Investors sent Interserve’s (IRV) share price down in the days following the release of its half-year results, after the group increased its forecast for average 2017 net debt to £475m-£500m, from the £450m previously expected. This is due to changes to timing assumptions for insurance receipts in the troubled energy-from-waste business, combined with the working capital demands of public sector outsourcing contracts. The figure is expected to come down to between £400m and £425m at the year-end. Future workload for the support services provider (excluding the troubled and now exited business) fell to £7.1bn at the end of June, from £7.6bn at the full-year results, after the company became more selective about the UK construction contracts it takes on.
Management believes the £160m exceptional charge taken on the energy-from-waste business remained appropriate, but cautioned that “significant risks and uncertainties remain”. Construction is expected to be substantially completed in the first half of 2018, and the waste treatment centre in Derby began testing during the period.
Elsewhere in the business, performance was mixed. Delays in government procurement around this year's snap general election was one reason given for flat revenue at the UK support services division, and profitability was hit by national minimum wage increases. The construction businesses grew revenue both in the UK and internationally, but poor domestic market conditions and operational underperformance dragged profit lower.
Analysts at Numis are forecasting adjusted pre tax profit of £102m, giving EPS of 58.9p for the year to December 2017 (from losses of £53.2m and 29.4p in 2016).
| INTERSERVE (IRV) | ||||
| ORD PRICE: | 187.75p | MARKET VALUE: | £273m | |
| TOUCH:187-187.75 | p | 12-MONTH HIGH: | 449p | LOW: 187.75p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 238p* | NET DEBT: | 107% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 1.85 | -33.8 | -25.5 | 8.1 |
| 2017 | 1.88 | 24.9 | 14.8 | nil |
| % change | +1 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £504m, or 346p a share | ||||
