The support services market is in a state of flux, with governments now driving a harder bargain on contracts and traditionally lucrative overseas markets showing signs of overcapacity. These trends were evident in the interim results of facilities management and construction support services company Interserve (IRV), with the weak international construction market nudging reported pre-tax profits slightly lower.
Unsurprisingly, the UK support services sector, which generates two-thirds of its revenues from government contracts, was relatively stable and turnover here increased by 4.4 per cent to £597m. A better operating margin led to a 29 per cent rise in UK profits to £25.3m. The support services division has also been expanding abroad and, with the benefit of acquisitions, the unit increased profits by 50 per cent to £2.4m on revenues of £40.5m, up from £15.5m in 2012.
By contrast, the problem area for Interserve was the construction sector where a notable slowdown in UAE infrastructure projects and overcapacity led to a 7 per cent fall in international revenues to £96.5m, which resulted in a £1.3m fall in operating profits to £5.7m. That dragged down what was otherwise a solid performance from the UK part of the division.
Broker Numis forecasts full-year pre-tax profits of £80.5m and EPS of 45.8p, compared with £78.4m and 46.3p in 2012.
INTERSERVE (IRV) | ||||
|---|---|---|---|---|
| ORD PRICE: | 553p | MARKET VALUE: | £713m | |
| TOUCH: | 550-556p | 12-MONTH HIGH: | 564p | LOW: 321p |
| DIVIDEND YIELD: | 3.8% | PE RATIO: | 4 | |
| NET ASSET VALUE: | 280p* | NET CASH: | £0.7m | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 1.21 | 31.1 | 18.6 | 6.40 |
| 2013 | 1.24 | 30.7 | 17.4 | 6.80 |
| % change | +2 | -1 | -6 | +6 |
Ex-div: 18 Sep Payment: 23 Oct *Includes intangible assets of £278m, or 215p a share | ||||
