closely given of £3.4m (H1 2008: nil). continuing uncertainty in the outlook for these sectors.

5 Staff turnover measures the proportion of managerial, technical and office-based staff leaving voluntarily over the course of the period. The figures for January-June have been doubled to give an annual equivalent.

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Among the new contracts won during the period were: Institute of Facilities Management Awards 2008, as part of In the private sector we have won a contract to provide • Infrastructure: A place on the Highways Agency’s its joint venture, PriDE, with Southern Electric Contracting a merchandising security system to Tesco Express stores £400 million framework agreement for the maintenance • Ealing Council: a 10-year contract worth over (SEC). We believe that sustainability know-how is becoming across the UK and Ireland and have secured major capital and repair of highways in the east and south-east of £5 million a year, providing a range of services an important differentiator. Our progress, summarised plant replacement work at the Bank of England. England. It lasts for two years with a possible two-year in buildings across the borough. above, positions us well to capitalise on this emerging extension. During the period our security operation entered into a • Leeds Partnerships NHS Foundation Trust: a 19-year growth driver. strategic partnership with Global Aware International (GAI) Shortly after the period end our KMI Plus joint venture contract worth over £2.5 million a year to deliver Specialist Services offers facilities services such as for the use of Global Integrated Incident Response Planning was awarded a £250 million, five-year extension to an facilities management at seven sites in Leeds providing security, mechanical and electrical (M&E) design, (GIIRP), a software application designed to prepare an existing framework for the delivery of United Utilities’ a range of mental health services. These are owned installation and maintenance and technical services (such organisation for any terrorist or emergency threat. treatment plant capital programme. and operated by Equitix in a PFI project on behalf of as heating, ventilation and air conditioning, lift Interserve has three years’ exclusivity for its distribution the Leeds Partnerships NHS Foundation Trust. • Waste: Preferred bidder, in conjunction with United maintenance and asbestos surveying and remediation). in the UK. We are confident that this addition to our Utilities, for the £500 million Derbyshire waste- • Alstom: a three-year contract to deliver integrated These are usually delivered in discrete packages, with capabilities will further develop our security offering and treatment contract. Interserve will undertake the support services across four sites for the heavy around two-thirds of revenues generated from the private help us offer a more rounded solution for our clients. design and build of the waste processing plant and engineering division of Alstom. sector, but are also often included as part of a bundled Project Services is a leading construction business other facilities. offering to clients of the Facilities Management or Project • Argos: a two-year contract to be the supplier of cleaning providing professional services to enable the creation of Services divisions. • Local government: We were awarded a place on and associated services across Argos’s 745 UK stores. a broad range of buildings and infrastructure. First-half Construction Framework South West soon after the Results summary: trading was solid in the UK and strong in the Middle East, • British Medical Association (BMA): a three-year period end. This £500 million, four-year arrangement H1 2009 H1 2008 Change producing a contribution to Total Operating Profit of extension to our contract to provide cleaning and has been developed by Devon County Council to Revenue £76.8m £88.5m (13.2)% £18.1 million (H1 2008: £15.2 million). porterage services at the Grade II listed BMA House, deliver construction projects in excess of £1 million, building on our 10-year relationship with the BMA. Contribution to Results summary: including local authority buildings, emergency Total Operating Profit £(1.6)m £2.0m n/a H1 2009 H1 2008 Change services, further education colleges and universities. • Northern Ireland Schools PPP projects: three 25-year Margin (2.1)% 2.3% (4.4)% pts Revenue (UK only) £406.4m £406.6m - contracts to provide facilities management services to We continued to receive accolades from industry bodies schools across Northern Ireland. These contracts are Contribution to during the period, including further recognition for our expected to begin during 2011. The division’s performance was affected by a continuation Total Operating Profit £18.1m £15.2m +19.1% - UK £7.1m £7.2m (1.4)% Leeds BSF team as they were awarded “Integrated Supply of the tough trading conditions experienced since last - International Chain of the Year” at the annual Building Awards hosted by We made good progress with the mobilisation of three autumn, notably a slowdown in client spending in the M&E associates £11.0m £8.0m +37.5% Building Magazine. The Thames Gateway desalination major contracts in the government sector. These contracts installation sector and a tightening of margins in manned Margin (UK only) 1.7% 1.8% (0.1)% pts plant, being built in joint venture with Acciona, was voted offer attractive, long-term revenue streams; however, guarding, where our client base is dominated by the the “Most Sustainable Project” at the Annual Awards start-up costs associated both with setting up a European financial sector in the City of London. This disappointing Ceremony of Global Water Intelligence, the international infrastructure and with back-office investment impacted result has also been impacted by investment in further In the UK we secured work across a number of our target water industry’s most prestigious publication. It is also profitability in the period. During the period we welcomed cost reduction measures implemented during the period. sectors, developing new client relationships and building on pleasing to note that UK Project Services was named the staff transferring from four European embassies Combined with previously announced plans, we expect existing ones. Notable contract wins included: “Best Building Contractor with over 500 employees” in the (Amsterdam, Budapest, Geneva and The Hague) to our these measures to deliver annualised cost savings of • Education: Preferred bidder on the Sandwell BSF Best Places to Work in Construction 2009 awards organised Foreign and Commonwealth (FCO) contract that first went approximately £3 million from 2010. project, worth £280 million in construction and by Contract Journal, and has recently been awarded the live last December. On 1 July the remaining five locations Specialist Services continues to support our clients facilities management revenues. maximum five-star rating in the Recognised for Excellence joined the contract, taking the number of embassies using throughout the Group. Notable examples include security scheme by the British Quality Foundation. our services to the full complement of 14. Elsewhere the • Health: Appointed as one of five Principal Supply Chain systems for Mapeley, and M&E services for Hadley Learning £500 million Defra Sustainable Workplace Management Partners on the £600 million NHS Scotland Frameworks In the Middle East our diversity across the region, both Community, Plymouth Schools and the Adult Mental Health contract went live on 1 April, followed by the Ealing Scotland healthcare programme, complementing our sectoral and geographic, together with the strength of our Unit in Wrexham. The division’s engineering capabilities Council contract later in the month. existing healthcare framework agreements in England local partnerships has enabled our associate companies are also being utilised on the Holme House prison contract, and Wales. to deliver an excellent first-half performance despite Our sustainability credentials were enhanced further with Malvern Hospital project and on the recently won Sandwell tougher trading conditions in Dubai. The presentation of the award of the “Sustainability in Real Estate Award” at Building Schools for the Future (BSF) project. On the Defra • Custodial: A £110 million contract to design and build results from our Middle East associates incorporates a the CoreNet Global UK Awards dinner in February 2009. contract Specialist Services is already assisting by providing a prison at Belmarsh East for the Ministry of Justice. change in the basis of taxation of our associate companies Since we launched our RENEWABLES guide to sustainable security guarding and passenger lift maintenance, whilst • Commerce: A £14 million contract at Turnberry Hotel in Qatar. Whilst there is no impact to the Group earnings work practice in June 2008 it has been highly commended our consulting operation is involved in looking at energy and Golf Resort to refurbish the resort in time for per share it has resulted in a reduction in reported by the Environment Agency and has contributed to our top management solutions such as utility bill validation and The Open. operating profits from associate companies, matched by an 20 ranking in the Observer’s Good Company Guide. management, adaptation-to-climate-change surveys, equal reduction in the Group tax charge. The impact on Interserve also won the Sustainability Award at the British energy audits and reviews. Project Services associate companies’ reported operating

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profits in the period was £3.2 million. Favourable currency The division performed very strongly, posting a record PFI Investments As at 30 June 2009 we had 33 signed PFI contracts movements benefited results by £2.7 million. first-half contribution to Total Operating Profit of H1 2009 H1 2008 Change (30 June 2008: 28), of which 22 are operational projects £20.4 million. This result benefited from the impact Contribution to and 11 are under construction, with two more at preferred Our associate companies continued to secure new of a weak sterling, though constant currency growth Total Operating Profit £1.8m £1.5m +20.0% bidder stage (30 June 2008: three). Our total investment contracts during the period, including: nevertheless measured an excellent 15.3 per cent. Interest received on commitment on the signed contracts was £75.6 million • Qatar: subordinated debt (30 June 2008: £64.5 million), of which £39.1 million Cash conversion within the division exceeded 100 per cent - A contract for the construction and fit-out of investments £2.4m £2.1m +14.3% (30 June 2008: £43.9 million) had already been made. in the period resulting from continued focus on reducing major petrochemical tanker maintenance facilities. £4.2m £3.6m +16.7% The two preferred bidder projects awarded during the working capital, limiting net capex and transferring under- period will involve investment of around £15 million. - Two separate contracts at Ras Laffan Industrial utilised assets from geographies of low utilisation to areas City, with Baker Hughes and ORYX, which will make with higher demand. The period under review has been another active one with Looking ahead we are short-listed on a number of projects use of the new fabrication facility we built in 2008. respect to our PFI portfolio. Despite the more challenging in the education and waste sectors and we expect to The Middle East was the primary driver of the strong environment for securing funding we reached financial make further progress in developing our PFI portfolio - A contract to construct pipeline stations across ten divisional performance, with profit in the region almost close on four preferred bidder projects during the period, and generating value from it during the remainder of separate locations for Punj Lloyd, worth doubling on a constant-currency basis. In particular we all in Northern Ireland: the acute hospital in Enniskillen 2009 and beyond. approximately £20 million. produced excellent growth in Abu Dhabi. Major projects and three schools projects in Down, Connor and here included the Yas Island development, where our Pension scheme • UAE: Downpatrick. Once built the projects will provide our FM equipment is being used on the bridge structures and the Progress towards agreement of the funding position - A £50 million contract to build an extension and business with steady revenue streams for over 25 years. hotel complex at the new Formula One race track, and our and deficit recovery of the Interserve Pension Scheme metro link at the Mall of the Emirates, a mall work on the Saadiyat Island Expressway bridge, the largest Since the beginning of the year we have been awarded continues. Whilst the entire process is unlikely to be originally built by our associate company in 2005. bridge built to date in the UAE. In Dubai, our Megashor preferred bidder status on two new projects. In January completed before the end of the year, we continue to - Construction of the New Exhibition Halls at the towers and other equipment have been used in building our joint venture with United Utilities was selected as the anticipate that the funding shortfall as at the end of Dubai World Trade Centre, providing a further one the elevated structures supporting the new Metro, which preferred bidder for a £500 million waste-treatment 2008 will be in the region of £250 million. A number of million square feet of exhibition space and building will transport up to 27,000 passengers per hour to Jebel contract in Derbyshire. This is a significant step as it takes actions have been completed during the period, designed on the previous work we have done for this Ali airport on project completion, whilst in Oman our our sustainability expertise and construction skills into an to reduce both the funding shortfall and the risk in customer. equipment was used in the construction of a new important new sector which will offer further opportunities accrued liabilities: 70-metre-high dam to supply water to a million people going forward. It also represents an evolution in our • Oman: • The Board has decided to close the defined benefit in Muscat. We are progressing with the registration of relationship with United Utilities, a client for whom we - Construction of a £10 million court building for the scheme to future accrual for all non-passport members our company in Saudi Arabia and expect to commence have worked for several years in the construction of water- Ministry of Justice. from the end of this year. trading during the second half of 2009. and waste-water-treatment facilities. - A contract to build a three-storey building for the • A full investment strategy review has been completed, Australasia produced a solid performance, due largely to We were selected as preferred bidder by Sandwell Council Oman Dental College. and initial conclusions implemented, in conjunction robust trading in the infrastructure sector which helped for its BSF project, worth more than £280 million in with the Trustee of the Scheme. This will reduce offset a weaker commercial market. Major projects worked construction and FM revenues to Interserve. We have Equipment Services is a global leader in the supply of investment risk through greater asset diversification on included the new A$268 million Rectangular Stadium in recently reached financial close on this project and have specialised equipment (formwork and falsework) used in and matching of inflation and interest volatility with Melbourne which is being built for Victoria State begun work at two pilot sites, with the buildings scheduled creating major concrete structures, often requiring Scheme liabilities. Government and where our Megashor towers and Alshor to be fully operational in 2011. In total over 20 schools in complex specification and design work. Plus propping solutions are being used to support the the borough are expected to benefit from the scheme. These actions will be reflected as an exceptional credit Results summary: construction of the structure and roof. H1 2009 H1 2008 Change Separately, cash amounting to £15 million has been of approximately £20 million to the Group 2009 income Trading conditions in Europe were, as expected, released from the portfolio via the sale of our interests statement. Revenue £80.4m £79.2m +1.5% challenging during the period. Our UK operation showed in the Sheffield Schools project and the repayment of During the second half of the year negotiations towards Contribution to resilience given the environment, benefiting from the majority of our subordinated debt in the landmark Total Operating Profit £20.4m £13.7m +48.9% agreement of the funding shortfall will be progressed. It is Olympics-related work and cost reduction programmes University College London Hospital project. Going forward anticipated that this will include both a revised schedule Margin 25.4% 17.3% +8.1% pts which helped offset a weak commercial sector, but there we expect further cash generation from the mature of increased Company contributions into the Scheme and has been a significant slowdown across key European projects in the portfolio, which will assist in the funding the use of alternative assets in order to mitigate the markets such as Spain and Ireland. We have taken action of new projects. current and future cash requirement on the Group. to lower the cost base in these territories and move under- utilised equipment to more attractive markets, but the near-term prospects in these countries remain challenging.

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Market prospects instead will look to meet the additional capacity planned. We are also continuing to take advantage of the Chairman United Kingdom requirements via five 1,500-place PFI prisons. Competitions burgeoning market in nearby Abu Dhabi, increasing our Norman Blackwell (Lord Blackwell) Demand in the majority of our UK markets remains for these are expected in the next two years, providing a presence there across the full range of our capabilities. Executive directors robust. Our customers, in particular central and local good pipeline of prospects. In defence we shall continue Prospects for Oman remain promising though the strong Adrian Ringrose Chief Executive governments, are increasingly under pressure to reduce to work closely with Defence Estates to deliver value-for- economic growth of recent years has been softened by a Tim Jones Group Finance Director budgets, to improve efficiencies and to maximise the money outsourcing solutions and maximise efficiency in a falling oil price. However, the government is accelerating Steven Dance effectiveness of their available resources given the current challenging environment. Bruce Melizan its long-term strategy aimed at diversifying the economy challenging economic environment. At the same time they Elsewhere there are a number of new local authority away from a reliance on oil production by boosting its continue to face rising demand from a growing and ageing Non-executive directors framework agreements, where county and district councils industrial and services sectors. Much of the investment in G Patrick Balfour population to improve the delivery of existing services. We and other public bodies are joining forces to extend the the industrial sector will centre on the Sohar Port complex Les Cullen are well-positioned to help them given our strong benefits of collaborative working. With our strong regional where we have been active for a number of years. David Thorpe capabilities across a broad range of markets, our proven network and familiarity with these methods of David Trapnell track record in delivering change and our ability to create The establishment of trading operations for our Equipment procurement we are achieving success in this market, with innovative solutions. With our focus on sectors that are Services business in Saudi Arabia is progressing according Group Company Secretary recent wins in Ealing and Devon being testament to this, operationally, legally and politically essential we continue to plan and we expect the business to begin making a Trevor Bradbury and are pursuing several other opportunities. to expect good opportunities. contribution from late 2009. Registered office Middle East & International In the private sector we expect the recent challenging Outlook Interserve House Our international operations continue to be dominated by Ruscombe Park demand outlook to continue and competition to remain With our record future workload, balanced and our strong position in the Gulf. We believe this region will Twyford intense, putting pressure on margins and impacting complementary operations in long-term growth markets, remain a rewarding place in which to trade over the Reading current-year performance in our facilities services and the ability to explore and develop new markets we coming years, aided by our diverse geographical and Berkshire RG10 9JU businesses. Against this backdrop we have taken action remain confident that the Group will maintain robust sectoral exposure and well-established local partnerships. T +44 (0)118 932 0123 to reduce our cost base in the affected market segments near-term performance and sustain long-term growth. The rest of our international operations, which are active F +44 (0)118 932 0206 and will continue to be vigilant with respect to costs across Australasia, the Far East, Europe, South Africa and [email protected] going forward. Recent wins with HSBC, Argos and Alstom, South America, are likely to continue to face more www.interserve.com however, demonstrate our ability to continue to win work challenging market conditions as the equipment services in this environment. Registered number they provide are dependent on the strength of the local Responsibility statement 88456 The BSF programme is set to continue to offer opportunities construction market. We have been taking action to Registrar and Share Transfer Office in the education sector and we are actively bidding for mitigate the anticipated lower demand levels by reducing The directors confirm to the best of their knowledge: future work to augment our existing Leeds BSF and costs and capital expenditure where necessary, and shall Capita Registrars Northern House Sandwell BSF projects. The current government is continue to review the specific situation in each territory a the condensed set of financial statements has been Woodsome Park committed to refurbishing or rebuilding 50 per cent of all going forward. prepared in accordance with IAS 34; Fenay Bridge primary schools over the next 15 years. Irrespective of the Our largest market, Qatar, is expected to record the highest Huddersfield HD8 0GA political party in power, an ageing infrastructure will have b the interim management report includes a fair review economic growth rate in the Gulf Cooperation Council (GCC) T +44 (0)20 8639 3399 to be tackled and hence we expect the education sector of the important events during the first six months and over the coming years. The government has outlined a F +44 (0)1484 600911 to remain an attractive long-term market. With a position description of the principal risks and uncertainties for continuation of its expansionary fiscal policy, which, [email protected] on the health framework agreements in England, Wales the remaining six months of the year, as required by together with its support of the more subdued banking and www.capitashareportal.com and, more recently, Scotland, we continue to see good DTR 4.2.7R; and real estate sectors, is expected to ensure relatively opportunities in this sector and note that all main Auditors attractive growth rates are maintained. We believe that our c the interim management report includes a fair political parties have to date committed to maintaining Deloitte LLP offering, which now encompasses construction, equipment review of the information required by DTR 4.2.7R robust spending on healthcare in response to an ageing services and outsourcing services, will be well-positioned to and DTR 4.2.8R of the Disclosure and Transparency Bankers UK population. win further work in this environment. Rules of the Financial Services Authority. Royal Bank of Scotland plc In the custodial sector, where we have a strong track HSBC Bank plc After several years of frenetic activity trading conditions record and unique construction expertise, there are Stockbrokers in Dubai have, latterly, become more challenging. By order of the Board ongoing opportunities under both PFI and public-sector JPMorgan Cazenove Limited Nevertheless our businesses have maintained strong client procurement initiatives. The National Offender Oriel Securities Limited relationships, won new work and developed an encouraging Management Service’s capacity programme aims to create pipeline of opportunities. Whilst the market is unlikely Lawyers approximately 12,000 additional prison places by 2014, to regain its previous confidence in the near term the Adrian Ringrose Tim Jones Wragge & Co LLP representing a doubling of the pace of expansion of the Emirate’s Grand Vision remains intact, albeit it will likely Chief Executive Group Finance Director last 10 years. The government announced in April that it develop at a more sustainable pace than previously 11 August 2009 would abandon plans for the large ‘titan’ prisons and

8 Interserve Plc Half-year report 2009 Interserve Plc Half-year report 2009 9 WorldReginfo - 929f2902-f240-4d93-9ec3-e9be943ec96c Business review Directors and advisers continued

8 Interserve Plc Half-year report 2009 Interserve Plc Half-year report 2009 9 WorldReginfo - 929f2902-f240-4d93-9ec3-e9be943ec96c Independent review report to Interserve Plc Unaudited condensed consolidated income statement For the six months ended 30 June 2009

Six months ended 30 June 2009 Six months ended 30 June 2008 Year ended 31 December 2008 We have been engaged by the Company to review the Our responsibility Before Before Before condensed set of financial statements in the half-yearly Our responsibility is to express to the Company a exceptional Exceptional exceptional Exceptional exceptional Exceptional items and items and items and items and items and items and financial report for the six months ended 30 June 2009 conclusion on the condensed set of financial statements amortisation amortisation amortisation amortisation amortisation amortisation of acquired of acquired of acquired of acquired of acquired of acquired which comprises the consolidated income statement, the in the half-yearly financial report based on our review. intangible intangible intangible intangible intangible intangible assets assets Total assets assets Total assets assets Total consolidated statement of comprehensive income, the £million £million £million £million £million £million £million £million £million Scope of review Continuing operations consolidated balance sheet, the consolidated statement of We conducted our review in accordance with International Revenue 951.2 - 951.2 913.6 - 913.6 1,800.0 - 1,800.0 changes in equity, the consolidated statement of cash Standard on Review Engagements (UK and Ireland) 2410 Cost of sales (837.9) - (837.9) (809.4) - (809.4) (1,576.8) - (1,576.8) flows and related notes 1 to 12. We have read the other Gross profit 113.3 - 113.3 104.2 - 104.2 223.2 - 223.2 “Review of Interim Financial Information Performed by the information contained in the half-yearly financial report Administration expenses (83.8) - (83.8) (76.4) - (76.4) (163.8) - (163.8) Independent Auditor of the Entity” issued by the Auditing Amortisation of acquired intangible assets - (2.5) (2.5) - (2.5) (2.5) - (5.0) (5.0) and considered whether it contains any apparent Practices Board for use in the United Kingdom. A review of Total administration expenses (83.8) (2.5) (86.3) (76.4) (2.5) (78.9) (163.8) (5.0) (168.8) misstatements or material inconsistencies with the interim financial information consists of making inquiries, Profit on disposal of property and investments - 3.4 3.4 ------information in the condensed set of financial statements. Operating profit 29.5 0.9 30.4 27.8 (2.5) 25.3 59.4 (5.0) 54.4 primarily of persons responsible for financial and Share of results 13.5 - 13.5 10.2 - 10.2 28.6 - 28.6 This report is made solely to the Company in accordance accounting matters, and applying analytical and other Amortisation of acquired intangible assets - (0.2) (0.2) - (0.3) (0.3) - (0.3) (0.3) with International Standard on Review Engagements (UK review procedures. A review is substantially less in scope Total share of result of associates and and Ireland) 2410 “Review of Interim Financial Information than an audit conducted in accordance with International joint ventures (note 5) 13.5 (0.2) 13.3 10.2 (0.3) 9.9 28.6 (0.3) 28.3 Total operating profit 43.0 0.7 43.7 38.0 (2.8) 35.2 88.0 (5.3) 82.7 Performed by the Independent Auditor of the Entity” Standards on Auditing (UK and Ireland) and consequently Investment revenue 15.0 - 15.0 19.2 - 19.2 39.9 - 39.9 issued by the Auditing Practices Board. Our work has does not enable us to obtain assurance that we would Finance costs (18.7) - (18.7) (20.7) - (20.7) (42.7) - (42.7) been undertaken so that we might state to the Company become aware of all significant matters that might be Profit before tax 39.3 0.7 40.0 36.5 (2.8) 33.7 85.2 (5.3) 79.9 those matters we are required to state to them in an identified in an audit. Accordingly, we do not express an Tax (charge)/credit (note 4) (8.9) 0.7 (8.2) (10.8) 0.8 (10.0) (23.6) 1.4 (22.2) Profit for the period 30.4 1.4 31.8 25.7 (2.0) 23.7 61.6 (3.9) 57.7 independent review report and for no other purpose. To audit opinion. the fullest extent permitted by law, we do not accept or Attributable to: Conclusion assume responsibility to anyone other than the Company, Equity holders of the parent 28.9 1.4 30.3 24.1 (2.0) 22.1 58.3 (3.9) 54.4 Based on our review, nothing has come to our attention for our review work, for this report, or for the conclusions Minority interest 1.5 - 1.5 1.6 - 1.6 3.3 - 3.3 that causes us to believe that the condensed set of 30.4 1.4 31.8 25.7 (2.0) 23.7 61.6 (3.9) 57.7 we have formed. financial statements in the half-yearly financial report Directors’ responsibilities for the six months ended 30 June 2009 is not prepared, Six months ended Six months ended Year ended 30 June 2009 30 June 2008 31 December 2008 The half-yearly financial report is the responsibility of, and in all material respects, in accordance with International Earnings per share (note 6) pence pence pence has been approved by, the directors. The directors are Accounting Standard 34 as adopted by the European Union Basic 24.2 17.7 43.5 Diluted 23.6 17.4 42.7 responsible for preparing the half-yearly financial report in and the Disclosure and Transparency Rules of the United accordance with the Disclosure and Transparency Rules of Kingdom’s Financial Services Authority. Dividend per share the United Kingdom’s Financial Services Authority. 2009 proposed and 2008 paid (note 7) 5.5 5.3 17.0

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as Unaudited condensed consolidated statement of comprehensive income For the six months ended 30 June 2009 adopted by the European Union. The condensed set of Deloitte LLP Six months ended Six months ended Year ended 30 June 2009 30 June 2008 31 December 2008 financial statements included in this half-yearly financial Chartered Accountants and Statutory Auditors £million £million £million report has been prepared in accordance with International London, United Kingdom Profit for the period 31.8 23.7 57.7 Accounting Standard 34, “Interim Financial Reporting”, as 11 August 2009 Other comprehensive income adopted by the European Union. Exchange differences on translation of foreign operations (26.1) 2.7 48.8 Gains/(losses) on available-for-sale financial assets (excluding joint ventures) 0.2 0.3 (1.3) Gains/(losses) on cash flow hedges (joint ventures) 46.9 3.6 (79.1) (Losses)/gains on available-for-sale financial assets (joint ventures) (32.0) (30.9) 109.2 Actuarial losses on defined benefit pension schemes (54.4) (32.6) (80.7) Deferred tax on items taken directly to equity (note 4) 11.0 16.7 14.2 Other comprehensive income net of tax (54.4) (40.2) 11.1 Total comprehensive income (22.6) (16.5) 68.8

Attributable to: Equity holders of the parent (24.1) (18.1) 65.5 Minority interest 1.5 1.6 3.3 (22.6) (16.5) 68.8

10 Interserve Plc Half-year report 2009 Interserve Plc Half-year report 2009 11 WorldReginfo - 929f2902-f240-4d93-9ec3-e9be943ec96c Independent review report to Interserve Plc Unaudited condensed consolidated income statement For the six months ended 30 June 2009

Attributable to: Equity holders of the parent (24.1) (18.1) 65.5 Minority interest 1.5 1.6 3.3 (22.6) (16.5) 68.8

10 Interserve Plc Half-year report 2009 Interserve Plc Half-year report 2009 11 WorldReginfo - 929f2902-f240-4d93-9ec3-e9be943ec96c Unaudited condensed consolidated balance sheet Unaudited condensed consolidated statement of changes in equity At 30 June 2009 For the six months ended 30 June 2009

30 June 2009 30 June 2008 31 December 2008 Hedging Attributable £million £million £million Capital and Investment to equity Share Share redemption Merger translation in own Retained holders of Minority Non-current assets capital premium reserve reserve reserves shares earnings the parent interest Total Goodwill 228.9 228.8 228.9 £million £million £million £million £million £million £million £million £million £million Other intangible assets 33.5 33.4 33.4 Balance at 31 December 2007 12.5 111.9 0.1 49.0 38.7 (0.5) (30.1) 181.6 1.6 183.2 Property, plant and equipment 143.6 124.4 156.8 Total comprehensive income - - - - (16.7) (1.4) (18.1) 1.6 (16.5) Interests in joint ventures 117.7 68.7 114.0 Dividends paid ------(14.0) (14.0) (1.4) (15.4) Interests in associated undertakings 69.0 40.5 72.5 Shares issued - 0.8 - - - - - 0.8 - 0.8 Investments - 0.1 - Share-based payments ------1.3 1.3 - 1.3 Deferred tax asset 35.5 13.0 19.2 Balance at 30 June 2008 12.5 112.7 0.1 49.0 22.0 (0.5) (44.2) 151.6 1.8 153.4 628.2 508.9 624.8 Total comprehensive income - - - - 86.3 - (2.7) 83.6 1.7 85.3 Dividends paid ------(6.6) (6.6) (1.5) (8.1) Current assets Purchase of Company shares - - - - - (0.2) - (0.2) - (0.2) Inventories 21.6 21.0 27.8 Company shares used to settle Trade and other receivables 395.3 420.1 372.1 share-based obligations - - - - - 0.2 (0.2) - - - Cash and deposits 70.4 52.2 61.3 Share-based payments ------1.9 1.9 - 1.9 487.3 493.3 461.2 Balance at 31 December 2008 12.5 112.7 0.1 49.0 108.3 (0.5) (51.8) 230.3 2.0 232.3 Total assets 1,115.5 1,002.2 1,086.0 Total comprehensive income - - - - (15.2) - (8.9) (24.1) 1.5 (22.6) Dividends paid ------(14.6) (14.6) (1.4) (16.0) Current liabilities Disposal of available-for-sale Bank overdrafts (13.7) (21.2) (3.1) financial asset and related Trade and other payables (492.7) (512.1) (466.0) cash flow hedges recycled Current tax liabilities (16.4) (11.3) (13.8) through the income statement - - - - (0.2) - - (0.2) - (0.2) Short-term provisions (15.5) (8.7) (14.0) Shares issued ------(538.3) (553.3) (496.9) Share-based payments ------2.1 2.1 - 2.1 Net current liabilities (51.0) (60.0) (35.7) Balance at 30 June 2009 12.5 112.7 0.1 49.0 92.9 (0.5) (73.2) 193.5 2.1 195.6 Non-current liabilities Bank loans (140.0) (145.0) (165.5) Trade and other payables (4.8) (7.4) (5.1) Non-current tax liabilities (9.1) (8.4) (9.1) Long-term provisions (22.6) (24.2) (24.0) Retirement benefit obligation (205.1) (110.5) (153.1) (381.6) (295.5) (356.8) Total liabilities (919.9) (848.8) (853.7) Net assets 195.6 153.4 232.3

Equity Share capital 12.5 12.5 12.5 Share premium account 112.7 112.7 112.7 Capital redemption reserve 0.1 0.1 0.1 Merger reserve 49.0 49.0 49.0 Hedging and translation reserves 92.9 22.0 108.3 Investment in own shares (0.5) (0.5) (0.5) Retained earnings (73.2) (44.2) (51.8) Equity attributable to equity holders of the parent 193.5 151.6 230.3 Minority interest 2.1 1.8 2.0 Total equity 195.6 153.4 232.3

12 Interserve Plc Half-year report 2009 Interserve Plc Half-year report 2009 13 WorldReginfo - 929f2902-f240-4d93-9ec3-e9be943ec96c Unaudited condensed consolidated balance sheet Unaudited condensed consolidated statement of changes in equity At 30 June 2009 For the six months ended 30 June 2009

12 Interserve Plc Half-year report 2009 Interserve Plc Half-year report 2009 13 WorldReginfo - 929f2902-f240-4d93-9ec3-e9be943ec96c Unaudited condensed consolidated statement of cash flows Notes to the unaudited interim financial statements For the six months ended 30 June 2009 For the six months ended 30 June 2009

Six months ended Six months ended Year ended 1 General information 30 June 2009 30 June 2008 31 December 2008 £million £million £million Interserve Plc (the Company) is a company incorporated in the United Kingdom. The half-year results and condensed consolidated financial Operating activities statements for the six months ended 30 June 2009 (the interim financial statements) comprise the Company and its subsidiaries (together Total operating profit 43.7 35.2 82.7 referred to as the Group) and the Group’s interest in joint ventures and associates. Adjustments for: Amortisation of acquired intangible assets 2.5 2.5 5.0 The directors have considered the Group’s financial position with reference to latest forecasts and the actual performance for the half-year Depreciation of property, plant and equipment 12.4 10.8 22.6 period. Whilst the current economic environment continues to be uncertain, the directors believe that the Group has adequate resources to Gain on disposal of property and investments (3.4) -- continue in operational existence for the foreseeable future, being a period of at least 12 months, noting in particular that: the majority of Pension payments in excess of the income statement charge (6.8) (5.2) (10.7) the Group’s revenue is derived from long-term contracts; the Group had visibility of 67 per cent of anticipated 2010 revenues at the half- Share of results of associates and joint ventures (13.3) (9.9) (28.3) year period; and the Group has access to committed debt facilities totalling £250 million until at least May 2011. Accordingly, the Group Non-cash charge relating to share-based payments 2.1 1.3 3.5 continues to adopt the going concern basis in preparing these interim financial statements. Gain on disposal of property, plant and equipment (3.3) (4.5) (9.0) Operating cash flows before movements in working capital 33.9 30.2 65.8 A copy of the statutory accounts for the year ended 31 December 2008 has been delivered to the Registrar of Companies. The auditors’ Decrease/(increase) in inventories 4.4 (5.0) (7.5) report on those accounts was unqualified and did not contain statements made under section 237(2) or (3) of the Companies Act 1985. (Increase)/decrease in receivables (28.4) (50.2) 11.2 Increase/(decrease) in payables 28.0 44.5 (10.9) The interim financial statements for the six months ended 30 June 2009 have been reviewed but have not been audited (see page 10). Cash generated by operations 37.9 19.5 58.6 Taxes paid (6.5) (8.1) (14.0) 2 Accounting policies Net cash from operating activities 31.4 11.4 44.6 The interim financial statements have been prepared in accordance with IAS 34 - Interim Financial Reporting, the recognition and measurement criteria of International Financial Reporting Standards (IFRSs) as adopted by the European Union, and the disclosure Investing activities requirements of the Listing Rules. The interim financial statements do not include all information required for full annual financial Interest received 2.8 2.9 7.3 statements, and should be read in conjunction with the Group’s Annual Report and Financial Statements for the year ended Dividends received from associates and joint ventures 5.2 7.7 13.5 31 December 2008, which are available on the Group's website at www.interserve.com. Proceeds on disposal of property, plant and equipment 6.6 10.2 20.2 Capital expenditure (14.5) (21.7) (54.8) The accounting policies and methods of computation followed in the interim financial statements are consistent with those published in the Purchase of subsidiary undertaking - (0.3) (0.3) Group’s Annual Report and Financial Statements for the year ended 31 December 2008 except for the adoption in the period of: Investment in joint ventures - PFI investments (3.0) (5.0) (8.2) • IFRS 8 - Operating Segments, which had no material impact on these interim financial statements. Disposal of investment 7.2 - 0.1 Receipt of loan repayment - PFI investments 7.6 0.2 0.4 • IAS 1 – Presentation of Financial Statements (September 2007), which has resulted in the inclusion of the condensed consolidated Receipt of loan repayment - associated undertakings 0.1 - 0.3 statement of changes in equity as a primary statement. The adoption of this standard has not changed the recognition or measurement Net cash generated/(used) in investing activities 12.0 (6.0) (21.5) of specific transactions or events.

Financing activities In addition the accounting policies used are consistent with those that the directors intend to use in the Annual Report and Financial Interest paid (2.0) (4.4) (10.2) Statements for the year ending 31 December 2009. Dividends paid to equity shareholders (14.6) (14.0) (20.6) Dividends paid to minority shareholders (1.5) (1.3) (2.9) At the date of authorisation of these interim financial statements the following standards and interpretations were in issue but not yet Issue of shares - 0.8 0.8 effective and therefore have not been applied in these interim financial statements: (Decrease)/increase in bank borrowings (25.5) (18.0) 2.5 Standards and interpretations Accounting periods starting after Movement in obligations under finance leases (0.1) (0.7) (0.2) IFRIC 12 - Service concession arrangements 29 March 2009 Redemption of loan notes - (1.0) (1.0) IFRIC 16 - Hedges of a Net Investment in a Foreign Operation 1 July 2009 Net cash used in financing activities (43.7) (38.6) (31.6) IFRIC 17 - Distributions of Non-cash Assets to Owners 1 July 2009 IFRIC 18 - Transfers of Assets from Customers 1 July 2009 Net decrease in cash and cash equivalents (0.3) (33.2) (8.5) Cash and cash equivalents at beginning of period 58.2 64.5 64.5 These standards and interpretations are not expected to materially impact the Group. Effect of foreign exchange rate changes (1.2) (0.3) 2.2 Cash and cash equivalents at end of period 56.7 31.0 58.2 The principal risks and uncertainties facing the Group are those described on pages 26 to 27 of the Group’s Annual Report and Cash and cash equivalents comprise Financial Statements for the year ended 31 December 2008. The seasonality of the Group results is not expected to differ Cash and deposits 70.4 52.2 61.3 significantly from prior years. Bank overdrafts (13.7) (21.2) (3.1) 56.7 31.0 58.2

Reconciliation of net cash flow to movement in net debt Net decrease in cash and cash equivalents (0.3) (33.2) (8.5) Decrease/(increase) in bank borrowings 25.5 18.0 (2.5) Movement in obligations under finance leases 0.1 0.7 0.2 Redemption of loan notes - 1.0 1.0 Change in net debt resulting from cash flows 25.3 (13.5) (9.8) Effect of foreign exchange rate changes (1.2) (0.3) 2.2 Movement in net debt during the period 24.1 (13.8) (7.6) Net debt - opening (109.2) (101.6) (101.6) Net debt - closing (85.1) (115.4) (109.2)

14 Interserve Plc Half-year report 2009 Interserve Plc Half-year report 2009 15 WorldReginfo - 929f2902-f240-4d93-9ec3-e9be943ec96c Unaudited condensed consolidated statement of cash flows Notes to the unaudited interim financial statements For the six months ended 30 June 2009 For the six months ended 30 June 2009

14 Interserve Plc Half-year report 2009 Interserve Plc Half-year report 2009 15 WorldReginfo - 929f2902-f240-4d93-9ec3-e9be943ec96c Notes to the unaudited interim financial statements continued

3 Business and geographical segments b) Geographical segments a) Business segments Facilities Management and Specialist Services are predominantly based in the United Kingdom. The Project Services division is located in the The Group is organised into five operating divisions, as set out below. The Group internally reviews and allocates resources to each of these United Kingdom and manages the investments in associates in the Middle East. Equipment Services has operations in all of the geographic operating divisions and each has a divisional managing director that reports into and forms part of the executive board. segments listed below.

Facilities Management: provision of outsourced support services to public- and private-sector clients. The table below provides an analysis of the Group’s sales by geographical market, irrespective of the origin of the goods/services.

Revenue by geographical market Total operating profit Specialist Services: mechanical and electrical design, installation and maintenance; asbestos surveying and remedial work; security services; Six months Six months Year Six months Six months Year and specialist cleaning operations. ended ended ended ended ended ended 30 June 30 June 31 December 30 June 30 June 31 December 2009 2008 2008 2009 2008 2008 Project Services: design, construction and maintenance of buildings and infrastructure. £million £million £million £million £million# £million#

United Kingdom 922.9 901.7 1,748.0 19.2 25.7 51.9 Equipment Services: design, hire and sale of formwork, falsework and associated access equipment. Rest of Europe 14.0 14.2 32.2 0.4 2.3 4.3 Middle East & Africa 40.4 29.0 75.1 27.2 14.0 42.1 PFI Investments: transaction structuring and management of the Group’s PFI activities. The Joint ventures - PFI Investments segmental Australasia 15.8 16.8 33.6 4.8 4.6 8.6 figures represent the Group’s share of its PFI special purpose companies. Far East 2.9 4.2 7.7 (0.4) (0.4) (1.8) Americas 2.6 2.2 7.4 (0.2) 0.2 0.8 Segment information about these operating divisions is presented below. Group Services - - - (8.0) (8.4) (17.9) Revenue Result Inter-segment elimination (47.4) (54.5) (104.0) - - - Six months Six months Year Six months Six months Year ended ended ended ended ended ended 951.2 913.6 1,800.0 43.0 38.0 88.0 30 June 30 June 31 December 30 June 30 June 31 December Profit on disposal of property and investments 3.4 - - 2009 2008 2008 2009 2008 2008 £million £million £million £million £million £million Amortisation of acquired intangible assets (2.7) (2.8) (5.3) 43.7 35.2 82.7 Facilities Management 435.0 393.8 793.3 12.3 14.0 32.8 Specialist Services 76.8 88.5 168.2 (1.6) 2.0 1.0 # The results of Joint ventures - PFI Investments have been reclassified into the United Kingdom. Project Services 406.4 406.6 770.8 18.1 15.2 39.7 Non-current assets Equipment Services 80.4 79.2 171.7 20.4 13.7 29.6 30 June 30 June 31 December 2009 2008 2008 Joint ventures - PFI Investments - - - 1.8 1.5 2.8 £million £million £million Group Services - - - (8.0) (8.4) (17.9) Inter-segment elimination (47.4) (54.5) (104.0) - - - United Kingdom 165.8 114.1 162.6 951.2 913.6 1,800.0 43.0 38.0 88.0 Rest of Europe 18.7 19.4 23.3 Profit on disposal of property and investments 3.4 - - Middle East & Africa 115.2 68.3 117.6 Amortisation of acquired intangible assets (2.7) (2.8) (5.3) Australasia 15.2 15.3 14.9 43.7 35.2 82.7 Far East 5.8 10.0 8.3 Investment revenue 15.0 19.2 39.9 Americas 4.2 4.2 4.5 Finance costs (18.7) (20.7) (42.7) Group Services, goodwill and acquired intangible assets 267.8 264.6 274.4 Profit before tax 40.0 33.7 79.9 592.7 495.9 605.6 Tax (8.2) (10.0) (22.2) Deferred tax asset 35.5 13.0 19.2 Profit after tax 31.8 23.7 57.7 Total non-current assets 628.2 508.9 624.8

4 Income tax expense Net assets/(liabilities) Six months Six months Year 30 June 30 June 31 December ended ended ended 2009 2008 2008 30 June 30 June 31 December £million £million £million 2009 2008 2008 £million £million £million Facilities Management (54.6) (30.7) (48.5) UK taxation 7.4 7.1 13.4 Specialist Services (8.1) (7.0) (6.6) Overseas taxation 1.8 2.1 4.6 Project Services (111.2) (104.0) (73.4) Deferred taxation (1.0) 0.8 4.2 Equipment Services 137.6 123.5 156.0 8.2 10.0 22.2 Joint ventures - PFI Investments 117.7 68.7 114.0 Effective tax rate 20.5% 29.7% 27.8% 81.4 50.5 141.5 Group Services, goodwill and acquired intangible assets 197.2 216.5 198.0 The effective corporation tax charged represents the best estimate of the weighted average annual corporation tax rate expected for the 278.6 267.0 339.5 full financial year. No account has been taken in these interim financial statements of the 2009 Finance Act that was substantially enacted Net debt (85.1) (115.4) (109.2) on 8 July 2009, after the balance sheet date. It is estimated that as a result of this change in tax legislation, deferred tax liabilities of Net assets (excluding minority interest) 193.5 151.6 230.3 £5 million on unremitted earnings from overseas associates should be released in the full-year financial statements.

16 Interserve Plc Half-year report 2009 Interserve Plc Half-year report 2009 17 WorldReginfo - 929f2902-f240-4d93-9ec3-e9be943ec96c Notes to the unaudited interim financial statements continued

4 Income tax expense (continued) Six months Six months Year ended ended ended In addition to the income tax charged to the income statement, the following deferred tax charges/(credits) have been recorded directly in 30 June 30 June 31 December equity in the period: 2009 2008 2008 Earnings per share pence pence pence Six months Six months Year ended ended ended Headline earnings per share 23.1 19.3 46.7 30 June 30 June 31 December Basic earnings per share 24.2 17.7 43.5 2009 2008 2008 £million £million £million Diluted earnings per share 23.6 17.4 42.7

Tax on actuarial loss on pension liability (15.2) (9.1) (22.6) 7 Dividends Tax on gain/(loss) on available-for-sale financial assets 0.1 - (0.4) Six months Six months Year ended ended ended Tax on fair value adjustment on cash flow hedges 13.1 1.1 (22.1) Dividend 30 June 30 June 31 December Tax on the fair value adjustments on available-for-sale per share 2009 2008 2008 pence £million £million £million financial assets within the PFI special purpose companies (9.0) (8.7) 30.5 Tax on the intrinsic value of share-based payments - - 0.4 Final dividend for the year ended 31 December 2007 11.2 - 14.0 14.0 (11.0) (16.7) (14.2) Interim dividend for the year ended 31 December 2008 5.3 - - 6.6 Final dividend for the year ended 31 December 2008 11.7 14.6 -- 5 Share of results and net assets of joint venture and associated undertakings Amount recognised as distribution to equity holders in the period 14.6 14.0 20.6 Share of results from joint venture and associated undertakings were as follows: The proposed interim dividend of 5.5 pence per share, amounting to £6.9 million, was approved by the directors on 11 August 2009 and has Six months ended 30 June 2009 Six months ended 30 June 2008 Year ended 31 December 2008 Joint Joint Joint therefore not been included as a liability as at 30 June 2009. ventures ventures ventures Project Facilities - PFI Project Facilities - PFI Project Facilities - PFI Services Management Investments Total Services Management Investments Total Services Management Investments Total 8 Defined benefit retirement schemes £million £million £million £million £million £million £million £million £million £million £million £million The following table sets out the key IAS 19 assumptions used to assess the present value of the defined benefit obligation. Revenues 164.3 47.7 73.1 285.1 124.2 38.2 30.0 192.4 284.2 83.1 134.5 501.8 Six months Six months Year ended ended ended Operating profit 14.2 1.0 1.7 16.9 8.0 1.0 1.5 10.5 25.2 1.8 3.8 30.8 30 June 30 June 31 December Net interest income 0.4 - 1.1 1.5 0.1 - 0.6 0.7 0.2 - 1.4 1.6 2009 2008 2008 Taxation (3.6) (0.3) (1.0) (4.9) (0.1) (0.3) (0.6) (1.0) (0.9) (0.5) (2.4) (3.8) Retail price inflation 3.5% pa 3.9% pa 2.90% pa Group share of profit Discount rate 6.2% pa 6.5% pa 6.30% pa after tax 11.0 0.7 1.8 13.5 8.0 0.7 1.5 10.2 24.5 1.3 2.8 28.6 Pension increases in payment: Amortisation of acquired LPI/RPI 3.4%/3.5% 3.7%/3.9% 2.70%/2.90% intangible assets (0.2) - - (0.2) (0.3) - - (0.3) (0.3) - - (0.3) Fixed 5% 5.0% 5.0% 5.0% Profit before dividends 10.8 0.7 1.8 13.3 7.7 0.7 1.5 9.9 24.2 1.3 2.8 28.3 3% or RPI if higher (capped at 5%) 3.7% 3.9% 3.5% Dividends (3.8) (1.0) (0.4) (5.2) (6.8) (0.7) (0.2) (7.7) (12.4) (0.7) (0.4) (13.5) General salary increases 4.25 - 5.00% pa 4.65 - 5.40% pa 3.65 - 4.40% pa Retained profits 7.0 (0.3) 1.4 8.1 0.9 - 1.3 2.2 11.8 0.6 2.4 14.8 The amount included in the balance sheet arising from the Group’s obligations in respect of the various pension schemes is as follows: The joint venture and associated undertakings are located in the United Kingdom except for the Project Services associates which are located in the Middle East. 30 June 30 June 31 December 2009 2008 2008 £million £million £million 6 Earnings per share The calculation of earnings per share is based on the following data: Present value of defined benefit obligation 597.5 557.6 534.2 Six months Six months Year ended ended ended Fair value of schemes’ assets (392.4) (447.1) (381.1) 30 June 30 June 31 December Liability recognised in the balance sheet 205.1 110.5 153.1 2009 2008 2008 Earnings £million £million £million Earnings for the purposes of basic earnings per share, The amounts recognised in the income statement are as follows: being net profit attributable to equity holders of the parent 30.3 22.1 54.4 Six months Six months Year Profit on disposal of property and investments (3.4) -- ended ended ended 30 June 30 June 31 December Amortisation of acquired intangibles 2.7 2.8 5.3 2009 2008 2008 Tax effect of above adjustments (0.7) (0.8) (1.4) £million £million £million Headline earnings 28.9 24.1 58.3 Employer’s part of current service cost 6.0 7.3 14.6 Earnings for the purposes of diluted earnings per share 30.3 22.1 54.4 Interest cost 16.7 16.3 32.5 Expected return on schemes’ assets (12.2) (16.3) (32.6) Six months Six months Year Total expense recognised in the income statement 10.5 7.3 14.5 ended ended ended 30 June 30 June 31 December 2009 2008 2008 Actuarial gains and losses are recognised in full in the period in which they occur. They are recognised directly in equity and presented in Number Number Number Weighted average number of shares thousand thousand thousand the statement of comprehensive income. Weighted average number of ordinary shares for the purposes of basic and headline earnings per share 125,057 124,861 124,936 Effect of dilutive potential ordinary shares: Share-based payments 3,566 2,364 2,396 Weighted average number of ordinary shares for the purposes of diluted earnings per share 128,623 127,225 127,332

18 Interserve Plc Half-year report 2009 Interserve Plc Half-year report 2009 19 WorldReginfo - 929f2902-f240-4d93-9ec3-e9be943ec96c Notes to the unaudited interim financial statements continued

18 Interserve Plc Half-year report 2009 Interserve Plc Half-year report 2009 19 WorldReginfo - 929f2902-f240-4d93-9ec3-e9be943ec96c Notes to the unaudited interim financial statements Principal Group undertakings continued As at 30 June 2009

9 Share capital Facilities Management PFI Investments Six months ended Six months ended Year ended 1 30 June 30 June 31 December Interservefm Ltd Addiewell Prison (Holdings) Ltd (33.33%) 2009 2008 2008 Interserve (Defence) Ltd Ashford Prison Services Holdings Ltd (33.33%)1 Shares thousand Shares thousand Shares thousand Interserve (Facilities Management) Ltd Belfast Educational Services (Derry) Holdings Ltd (50%)2 At 1 January 125,016 124,751 124,751 Interserve (Facilities Services-Slough) Ltd1 Belfast Educational Services (Down & Connor) Holdings Ltd (50%)2 Exercised share-based payments 352 241 265 Interserve Industrial Services Ltd Belfast Educational Services (Downpatrick) Holdings Ltd (50%)2 At the end of the period 125,368 124,992 125,016 Landmarc Support Services Ltd (51%)1 Belfast Educational Services (Dungannon) Holdings Ltd (50%)3 MacLellan International Ltd Belfast Educational Services (Holdings) Ltd (33.33%)4 10 Related parties 3 MacLellan International Airport Services Ltd Belfast Educational Services (Omagh) Holdings Ltd (50%) Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not MacLellan Management Services Ltd Belfast Educational Services (Strabane) Holdings Ltd (50%)2 disclosed in this note. PriDE (SERP) Ltd (50%)1 Environments for Learning Ltd (50%)2 1 Key management compensation is disclosed on pages 52 to 60 in the Annual Report and Financial Statements for the year ended Falcon Support Services (Holdings) Ltd (50%) 31 December 2008. Specialist Services Harmondsworth Detention Services Ltd (49%)5 Interserve Specialist Services (Holdings) Ltd Healthcare Support (Newcastle) Holdings Ltd (20%) During the period, Group companies entered into the following transactions with related parties who are not members of the Group: First Security (Guards) Ltd Health Management (Carlisle) Holdings Ltd (50%) Interserve Engineering Services Ltd Health Management (UCLH) Holdings Ltd (33.33%) Six months ended Six months ended Year ended 30 June 30 June 31 December Interserve Environmental Services Ltd ICB Holdings Ltd (20%) 2009 2008 2008 1 £million £million £million Interserve Security Ltd Inteq Services (Holdings) Ltd (50%) Interserve Technical Services Ltd Kent and East Sussex Weald Hospital Holdings Ltd (25%) Sales of goods and services Joint ventures - PFI Investments 109.1 109.0 213.2 R & D Security Manufacturing Ltd Minerva Education and Training (Holdings) Ltd (45%)1 Associates 76.4 62.0 125.9 1 SSD UK Ltd Newcastle Estate Partnership Holdings Ltd (20%) Purchases of goods and services Joint ventures - PFI Investments - - - TASS (Europe) Ltd NIHG Ltd (31.5%)1 Associates 1.3 0.8 2.3 1 Amounts owed by related parties Joint ventures - PFI Investments - 0.9 0.9 Peterborough Prison Management Holdings Ltd (33.33%) 1 Associates 3.1 2.6 2.1 Project Services Pyramid Accommodation Services (Cornwall) Holdings Ltd (50%) 1 Amounts owed to related parties Joint ventures - PFI Investments - - - Interserve Project Services Ltd Pyramid Schools (Cornwall) Holdings Ltd (50%) Associates 0.2 0.2 0.3 Acciona Agua SAU Joint Venture (47%) Pyramid Schools (Hadley) Holdings Ltd (50%) Douglas OHI LLC (49%) Pyramid Schools (Plymouth) Design & Build Ltd (50%)2 Sales and purchases of goods and services to related parties were made on normal trading terms. Gulf Contracting Co WLL (49%) Pyramid Schools (Plymouth) Holdings Ltd (50%)2 How United Services WLL (49%) Pyramid Schools (Southampton) Holdings Ltd (50%)6 The amounts outstanding per the above table are unsecured and will be settled in cash. No guarantees have been given or received on these Khansaheb Civil Engineering LLC (45%) Pyramid Schools (Tameside) Holdings Ltd (50%)1 amounts. No provisions have been made for doubtful debts in respect of the amounts owed by related parties. 1 Khansaheb Hussain LLC (49%) Summit Holdings (Dudley) Ltd (33.33%) KMI Water Joint Venture (33.33%) Victory Support Services (Portsmouth) Holdings Ltd (50%) 11 Contingent liabilities Contingent liabilities of the Group have not materially changed from those published in the Annual Report and Financial Statements for the KMI Plus Water Joint Venture (30.83%) year ended 31 December 2008. Madina Group WLL (49%) Group Services Qatar Inspection Services WLL (49%) Bandt Ltd 12 Post balance sheet events Qatar International Safety Centre WLL (49%) Bandt Holdings Ltd On 7 August 2009 the Board approved the closure of the defined benefit scheme to future accrual for all non-passport members from the end Severn Glocon (Qatar) WLL (49%) Bandt Properties Ltd of 2009. This will be reflected in a reduction in pension liabilities of approximately £20 million. How Group Ltd Equipment Services How Investments Ltd RMD Kwikform Ltd Interserve Deutschland GmbH* Rapid Metal Developments (Australia) Pty Ltd Interserve Group Holdings Ltd* Rapid Metal Developments (NZ) Ltd Interserve Holdings Ltd RMD Kwikform (Al Maha) Qatar WLL (49%) Interserve Insurance Company Ltd RMD Kwikform Chile SA Interserve Investments Ltd RMD Kwikform Hong Kong Ltd* Interserve PFI Holdings Ltd RMD Kwikform Ibérica, SA (95%) Interserve PFI 2003 Ltd RMD Kwikform Ibérica – Cofragens e Construçôes Metalicas, Interserve PFI 2005 Ltd Unipessoal, Lda (95%) Interserve PFI 2009 Ltd RMD Kwikform Ireland Ltd MacLellan Group Ltd RMD Kwikform Korea Co, Ltd The Indium Division Company, S.L. RMD Kwikform Middle East LLC (49%) Tilbury Douglas Projects Ltd RMD Kwikform Philippines, Inc* Tilbury Ibérica, SA* RMD Kwikform Saudi Arabia LLC RMD Kwikform (South Africa) (Proprietary) Ltd * Shareholding held directly by Interserve Plc (shareholdings in all other companies are held by subsidiary companies)

The accounting reference date is 31 December unless otherwise stated: 1 31 March 4 24 February 2 30 September 5 31 August 3 7 October 6 28 February

20 Interserve Plc Half-year report 2009 Interserve Plc Half-year report 2009 21 WorldReginfo - 929f2902-f240-4d93-9ec3-e9be943ec96c Notes to the unaudited interim financial statements Principal Group undertakings continued As at 30 June 2009

The accounting reference date is 31 December unless otherwise stated: 1 31 March 4 24 February 2 30 September 5 31 August 3 7 October 6 28 February

20 Interserve Plc Half-year report 2009 Interserve Plc Half-year report 2009 21 WorldReginfo - 929f2902-f240-4d93-9ec3-e9be943ec96c Interserve Plc Half-year report 2009

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TT-COC-002228 WorldReginfo - 929f2902-f240-4d93-9ec3-e9be943ec96c