Interserve Share Discussion Threads

[wad collector] 16/12/2014 17:32

If someone is foolish enough to sell you them at that price , it is like taking candy from a baby..

[edmundshaw] 16/12/2014 15:57

Added today, 520s is a bit mad I think when 700p looked quite a decent shout recently; oil price drop is the obvious downer, but it is not bad for all of Interserve businesses, and the oil-specific operations cannot be much more than 10% or so of the business, can it?

Obviously, if significant operational cutbacks occur in oil production and project initiation, this will hit revenue there, and it is impossible (from here) to quantify that. But even if the oil business falls off a cliff (and likely to bounce in the medium term), it is only a small part of the business, and it can be dealt with.

[the juggler] 12/12/2014 22:32

As I understand there will be 1800 probation staff across the 5 geographical areas they have been awarded by the MoJ. Trying to catch the low point to buy more but everyday they have gone down, so will continue to watch and wait and hopefully get them as they turn up.

[wad collector] 12/12/2014 11:55

I think you are right , though also strikes me as a classic over-reaction to one factor in a complex equation of income streams.
I see it as another opportunity and just added at 542.

[jeffian] 12/12/2014 10:27

I imagine that the market's concern here is that the collapse in the oil price is impacting on the revenues of oil-producing countries. There's a piece in today's Telegraph about a collapse in the Dubai market over concerns that property companies will come under pressure.

[salpara111] 12/12/2014 09:12

Serco was heavily into "safer government guaranteed contracts" that did not end well for them!
IRV has changed quite a bit over the last few years with big acquisitions adding substantial debt to the balance sheet which was once debt free.
I still like the business but the risk profile has changed and any suggestion that they have lost cost control over any of their contracts will see the share price marked down 20% as people expect the worst.
I am keeping an eye on them and if they retest the 510 support area I will take a stake again.

[mike24] 12/12/2014 08:14

are'nt they moving away from construction,
into safer government quaranteed contracts
ie, 900 probation staff

[edmundshaw] 11/12/2014 13:28

Seems the good updates get forgotten within a few days here... handy if you want to add.

[deadly] 11/12/2014 09:49

You would think this is in the oil services sector, and I suppose it does a fair amount of work in the Middle East, but I doubt that is significant. Instead it should benefit from lower fuel costs.

[philo124] 11/12/2014 09:49

Support gone.

[wad collector] 11/12/2014 09:39

It would seem not.
I think I will be adding soon as it currently heads towards 550.

[philo124] 05/12/2014 18:45

Hopefully 575p left behind now.

[the juggler] 05/12/2014 14:45

It is an excellent acquisition and fits well into its welfare to work portfolio and increases the company's exposure to that sector hugely. Hopefully this will propel the shareprice back to a more realistic level.

[edmundshaw] 05/12/2014 11:06

Market likes the acquisition. Therefore so do I...

[bertiebru] 05/12/2014 11:03

if we go on adding like this it will not be too long before IRV becomes a FTSE 100 company.

[bertiebru] 03/12/2014 10:44

Jeffian

Many thanks for reminding us of the accounts details.

The small margins on UK construction have always been at that level, but construction provides cash flow for other parts of the business. Interim payments and the like provide ready cash for other activities.

[jeffian] 03/12/2014 00:33

Never mind morningstar; it's easy enough to go straight to the accounts! All this talk of 1.8% margins relates solely to the UK construction segment - 31% of the total revenues. The other segments have a range of margins aggegating to 3.4%

"Full-year operating margin of 3.4 per cent (2012: 3.3 per cent) again reflects a stronger second half than first half with an operating margin of 3.5 per cent (H1 2013: 3.2 per cent). Support Services UK achieved its 5 per cent margin target in the second half of the year with a return of 5.1 per cent, this helped lift the overall year result from 4.0 per cent in 2012 to 4.7 per cent in 2013. International Support Services margin of 4.4 per cent (2012: 12.8 per cent) reflects the changing shape of the division following the acquisitions of TOCO & Adyard. UK Construction margins were in line with our expectations at 1.8 per cent (2012: 2.0 per cent) and have reverted to near long-term norms. Margins in our International Construction operations remain under pressure, declining from 6.5 per cent to 5.1 per cent. Market conditions are mixed with the UAE beginning to show signs of recovery but Qatar remaining difficult. We remain confident in the medium term potential of our chosen markets. Equipment Services delivered a strong performance with full year margins of 11.9 per cent (2012: 9.6 per cent). We continue to see half on half improvements in this division with H2 2013 margins at 13.5 per cent (H2 2012: 10.7 per cent). We expect a further recovery towards medium term margin expectations of 15 per cent over the coming year."

[edmundshaw] 02/12/2014 22:57

Yes. 2% might sound scary if you are new to the sector, but it's a pretty normal kind of margin for this kind of business, at least those I have looked at. The key is not to make any really bad deals that cost big time.

Some of that is down to careful contract conditions; I hope and expect IRV have the experience necessary to get those right.

[triktrak] 02/12/2014 22:32

On the subject of operating margins, it's interesting to look back over the past few years. This is data taken from Morningstar (though not broken down into UK and international margins):

2006: 2.81
2007: 2.57
2008: 2.53
2009: 1.87
2010: 1.24
2011: 1.41
2012: 1.71
2013: 2.09

It'll be interesting to see this year whether the growth has continued.

It's been a well-run company and on most measurements, appears to be very good value at its current level.

[philo124] 02/12/2014 10:50

Sal I did the same with half of mine. Wish it would definitively break up from this 570/575p support.

[jeffian] 02/12/2014 10:46

Salpara111,
I've been scouring the accounts - unsuccessfully so far - to see what form of contract IRV use but, speaking entirely off the top of my head, my feeling (as an ex-developer) is that on those margins they must use some form of 'cost plus' contract whereby the client agrees to pay the underlying costs with a small margin on top to the contractor for organising it. In that case, the risk to the contractor is limited.

I'll keep looking!

[salpara111] 02/12/2014 10:24

Just having a look at the last results again and have to say I am now a bit less confident.
The drop in margins across all business segments in their international markets is concerning especially as they don't guide for them to improve but seem to suggest that they are the "new normal" for those markets.
This business has been very well run but my concern is that with margins as low as 1.9% in parts of the business it really does not leave any margin for error whatsoever.
I guess that the market, like myself, is just a bit nervous that as the business grows and with new acquisitions and substantial debt now on the previously debt free balance sheet, the balance of risk and reward has changed.
As I have mentioned before, this was my best investment ever when I acquired a substantial stake at under £2 and then kicked myself as I sold them out between £3.50 and £4.60.
I like the business but the risk reward profile has changed considerably over the last 18 months.
I am keeping them on my watch list but think I will wait until the next results as I really want to see what the margins look like and be reassured that business is progressing as planned.

[wad collector] 01/12/2014 12:17

565 and I will have some more..thanks.

[nehpets81] 01/12/2014 11:57

Spacecake - not too surprising given the usually brief and terse updates we get from Interserve. I am pretty sure that is one chore they will give up on.

[huntie2] 01/12/2014 10:55

Surely looking very good value now....