Interserve (IRV) is fighting hard to get its house in order. The outsourcer has taken a similar tack to many of its UK-listed rivals, selling out of non-core businesses and assets, rooting out cost savings, while trying to bring down debt in order to shore up the balance sheet. Unfortunately, while this is going on, sales, profits and earnings have all fallen, while net debt has climbed dramatically. The group has succeeded in stripping out £8m in costs during the first half of the year, and still expects £40m-£50m annually by 2020, but this has yet to have an impact on wider performance.
Then there are the challenges with the UK government. In late July it was revealed the Justice Secretary would end private sector probation contracts two years early in 2020. Interserve increased the forward loss provision for its rehabilitation contracts as a result. While the impact is expected to be relatively small, UK support services continues to account for 49 per cent of revenues and a shift away from outsourcing by the UK government in the wake of Carillion’s collapse could have a profound effect on the business.
Analysts at Numis are forecasting adjusted pre tax profit of £12m in 2018, giving EPS of 5.2p (from £52.4m and 29p in 2017).
| INTERSERVE (IRV) | ||||
| ORD PRICE: | 70p | MARKET VALUE: | £104m | |
| TOUCH: | 69.1-70p | 12-MONTH HIGH: | 233p | LOW: 53p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 24p* | NET DEBT: | £614m | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 1.88 | 24.9 | 14.8 | nil |
| 2018 | 1.67 | -6.0 | -12.4 | nil |
| % change | -11 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £418m, or 280p a share | ||||
