Shares in support services group Interserve (IRV) initially dipped on the release of first-half results that detailed a 12 per cent rise in headline operating profit to £60.3m, along with £2bn in new business contracts. Chief executive Adrian Ringrose says that investors may be wary of the impact that the government's recently announced reform of the national minimum wage will have on margins - an overall hit of £10m to £15m is now being touted.
Revenue for support services UK increased by 15 per cent £933m, while margins increased slightly to 4.3 per cent. The business won a number of long-term contracts in the travel sector including MTR Crossrail and KeolisAmey Docklands. The equipment services business was the standout performer, increasing operating profit by a third to £18.6m, while capital expenditure was £10.4m. This was supported by a strong performance in the Middle East, benefiting from increased demand in Qatar and the UAE where large-scale infrastructure projects are under way.
As expected, margins for the group's UK construction business were squeezed, with operating profit declining by around a third to £5.3m. A skills shortage in the sector and supply chain price inflation meant margins dipped below the group's medium-term expected range to 1.1 per cent. Mr Ringrose says he expects trading for this segment not to pick up until next year.
Analysts at broker Peel Hunt expect adjusted EPS of 63p for the full year, up from 57.9p in 2014.
INTERSERVE (IRV) | ||||
|---|---|---|---|---|
| ORD PRICE: | 610p | MARKET VALUE: | £886m | |
| TOUCH: | 607-610p | 12-MONTH HIGH: | 688p | LOW: 488p |
| DIVIDEND YIELD: | 3.8% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 333p* | NET DEBT: | 60% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 1.37 | 28.3 | 14.7 | 7.50 |
| 2015 | 1.60 | 33.7 | 19.9 | 7.90 |
| % change | +16 | +19 | +35 | +5 |
Ex-div: 17 Sep Payment: 23 Oct *Includes intangible assets of £526m, or 362p a share | ||||
