Interserve Share Discussion Threads

[haywards26] 11/5/2016 21:58

I remember buying IRV first time around in 2008 for 180 and selling up around 5 yrs later. It has probably been my best investment. Hoping for similar returns this time around, whilst also enjoying the divis.

[edmundshaw] 11/5/2016 19:31

Good shot, sir!

I was planning to add more if they dropped to around 290p. Sigh... Still got plenty though :-)

[haywards26] 11/5/2016 17:43

That's a nice start :)

[edmundshaw] 11/5/2016 08:36

Good luck! I am with you.

[haywards26] 10/5/2016 22:13

I bought back in here at under £3 after a successful investment over 3 years ago. Will top up if price reduces further.

[jeffian] 10/5/2016 16:46

Had a chance to listen to the conference call now. Thanks for the link edmundshaw. They certainly meet the problem head on and give good response. I'm tempted to add for the long term but need to see a bit of stabilisation first. The market tends to over-react to the unexpected - good and bad - and I'm not sure it's finished kicking IRV yet.

[salpara111] 10/5/2016 08:54

I have to agree that while selling the equipment services business would fix a temporary cash problem, it would remove a major profit centre from the business.
I find myself struggling to work out what the overall business strategy is now.
FTSE 250 relegation now looks inevitable so I will sit on my hands and wait for the next market update to see if that can bring some more clarity.

[lordyjordy1] 09/5/2016 22:52

My understanding is that equipment services accounted for a third of operating profit (last financials). Why sell it? What are the ramifications if they do sell it?

[edmundshaw] 09/5/2016 21:13

Equipment services apparently doing OK. Also ME OK from Interserve's viewpoint, though as ever visibility is poor there - they seem to be reducing exposure to Saudi Arabia too, which is probably good news...

[jeffian] 09/5/2016 20:16

Interserve have been pretty canny over the years at financial problem-solving. Not many years ago, one of the things holding back the share price was a substantial pension fund shortfall. They got round that one by transferring some of their PFI schemes into the pension fund, booking a profit on the 'sale' and keeping the cashflows! We know from recent statements pre-dating the profit warning that Equipment Services was under 'strategic review' (i.e. for sale!). Maybe go some way to plugging the recent shortfall? Haven't listened to the presentation yet. Any mention of this?

[edmundshaw] 09/5/2016 18:56

Interserve has already successfully and profitably completed (and been paid for) a contract in waste-to-energy. Glasgow is the only (rather catastrophic) failure to date and Interserve is keen not to have another, another 2 contracts in the area should be OK. The final outcome from Glasgow is set at a "prudent" (I quote) £70m provision, but there were some suggestions that some investors may consider that some good may come of attempts to claw back some of the losses - but no detail and no guidance could be given due to sensitivity of discussions in the area. And £70m is apparently a "subjective" evaluation (whatever that means). My take is it could get a bit worse or it might get better.

Seems £70m is a prudent provision for me to use too.

Interserve management and contract writing is usually pretty good - I have been a bit surprised that they haven't had a serious problem before in the last few years (looking at the tribulations of some of the competition) but this one is a shocker. I'd be very disappointed to see another one anything like this scale.

From the CC it was good to hear other segments of the company business seem to be doing just fine.

[pugugly] 09/5/2016 15:40

Date Broker Recommendation Price Old target price New target price Notes
09 May Liberum Capital Hold 310.15 400.00 320.00 Upgrades

Appear to be low ball caller but CC2014 has rased a very worrying point re the Air Products withdrawal and write offs. Could it happen with Glasgow and if so at what final cost.

From UKWIN no apparent successes in this area - From memory I considered investing in a similar exercise in I think Avonmouth some 10 years ago but with luck never followed though - it was never successful (as a quoted company) and I think went bust after being taken private.

Just Googled and memory was correct



but now sems to be operating BUT in a very high value and specialist area of medical waste .

On the surface does not give me much hope for Glasgow -

Thoughts - comments - or am I wrong ?

[cerrito] 09/5/2016 13:57

Just seen that since Friday’s conference call JPM Cazenove have ome out with an overweight and a tp down from 543p to 500p and Jefferies(with a 570p tp) and Berenburgs with buys.

[cerrito] 09/5/2016 13:47

Thanks edmundshaw for pointing us in the right direction...very odd that no reference on the website especially as I thought the CEO/CFO came across well. You have saved me from going to the AGM tomorrow.
CC2014 thanks for that...I have to say I was reminded of the Manchester Contract which killed TEG and damaged Costain some years back.

[cc2014] 09/5/2016 13:32

Hi Edmund - re your question on how to value the write off. I am concerned that all the technical issues may not be fully understood. Note the issue related to the design in the RNS. The directors do not detail how the £70m has been calculated but if IRV are in on a design and build contract it doesn't look good.

From the RNS
"However, our expectations for the UK construction division as a whole have been significantly adversely impacted by a further deterioration in our Glasgow energy from waste contract. The issues relate to the design, procurement and installation of the gasification plan"

And this article really worries me

"Air Products has opted to face a $1bn write-off in preference to carrying on with their doomed gasification projects in Tees Valley, and have belatedly decided to get out of the so-called ‘Advanced Thermal Treatment’ business “blaming technical problems and rising costs"

Those still invested in gasification and pyrolysis will now presumably be considering whether they should follow suit with disinvestment. Companies such as Peel, who rely on a more experimental version of the technology that failed at TV1, could be next in getting out of the sector.

However, one-track companies such as Clean Power Properties have so far opted to burn through millions after millions by lurching from one failed thermal treatment technology to another rather than admit defeat, seeking refinancing and further investment despite their poor track record.


I remain on the sidelines until the price is right. IRV are a good company


PS if you want something which is in the construction sector with an M&E bias, alot less risk and decent growth CTO might be worth a look. Small cap M&E contractor on the up with the problems of the recession behind them. Recent trading update on Friday and RNS's from company are always very clear and very cautious. I am long, have been for some considerable time and holding for more than double the price the stock is now.

[edmundshaw] 09/5/2016 10:12

Further, the problems seem exclusively with aspects of waste-to-energy contracts. These are complex, involve process risk, and further involved risks due to poor performance and insolvencies from subcontractors.

These risks are not generally inherent in other construction work, and there are a couple of such contracts still running (another one has been completed to time, budget, cash in the bank). Of the 2 remaining one is complete, in dispute regarding payment, the other is 70% complete and is looking OK.

Various other points are raised, but need to listen personally for these. I am now bullish from this share price.

[edmundshaw] 09/5/2016 09:56

Following the Interserve analyst and investor call that was hosted last week, below please find the access details for the call playback facility (I got this by sending a single email).

Audio playback access phone numbers UK Toll Number: [phone]

UK Toll-Free Number: 0808 237 0026

Conference Number: 672211#

Well worth a listen for holders, and pretty reassuring in general terms imo.

From the Q&A:
One comment from Adrian (I think, or the FD): impact on dividend is zero.

Another comment on net debt/ebitda: IRV is comfortable with a ratio of 2x, covenants ae at a ratio of 3x (and these are pre-exceptionsal - the 70m is exceptional). 2016 the ratio looks to be 2x, 2017 looks to be a little over 2x.

[dogwalker] 08/5/2016 21:30

Thank you, ali47fish. Sounds sensible, & good luck too.

[philo124] 08/5/2016 20:34

I think u probably did and u won't look back.

[ali47fish] 08/5/2016 15:40

hi dogwater- i sold the whole lot just before close of the market- as i held thse for a long time i calculated that with dividends accrued and slicing for the cgt last year i just about got away with a 500 pounds loss- better safe than sorry as every body seems to think the impairment is fairly substantial and definetely lost faith in the management as they have not come out with the truth before we had the leak- i visit these bbs to learn something and hope i did the right thing- good luck to holders

[cerrito] 08/5/2016 14:41

Assuming that there would be a recording of the Friday morning investor call I went on to the website and could not find it...not sure if looking in the wrong place. If anyone else found it appreciate if you could send link.
Thanks

[spacecake] 07/5/2016 13:14

Flogged the remaining remnants yesterday - more p*ssed off than panicking.

[dogwalker] 06/5/2016 18:12

ali47fish....what did you do in the end ? If you'd bought the shares at 10.30 when you last posted you might have paid £3.05. And sold at the end of the day for £3.25, say. Perhaps making 5%. Easier said that done of course. And next week's another day etc.
Me,I'm still trying to work out if £70million is about right or not re fixing things in Glasgow.

[edmundshaw] 06/5/2016 14:45

Good idea CC2014. Could you please let us know the method you would use to figure out a better estimate of the cost of a problem in one of Interserve's bigger contracts than Interserve themselves can provide?

[cc2014] 06/5/2016 13:12

I'd suggest you need to try and figure out whether £70m is a reasonable estimate of what it would cost to fix the problem.

I am avoiding as these things have a habit of rolling on and on. At some point there will be value here and I shall keep watching.