To no one's great surprise, Interserve (IRV) plans to pull out of its energy-from-waste business, following on from a £70m hit from cost overruns and delays on an ill-fated Glasgow contract. That charge propelled the support services and construction group into the red at the half-year mark, at least on a reported basis. On a normalised basis, operating profit actually crept up 5 per cent to £53.6m - a creditable enough outcome given where we are in the cycle.
Trading across the majority of the group's divisions was solid, with operating cash flow up from £18.6m to £75.5m - the figure would have been all the more impressive bar outflows associated with the exited business.
The impact of the national minimum wage on the domestic support services unit wasn't overly exacting, contracting margins by 20 basis points. The UK order book was on the rise, helped in no small part by a new five-year contract worth £230m to provide facilities services to the United States Air Force's UK estate. Interserve's international support services arm continued to perform well, aided - somewhat counter-intuitively - by the oil and gas services business, which has maintained a steady revenue stream through the provision of essential (and relatively predictable) maintenance services to national oil companies in Abu Dhabi, Oman and Qatar.
Broker Numis expects adjusted profit of £59.3m for the December year-end, giving way to EPS of 24.2p, before rising to £141m and 76.1p in 2017 (from £132m and 68.4p in 2015).
| INTERSERVE (IRV) | ||||
|---|---|---|---|---|
| ORD PRICE: | 334p | MARKET VALUE: | £487m | |
| TOUCH: | 333p-334p | 12-MONTH HIGH: | 635p | LOW: 215p |
| DIVIDEND YIELD: | 7.3% | PE RATIO: | 159 | |
| NET ASSET VALUE: | 299p* | NET DEBT: | 61% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 1.80 | 33.7 | 19.9 | 7.9 |
| 2016 | 1.85 | -33.8 | -25.5 | 8.1 |
| % change | +3 | - | - | +3 |
Ex-div: 15 Sep Payment: 21 Oct *Includes intangible assets of £514m, or 353p a share | ||||
