Outsourcing firm Interserve enjoyed a buoyant first half and shareholders were rewarded with an increased dividend. However, there are a number of concerns that could continue to weigh on its share price. Indeed, the group - which provides services through the life of capital projects from their planning to construction to ongoing facilities management - has already seen a drop off in private sector work and associated margin pressure.
Analysts are also worried over the potential effect of tightening public finances on Interserve's public sector business and a potential slowdown in its Middle Eastern operations, which accounted for 63 per cent of first-half operating profits. The group's involvement in some core public spending areas, such as health and education, should provide some resilience, though, and despite difficulties in Dubai, Interserve continues to see strong demand from other parts of the Emirates.
Another major concern for would-be investors in Interserve is the group's pension deficit. The latest triennial review is expected to show a £250m funding shortfall, which could require cash injections of £10m or more a year.
Broker Panmure Gordon forecasts full-year pre-tax profits of £85m and EPS of 43.9p ( £85.2m and 45.8p in 2008).
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| Interserve (IRV) | ||||
|---|---|---|---|---|
| ORD PRICE: | 235p | MARKET VALUE: | £295m | |
| TOUCH: | 235-236p | 12-MONTH HIGH: | 431p | LOW: 155p |
| DIVIDEND YIELD: | 7.3% | PE RATIO: | 5 | |
| NET ASSET VALUE*: | 154p | NET DEBT: | 43% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 914 | 33.7 | 17.7 | 5.3 |
| 2009 | 951 | 40.0 | 24.2 | 5.5 |
| % change | +4 | +19 | +37 | +4 |
Ex-div:23 Sep Payment:26 Oct * Includes intangibles of £262m, or 209p per share | ||||
