Interserve's stock market performance has been poor recently, largely due to concerns about a slowdown in its great growth market, the Middle East, and the likely impact of the sharp fall in activity in the UK private sector.
The company is certainly feeling the pain in parts of the business, notably in specialist services, which fell into the red in the second half. But Interserve is fighting back with cost-cutting measures, and these results should help to put most anxieties to rest. Although the UK commercial market is likely to struggle, the business is weighted towards public sector work where conditions should remain buoyant given the rising government spend on education, healthcare and custodial services, while the trend to outsourcing further underpins prospects.
And although projects are being put on hold in Dubai, Interserve already has a sizeable contracted workload there, while demand remains buoyant in Qatar, its the main centre of activity in the region. At any rate, Interserve goes into 2009 with order books up by 9 per cent to £6.2bn, and announced further contracts in the UK and Middle East worth over £200m alongside its results. As a result, Panmure Gordon expects 2009 profits of £86.2m and EPS of 44.4p (£85.2m and 43.3p, respectively, in 2008).
INTERSERVE (IRV) | ||||
|---|---|---|---|---|
| ORD PRICE: | 187p | MARKET VALUE: | £233m | |
| TOUCH: | 185-187p | 12-MONTH HIGH: | 519p | LOW: 158p |
| DIVIDEND YIELD: | 9.1% | PE RATIO: | 4 | |
| NET ASSET VALUE: | 184p* | NET DEBT: | 47% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2004 | 1.24 | 41.4 | 24.2 | 14.1 |
| 2005 | 1.23 | 36.2 | 18.9 | 14.7 |
| 2006 | 1.41 | 15.1 | -1.4 | 15.4 |
| 2007 | 1.74 | 69.3 | 37.5 | 16.2 |
| 2008 | 1.80 | 79.9 | 43.5 | 17.0 |
| % change | +4 | +15 | +16 | +5 |
Ex-div: 22 Apr Payment: 5 Jun *Includes intangible assets of £262m, or 210p per share | ||||
