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Interserve constructs revenue growth

Interserve's recent acquisitions are bedding in nicely.
March 2, 2015

In March 2014, support services and construction group Interserve (IRV) acquired Rentokil Initial's facilities services business, resulted in exceptional transaction charges of £19.8m. While this depressed full-year net earnings, headline operating profits were up more than a third to £117m.

IC TIP: Buy at 596p

Initial Facilities added around £440m in revenue to the group's UK support services business. Coupled with 9 per cent organic growth, the acquisition helped boost operating profits at the segment by almost half to £81.4m. The division also won a £622m contract to provide probation and rehabilitation services for the Ministry of Justice.

Strong performance from fit-out business Paragon, acquired in 2013, and energy-from-waste activities, boosted operating profits at its UK construction division by 5 per cent to £15.4m. However, despite large contract wins, including a £323m joint-venture deal to build Doha Festival City in Qatar, increased competition dampened the performance of its international counterpart. This meant construction operating profits dropped 6 per cent to £26.2m during the year.

Chief executive Adrian Ringrose said this year the group will concentrate on the work it has won "rather than pushing on to some new frontier".

Broker Numis expects adjusted EPS of 63.1p this year, up from 32.2p in 2014.

INTERSERVE (IRV)

ORD PRICE:596pMARKET VALUE:£858m
TOUCH:594-597p12-MONTH HIGH:752pLOW: 488p
DIVIDEND YIELD:4%PE RATIO:19
NET ASSET VALUE:325p*NET DEBT:57%

Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20102.364.040.018.0
20112.367.046.019.0
2012 (restated)2.4180.0130.020.5
20132.268.139.121.5
20142.961.932.223.0
% change+32-9-18+7

Ex-div: 6 Apr

Payment: 20 May

*Includes intangible assets of £524.5m, or 364p a share