Interserve Share Discussion Threads

[bertiebru] 26/2/2016 10:27

As I'm 83 now, 28 years would only be a small wedge of my investing lifetime.

[edmundshaw] 26/2/2016 09:26

Hurrm... I have held this for four years now, which I consider a decent wadge of time. But R.M.Douglas? You've held these for 25 years? More? Since you were in short trousers? Warren would be proud :-)

[bertiebru] 25/2/2016 22:54

Exactly Wad Collector. We do not need investors like that. I have held shares in this company a lot of the time since it was R.M. Douglas Construction, then Tilbury Douglas and now Interserve.

It has always been brilliantly managed. If some people do not understand that it is their fault. Let 'em stay away.

[wad collector] 25/2/2016 21:38

Ok ,don't buy then. See if we care :-)

[nehpets81] 25/2/2016 16:09

OK, this is probably going to sound pedantic but...

"amortisation writes down the good will gradually"

is not true. Goodwill is not amortised but sadly sits on a balance sheet until such a time that the acquired business is sold or the board decide they overpaid for the acquisition and it is impaired. This accounting treatment for goodwill is a real bugbear for me and you just end up seeing the balance sheets of acquisitive companies stuffed full of goodwill which tends to mean that the strength of the balance sheet is overstated.

In IRV's case there is a negative tangible book value and a lot of debt. Given the recent choppy markets, particularly in the Middle East (which admittedly seems to be doing well here), this state of affairs is preventing me from buying back in here.

Of course other investors will have different attitudes to risk and see the stonking (uncovered by operating cash flows) dividend as giving a bit of a floor to the price and buy in - just not me.

[edmundshaw] 24/2/2016 15:15

I'd be supportive of the sale of RMD Kwikform if at least part of the (hopefully) cash proceeds would be returned as a capital return to investors - say £1 or so per share.

Not that Adrian is likely to take my wishes as a major consideration...

[richardbroughton] 24/2/2016 14:02

Interserve confirmed today that its RMD Kwikform business has been put under strategic review with disposal of the profitable arm an option.
Adrian Ringrose Interserve
Ringrose reveals strategic review of Equipment Services business RMD Kwikform
Chief executive Adrian Ringrose announced the decision as Interserve reported a 28% jump in pre-tax profit to £80m on turnover up 10% to £3.2bn in 2015.

Interserve delivered strong profit performances at its support services, international construction and equipment services businesses, but only a break-even result from UK construction.


Construction was hit by three loss-making energy projects in the UK, which saw the division squeeze out a £100,000 operating profit after making £15m in 2014 from turnover ahead 7% at £1bn.

Ringrose said that UK Construction had a difficult year, with industry-wide pricing pressures, and specific supply-chain failures, significantly impacting three energy from waste projects.

Interserve trading divisions
Op profit Change Turnover Change Margin
Construction UK £0.1m – £1bn +7% 0
Construction Int £13m +20% £279m +34% 4.3%
Support Services UK £92m +13% £1.8bn +9% 5%
Support Services Int £8.2m +11% £224m +43% 4.1%
Equipment Services £42m +58% £211m +8% 20%


He added: “Over the last five years we have made substantial strategic progress creating a broader, stronger business.

“Our performance in 2015 was good, resulting in 12% operating profit growth in markets that continue to offer both opportunities and challenges.

“These issues were, however, partially offset in the year by strong performance in our building and fit-out businesses.

“In light of the changing shape of our portfolio over the last few years, we have started a strategic review of our equipment services business RMD Kwikform.”

The options include offloading the business, which now accounts for around 6% of group turnover but a third of headline operating profit.

From Contruction Enquirer today


Ringrose said: “We set out some goals five years ago, now it is appropriate to set out what the medium term will look like for the group.

“Equipment services is an obvious candidate to consider. It is growing strongly with good growth opportunities ahead, but is the most discrete part of our total business.

“Its prospects and our prospects may be better served by a change of ownership.”

Looking forward Ringrose said he expected 2016 to be broadly steady compared to 2015 as underlying growth was restrained by the impact of a slower order intake following an election year and the impact of the National Living Wage.

“However, we expect to return to growth in 2017, underpinned by our strong positions in attractive markets,” he added.

[salpara111] 24/2/2016 11:56

Yeah, I noticed the "strategic Review" tag hung over Kwikform.
That could inject some value here if they were to offload that business.

[philo124] 24/2/2016 10:59

Agreed. Sold 50% last year.

[wad collector] 24/2/2016 10:47

I think these results are better than expected , but I just took the opportunity to trade some out at 406p for a quick 7%. I hold too many . Happy to hold the rest , I think the statement confirms that the medium future looks rosy.

[tuscan4] 24/2/2016 10:29

Kwikform could be worth £300m, wiping off all debt.

[edmundshaw] 24/2/2016 10:07

Yes new work generally has upfront costs. Doh!

[phillis] 24/2/2016 10:02

Cash generation after fleet capex c39 m
Divi last time 33m

Mobilisation for new contracts is cash consumptive

[edmundshaw] 24/2/2016 09:53

Matt, from the consolidated cash flow statement, the debt has gone up a bit largely because of increased receivables (less payables). This also happened a bit last year, but as long as the payers are trustworthy (typically very reliable - governments, councils etc) not a problem. That aside cash flow looks good.

[phillis] 24/2/2016 09:43

Thorpe
Try reading with a little more precision

[salpara111] 24/2/2016 09:40

Solid statement under the circumstances but they have basically flagged a flat year which means the share price will likely trade sideways in a range based on the current price.
If it dips back to the 375 level I will most likely take a stake but feel that momentum will not return for some time.

[thorpematt] 24/2/2016 09:35

Right so lets be clear depreciation and cash are NOT the same.
Cap-ex of course effects cash so that's realted but depreciation wipes off the balance sheet directly.

Amortisation would be expected and indeed not evan of any concern whatsoever to me when we are talking about where it comes from in IRV's instance. Yes it is a bugbear of Warren Buffet as disussed in one of his letters beacause he values his success in book vlaue. We don't need to worry about that here.

I have had a VERY quick scan: Depreciation looks normal considering previous years and ongoing cap-ex. (You spend mopnmey on stuff, it gets old, you buy new, you write down the old)

Debt has gone up (aqcuisitions), amortisation writes down the good will gradually.

I don't hold right now because the chart and the global stuff is trumping the fundamentals right now (as previously posted) BUT its imnportant to understand these accounts if you wanna make decisions on such companies because these can be complex and subtle. IRV has been pretty consistent, honest and transparent by comparison. (Bear ion mond CNT and ROK as similarly related bad news stories)

Interestingly this stock doesn't score well on some bankrupcy risk levels (Altman) BUT again I am not worried about this. The debt is higher of late BUT for good reasons and banks will look at 3x EBITDA before thay get worried.

I hope this is of help - its intended to be (I am not short IRV...just the FTSE)

[phillis] 24/2/2016 09:32

It's the same thing
The waiting off of an intangible as opposed to a tangible asset
Accounting effect is the same

DOH!

[edmundshaw] 24/2/2016 09:14

Headline profit before tax 115.4
Amortisation of intangible assets (31.1)
Other exceptional items (4.8)
Profit before tax, tax charge & tax rate 79.5

Amortisation of intangibles is a big number. Depreciation is not included in it.

[phillis] 24/2/2016 08:41

Depreciation etc is a real cost, just not a cash one, the cash having gone out the door on day 1

[edmundshaw] 24/2/2016 08:15

Underlying EPS, diluted, 67.5p. Most of the adjustment to underlying from basic is amortisation, which is pure accountancy.

So An underlying PER of under 7. And a yield of 6.2%.

OK no growth for one year, then growth in 2017 again, even a PER of 10 is miserly. Looks like there should be a clear upside of around 50%, but honestly a share price of double where we are now would not be remarkable.

[cwa1] 24/2/2016 08:10

Must confess, although there are some obvious concerns and small issues, I thought they were fair enough under the circs. and didn't justify the hammering the stock has had, so I bought some too. Oh well, fingers crossed and all that malarkey.

[edmundshaw] 24/2/2016 08:06

Looks fine, added early doors as the price is down. I don't get it...

[cwa1] 24/2/2016 08:04

Market seems unhappy(irrational?) with them. Wondering what they were expecting?

[philo124] 24/2/2016 08:00

Yes. very good. They need to manage their levels of debt and be more careful which currency they borrow money in.