Support-services group Interserve (IRV) announced a deal to buy Rentokil’s (RTO) facilities service unit for £250m as it revealed a step-up in revenues for 2013. Costs were proportionately higher over the course of the year, but if you strip out around £115m in disposal gains from last year’s income statement, operating profits were up by 31 per cent to £56.5m.
The two key business segments – support services and construction – recorded solid revenue growth, while operating profits from the former were up by a quarter to £60m. By the end of the year, the UK support services business had also delivered Interserve’s medium-term 5 per cent margin target - though the margin for the whole year was slightly lower. Against “a backdrop of subdued major infrastructure activity” Interserve was also able to increase profits on UK construction projects, albeit marginally, by diversifying into new sectors and nurturing repeat business. However, profits from Interserve’s overseas construction interests were down 9 per cent, as intense competition depressed margins.
The Rentokil acquisition is to be funded with bank debt and a share placing equivalent to around 10 per cent of existing shares. Interserve finished 2013 with £38.6m of net debt, compared with a cash surplus of £25.8m at the end of 2012, which management said reflected acquisitions.
| INTERSERVE (IRV) | ||||
|---|---|---|---|---|
| ORD PRICE: | 600p | MARKET VALUE: | £0.8bn | |
| TOUCH: | 600-602p | 12-MONTH HIGH: | 696p | LOW: 459p |
| DIVIDEND YIELD: | 3.6% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 279p* | NET DEBT: | 10% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 1.9 | 89 | 55 | 17.5 |
| 2010 | 2.3 | 64 | 40 | 18.0 |
| 2011 | 2.3 | 67 | 46 | 19.0 |
| 2012 (restated) | 2.4 | 180 | 130 | 20.5 |
| 2013 | 2.6 | 68 | 39 | 21.5 |
| % change | +9 | -62 | -70 | +5 |
Ex-div:02 Apr Payment:21 May * Includes intangible assets of £287m, or 222p a share. | ||||
