Interserve Share Discussion Threads

[cc2014] 19/4/2018 09:16

hmm. We know the write downs will be massive as you can't hold intangibles on the balance sheet unless there are future profit streams to back them up. Also there's the accounting adjustment for that change in accounting policy I can't remember the name of off the top of my head which Fenners reminds us of from time to time.

We know this, the market knows this and as long as there are no surprises it should be priced in. The cash impact of the above will be nil anyway so the market won't be too bothered as cash generation is more important right now.

More troubling may be the level of provision for EfW since the value of future liabilities aren't fully known. The cost to completion of building maybe but the amounts clients are seeking for damages will be different than IRV will have provisioned. This part is a question of judgement and the auditors are probably going to have to write something around range of possible outcomes. this number will move around over the next 5 years or so and we need to be careful to separate the future cash impacts from the accounting provision.


In my opinion the FD has an impossible task here. It is normal practice that in these circumstances the kitchen sink rule is applied. However, going full out for the kitchen sink approach would make the balance sheet look so bad it would make IRV look insolvent as liabilities would exceed assets. No FD is going to do that unless forced to by the auditors.

I'll be looking at the EBITDA number and free cash flow and comparing it with the interest charge

[ih_127877] 19/4/2018 08:26

Well be ready to be surprised!

[dexdringle] 19/4/2018 08:06

"ih_127877 19 Apr '18 - 07:30 - 9044 of 9045

I'm 100% sure the write-downs WILL be viewed very badly by the market and hence I went short yesterday on 60,000 shares @83.69p"

You are right. It isn't as though the City is expecting a massive write down and has factored this into the already 80% fall in the share price. Everyone is expecting a fantastic set of results, a massive profit, and even an upward valuation of the intangible assets and it is going to be a real surprise if that doesn't happen.....

[aendjo] 19/4/2018 07:46

Morning all. What is the source of your 100% certainty ih? Based on my assessment, the opposite will be the case - although I’m not 100% certain I’m feeling fairly confident. Only seven days of trading before we find out.

[ih_127877] 19/4/2018 07:30

I'm 100% sure the write-downs WILL be viewed very badly by the market and hence I went short yesterday on 60,000 shares @83.69p

We shall see.

[dandanactionman] 18/4/2018 19:06

All the following imho, dyor, I know nothingI have been looking at the circular http://tools.morningstar.co.uk/tsweu6nqxu/globaldocuments/document/documentHandler.ashx?DocumentId=167992589From the way they are talking about the technical breach of the articles can we work out an idea on how much the write downs are going to be?I am long these shares but am concerned that very significant write downs could be taken very badly by the market?

[aendjo] 17/4/2018 12:44

I just noticed that there are very low volumes across the FTSE, not just Interserve (many stocks with trade volume today at 10-20% of average historical volume), perhaps a seasonal slow down after tax year end? Does anyone understand this?

[da vinci1] 16/4/2018 20:32

Yes,SP is flatlining at the moment, perhaps even drifting lower pending news etc. Still, long term, labour unlikely to win power now (thereby bringing services in-house) following what many perceive as Corbie's treacherous remarks re participation in Syrian air strikes! Am apolitical myself but good news for outsourcers that he has shot himself in the foot!-Oh! Jeremy Corbyn ?

[aendjo] 16/4/2018 17:47

Hardly any volume today. Only 9 trading days left before results. Shorts at 5% - over the past few days there hasn’t been any trend there either. It might be that most big players have now taken their positions based on existing information and await results before making further moves. I would expect some upward volatility leading to results (I would guess towards 100-110) but there might be limited or no movement from here. If the price remains at these levels I will buy more towards the end of the month, if my liquidity allows. Average target price 133p for brokers issuing a statement in March (4 out of 5 strong buy, one hold).

[aendjo] 13/4/2018 15:14

Thanks cj. If they raise a few millions
and reduce fixed costs... I’m in favour! I hope the auction is profitable.

[cjl62] 13/4/2018 11:58

Aendjo. It makes perfect sense and a sensible way forward as it is cheaper to hire.1 There are no maintenance 2 Very costly when sat doing nothing.
This plant needs operators maybe on average earning 40K. Interserve are not a plant operator and when they tender for jobs the costs for any plant will be include and a plant operator employed as a subcontractor.

[aendjo] 13/4/2018 11:02

I have zero knowledge of auctions for heavy equipment. Looking at big excavators they can trade at 100k brand new. Disposing at 20% to 40% on auction you might have to sell 50 excavators to raise just one or two millions... every little helps I guess but the company has a long way to go and I hope they have enough equipment left to run their sites and meet the needs of the pipeline.

[aendjo] 13/4/2018 10:56

Massive sale of Interserve building equipment. 600+ items including several pages of heavy machinery (excavators etc.) not sure how much it is going to raise and not sure whether they will need to buy some new equipment in the short term to replace all this stuff... hxxps://www.rbauction.com/heavy-equipment-auctions/rockingham-gbr?keywords=&auction_key=ROCKINGHAM%25c%25%20GBR%20-%20May%209%25c%25%202018

[liamnich04] 13/4/2018 10:39

Interserve has won a place on a £250 million construction framework for the University of Strathclyde in Scotland.

Interserve is one of four contractors that will be able to bid for major works valued at between £4 million and £50 million to support the University’s plan to transform its estate to deliver first-class teaching and research facilities.

Renfrewshire Council and Renfrewshire Leisure Ltd can also use the framework to tender for major building works.

The framework will last for four years, with an initial two-year term, plus the potential for further extensions.

[aendjo] 12/4/2018 21:13

Sadly, UK is going to be tangled up in a war with Siria / Russia by proxy. Shorting Easyjet, Ryanair and low cost airlines (with the exception of Norwegian) is a safe bet. BP likely to be adversely affected as well, paradoxically. Oil is going to go up, but they have big ties and JV with Russian companies. I don’t think the support services / construction sector, or Interserve, will be negatively affected. Opinions?

[southernman] 12/4/2018 19:45

da vinci ..
"Southernman-Committed longs have a vested interest in the company and have (in many cases) put their children's inheritance at risk. It is only natural therefore that they might defend their interests against unfounded and scurrilous scaremongering"

Agree that "unfounded and scurrilous scaremongering" is reprehensible. But there are several regular posters here (mostly longs) who seem surprisingly unwilling to consider alternatives to their own hopes.

Surely - especially if you have decided to put your kids' inheritance at risk - you should be willing to contemplate the possibility that you got something wrong, in a small or big way, and even change your bet?

[southernman] 12/4/2018 19:29

cfc ..
"southernman....I guess you sold then?"

Nope, neither bought nor sold yet - may do if I believe suitable for me.

[da vinci1] 12/4/2018 19:27

Southernman-Committed longs have a vested interest in the company and have (in many cases) put their children's inheritance at risk. It is only natural therefore that they might defend their interests against unfounded and scurrilous scaremongering. The assertions I've made were not directed at any particular poster so I apologise if you take personal umbrage at my observations! Nice to see IRV holding up well today again! GLA!

[cfc1] 12/4/2018 17:34

southernman....I guess you sold then?

Dunno why you get so stressed over words on a msgboard....

[losses] 11/4/2018 23:58

Private equity firm Mobeus invests £14m in HS2 supplierhttps://uk.finance.yahoo.com/news/private-equity-firm-mobeus-invests-210000255.html

[da vinci1] 11/4/2018 19:21

Sentiment is strong. We've seen a 10% increase in share price today alone from initial declines (notwithstanding the pontifications of the 'what if...?', 'yeah but...',over-analytical,glass half empty brigade!). Roll on Apr 30th!

[cc2014] 11/4/2018 17:08

Dear cc, is it not correct to estimate interest based on the following: “Pricing on BOTH the new facilities, and the existing debt and bonding facilities have been renegotiated as part of the refinancing. It is anticipated that the TOTAL INTEREST EXPENSE in 2018 will be approximately £56m of which circa £34m will be cash interest”


Agreed - what I'm trying to get to is what the interest charge will be in 2019 when we don't have any of this part year stuff clouding the numbers. What I don't understand is the difference between interest expense of £56m and cash interest of £34m. Ok, I get what the words mean but I don't understand why? It kind of implies that the interest is being added to the principle and not repaid (possibly on the Emerald debt which may be subordinated)

The bond interest is payable 6 monthly in March and September which implies the interest "accrual" for the last 3 months is £22m or the interest charge is £88m for a full year but that can't be right, it's too high. It's also wrong because they have bond interest to pay in 2018 related to 2017. So, what is the difference unless the interest payments are being rolled into the principle? (which may mean even when IRV have the ability to repay the interest, they can't as they've signed up to adding to the principle). That difference of £22m really puzzles me and I'd be grateful for explanation. I doubt the accounts will help when they get published.



I think it's fair to say the interest in 2019 will be higher than £56m due to the part year affect (ignoring disposals). £60m wouldn't seem unreasonable as a guess. Even £65m at a stretch.

All my musings.

Btw I don't see the average net debt as £550-£650m. If they've drawn £40m of the new facilities in mid March and they would only have done this after they maxed the cheaper older facilities that gives debt of £640m in the middle of March.


10% interest won't be too far off the mark though. CLLN were paying 12.5% on the last tranche they got and therefore it's reasonable IRV would be less than that.



cfc - yes the price action is outrageous. They do it all the time. Easy money for us PI's if you are quick on the button and are sure they are messing with it.

[aendjo] 11/4/2018 15:32

@southern: not sure it was particularly rewarding. We would have to calculate the weighted average but they’ve certainly bought a fair chunk below the current price point (including the latest increase in their short position) - my guesstimate is they are probably near even if not making a small paper loss. @fenners: the write down of goodwill reflects a recurring reduction in revenue and earnings, which (along with increased debt) has resulted in the company breaching article 85 (the second item to be voted at GM exonerates directors from liability associated with “technical breach” of article 85). I see no aberration.