Interserve Share Discussion Threads

[wallywoo] 18/4/2017 14:13

Not sure you can compare clln to irv. Though both have similar turnover, and sectors. Clln valued 3 times IRV. They have roughly 20% short positions where IRV have virtually none. The market thinks this is the lower risk option and I agree. Just no dividend here currently but I reckon 6-12 months to change that. Also a lot of intangible assets on clln balance sheet due to all their acquisitions.

[bookbroker] 18/4/2017 13:56

A generalisation perhaps, but support service cos. tend to trade on wafer thin margins overall in the public/private sector, and any one contract can go pear-shaped, but you only need to look at Carillion for an example of a company that, on the face of it, appears a good investment, well-managed, good yield, decent order book, etc., but the market always anticipates a clanger down the line, hence the high short positions!

[jeffian] 18/4/2017 11:56

"These companies tend to be a rotten investment". Well it was a pretty spectacular investment at one stage! I first bought in years ago when it was a low PER/High yield stock. It had a good run up to the 2008 crash and from 2009-2015 the share price went up 3.5x as well as paying a good divi. The current malaise can firmly be pinpointed to the initial announcement of problems with waste in November 2015. If you're saying that "these companies" (contractors? PFI? services?) are prone to Black Swan events, that may be so, but for many it hasn't been a "rotten investment".

[wallywoo] 18/4/2017 11:40

SP is holding up very well in a market that is tanking. Good sign that this has / is forming a good bottom level for the share price to bounce. I am adding on any weakness

[kazoom] 18/4/2017 11:08

"one thing for sure, this will need a substantial capital raise, hence the lagging share price!"

I kindof hope that is what is causing the "lagging share price" as it is far from clear that they would want/need to raise capital. Debt looks set to be up (of course) but comfortably within their revised facilities (on which they are paying around 5%) and at somewhat less that 3x EBITDA.

Never say never, but I cannot see from here why any fundraising would be required.

[edmundshaw] 18/4/2017 10:48

And a cheery morning to you too bookbroker! Hope you enjoyed your holidays.

[bookbroker] 18/4/2017 09:14

These companies tend to be a rotten investment, Connaught springs to mind, could this be another one, one thing for sure, this will need a substantial capital raise, hence the lagging share price!

[luisfrg] 17/4/2017 16:19

Foundations of stability finally in place for the share price onwards and upwards from here ...

[edmundshaw] 16/4/2017 14:41

Like something out of Mediterranean building standards of 40 years ago. I am quite astonished. Perhaps "Design and Build" included "Inspect". Wonder where the workforce came from too, very sloppy.

[duplooy] 15/4/2017 21:21

Jeffian, I think very much on point. Until recent years the MD of the construction business was a Board member. Now the MD reports through another director to the Board. Is it a coincidence that the problems in this division are also in recent years? Leadership and direction come from the top so I am hoping for fresh blood to head up construction with direct representation on the Board.

[jeffian] 14/4/2017 16:47

Slightly off topic but, as someone who used to be in the development and construction industry, I find it hard to understand how a problem so specific could have been so widespread across so many sites.

"The 250-page report identified fundamental defects which led to the wall collapse:
not enough wall ties
the wrong type of ties were used
wall cavities were not uniform.
The report said: "It is the view of the inquiry that the primary cause of the collapse of the wall at Oxgangs school was poor quality construction in the building of the wall, which failed to achieve the required minimum embedment of 50mm for the wall ties, particularly in the outer leaf of the cavity wall. The poor quality relates to all three of the following aspects:
the direct laying of the bricks and the positioning of the wall ties
the direct supervision of the laying of the bricks and the positioning of the wall ties
the quality assurance processes used by the sub-contractor and main contractor to confirm the quality of the construction of the walls
"All three issues were ultimately the responsibility of the design and build contractor in charge of the site."

Assuming that they were not using exactly the same bricklaying subcontractors across all sites, you would have thought that such a simple and basic error in the construction of a cavity wall would have been spotted by someone, if not the Building Control departments of the relevant region. On our sites, the new brickwork was inspected each day as it was built and kicked over if it wasn't up to scratch. It's a mystery to me.

[ferries5] 13/4/2017 23:39

Juggler

Thanks

[the juggler] 13/4/2017 14:34

As I understand there are none of these issues at IRV, a pal of mine who worked there until recently said that like many other construction outfits they made checks at the time of the Scottish schools becoming breaking news.

[ferries5] 13/4/2017 10:14

Anybody know if this could effect IRV, Now hospitals being mentioned.

[wallywoo] 10/4/2017 14:15

There is no evidence of that Juggler. What looks to have happened is that IRV had a ok year (with good cash generation), with a disappointing construction performance, and a terrible energy from waste project (leading to large exceptional right off). Construction performance is being addressed, and hopefully the waste project is behind them (though that needs to be confirmed from here). IF that is the case future profits should be substantial (in relation to the SP). Time will tell

In addition the hedge funds are not attacking this share (ie no short positions of note). Always a sign of potential trouble, but not here

[the juggler] 10/4/2017 13:17

My tuppence worth : Turnover is easy, order book is easy IF they are cutting margins to get/win and retain work.

The only thing that is important is profits.

In my opinion the next important date for us shareholders will be end of August 2018. No that is not a typo. Give Debbie White a 12 month in the CEO post to get all the dirt out, make some big strategic decisions and get the company back on track with a good idea of any likely ongoing costs.

[wallywoo] 10/4/2017 12:07

That's true, but on the plus side you have a company with a £7.2B order book, over £3B a year in turnover, with a valuation of £325M. Seriously cheap

[jeffian] 10/4/2017 11:50

I know it's been said before here but the risk remains the unknown extent of the losses arising from the aborted waste contracts. Yes, huge provisions have been made but the doubling of the original provision smacks of arbitrary guesswork and that fact that IRV may well be on the hook for 'consequential losses' as well as the simple cost of completing the projects means this could be a continually running sore for years, a bit like PPI has been for the banks. I have a reasonably large holding and am sitting on my hands, but I'm not that confident that the worst is over yet.

[wallywoo] 10/4/2017 10:23

Well that's the question, if forced into a deeply discounted rights the share price will stay low, with the rights even lower. If can sell something / generate enough cash to get back on track they are off and running again. IMO nothing will be done for 6 months til the new CEO is on board. Place your bets.

I am taking my lead from this level being a firm support level where the share price bounced in 2016 and in 2010/11. But still risky

[rhatton] 10/4/2017 10:08

How likely do we think a rights issue is here?

[wallywoo] 10/4/2017 09:29

Article below is a good summary. "Risky but could pay off hansomely":

[garycook] 08/4/2017 04:22

warranty,Good post.Agree with you on the clarity,and adding on the way up.

[warranty] 07/4/2017 18:13

I'd like to think you're right that it won't go lower Gary but the problem with these legal cases is that they tend to drag on, can get extremely expensive and make things very uncertain. We also can't say with real assurance that the amounts provisioned will be enough and as wally says, things usually come in 3's. I'm hoping we have seen the bottom but until I see some form of clarity around that I'll just stick with what I've got and hopefully add on the way back up. Ticking up nicely at the moment anyway so let's hope that continues and the next news is more positive.

[wallywoo] 07/4/2017 11:49

Agreed, but bottom fishing is a tricky game. Famous last words, "can't go any lower" and profit warnings tend to come in 3's.

Have said all that have bgt in and will add, if all looks well

[garycook] 07/4/2017 11:45

Should not go any lower from here.All the bad news and over provision is factored in to the share price as you state.So the share price could rise slowly higher from here.If a dividend is reinstated then it will fly higher.