Interserve Share Discussion Threads

[jeffian] 07/6/2018 16:12

"I am assuming the option price for his shares is 75p (or whatever) should he decide to exercise."

Wrong assumption, I'm afraid, dexdringle.


"b) Nature of the transaction

Nil-cost options granted on 4 June 2018 pursuant to the Interserve Performance Share Plan 2015"

The figure of 75.65p/share is being used as the starting point to calculate how many shares he will be awarded, but whatever that figure is, those shares will be free.

"The price used to calculate the maximum number of ordinary shares under the Plan was 75.65p, being the average closing price on 30, 31 May and 1 June 2018 of the Company's shares on the main market of the London Stock Exchange. The Awards will normally vest on or after the third anniversary of the date of grant subject to the fulfilment of certain performance conditions based on cumulative operating profit, total shareholder return and strategic targets and are subject to recovery and withholding provisions. No consideration is payable on the grant or the vesting of the Awards which must be exercised within two years of vesting."

[whyyy] 07/6/2018 16:00

I'm pretty sure they'd rather be treated now with something approaching the "generosity" that the new board members are enjoying after a handful of months in post and before actually achieving anything that couldn't have been done by a halfway competent businessperson.

[windrushg] 07/6/2018 15:24

Maybe they can spend the redundancy money on IRV shares and see a quadruple of their lump sum in couple of years. That will be a great Golden Goodbye then!

[whyyy] 07/6/2018 14:22

Meanwhile, people with many years loyal service are being made redundant and given the absolute bare minimum statutory pay. No golden goodbye for them. The board is in danger of alienating their workers.

[dexdringle] 07/6/2018 14:19

I am assuming the option price for his shares is 75p (or whatever) should he decide to exercise. And that his right to exercise is based on certain performance parameters.

They can't be 'free' shares as that wouldn't be an 'option' would it as he would hardly not take up the option of free shares ?

[da vinci1] 07/6/2018 13:58

He surely will be motivated to perform very well IMO. The incentive to perform is in the increasing value of the share price isn't it. or am I missing something? If i were him i'd do my level best to perform very well and see my holding rise in value!

[gregpeck7] 07/6/2018 09:46

Capita, Mitie all surging.. Irv about to get going imo. Mitie results make for very good reading.

[fenners66] 07/6/2018 09:15

So a golden hello shares instead of cash then?

Makes a mockery of calling it a "Performance" share plan - if he only just arrived !

So we can assume that in the terms for the performance share plan - one thing that is not necessary in order to give away shares is ............
...... Performance.....

[aendjo] 07/6/2018 09:11

The 2015 plan - rewarding shares to new directors joining the board as an incentive for talents. It looks like a good appointment, given the outstanding legal issues and how central it is for the company to get contracts right.

[fenners66] 07/6/2018 09:06

Award under the 2015 plan - how does that work then

[the juggler] 07/6/2018 08:39

Fenners66 - he only joined the Company on Monday this week so I don't think the blame lies at his door.

[cfc1] 06/6/2018 18:19

its call Hedge Funds!! they are still very active...we need a major deal and a solid Q2 update to get rid of these leaches...otherwise they will play the stock as long as they like....
They have now given up with Capita for example after all news and speculation done

[windrushg] 06/6/2018 15:13

Possibly. Or just reducing pending results plus interested investors deferring commitment for same reason.

[fenners66] 06/6/2018 09:06

Yesterday's price move looked more like people using the rise to exit

[cfc1] 06/6/2018 08:19

aendjo. ok. Well the feeling is they will trade out of current situation an make the right disposals. Clearly the shorters are still (since sept 2017) still playing the share price Once we get more solid deal news and a good q2..

[aendjo] 05/6/2018 19:34

CFC - I was not implying they would. In fact, I am confident they will not. This is stated very clearly in the annual statement as well. I was just valuing the company based on its parts. RMDK, a growing business with annual earnings of 55m and 25% margin, market dominance in many geographies, valued at P/E 8-10 would wipe clean the debt. The rest of Interserve business - debt free - is worth much more than current market valuation. I expect a strong correction.

[eodfire] 05/6/2018 18:29

I was thinking along the same lines.... wait until the share price hits 100 then short... Why not buy now if you think it's going to 100. Interesting perspective from cc.

[cfc1] 05/6/2018 18:01

aendjo.....IRV will NOT sell RMDK! its the crown.
The board is more committed to trade their way our of this and obviously make disposals...and NOTE at terms THEY want - not a fire sale!

[aendjo] 05/6/2018 16:16

From Interserve Annual Report 2017:

"It is anticipated that total interest expense in 2018 will be approximately £68m. […] The borrowing is subject to a number of financial covenants. […] Interest cover requirement is broadly for EBIT to cover interest by at least 3.5x. […] Gross debt to be less than 450m by June 2020 […] non-compliance would be an event of default"

(My comment: the above works out as EBIT of 238m, or current P/EBIT of 0.3!)

Annual report, continued: "Although they consider that the output of strategic plan is a best estimate […] the directors have stress tested the future viability of the group for the following: 1) aggregate group EBIT lower than estimate by 25%; 2) reduced benefits from Fit for Growth despite incurred costs; 3) disposal of assets delayed by 6 months compared to expectations; 4) EfW proceeds lower than expected; 5) 2018+2019 TOP reduced by 10% compared to expectations; 6) working capital adverse by 25m, compared to expectations; The company is able to sustain up to five of these scenarios […] whilst forecasting to remain within covenant tests. The directors have a credible plan […] but they acknowledge the inherent risks of delivery" (end of quote).

Whilst the ongoing concern remains, the current market valuation is one that implies bankruptcy. In my opinion the plan - whilst NOT risk free - appears to be robust. I see a good upside here if disposal of assets continues.

__

In my opinion, the current market valuation underestimates the company even from a sum-of-parts perspective. The value of RMDK would wipe most if not all the debt. What is left after wiping the debt is 1) Support services (annual revenue of 1.8b GBP) and 2) Construction (annual revenue 1.3b GBP but shrinking say to 1b GBP). Aggregate revenues for what is left of Interserve after disposal of RMDK is therefore circa 2.8b. Assuming that after restructuring these businesses can generate a very conservative 3% margin, that works out as forward earnings of 84m. At a P/E of 4 that values the debt-free company at 336m, 3 times current market capital - or a share price of 225p.

I'm staying long.

[windrushg] 05/6/2018 12:00

Agreed eodfire. And nigh-on £50m wiped off the debt pile today already. GREAT PROGRESS!

[eodfire] 05/6/2018 11:55

Imo, the "The best thing that happens to us is when a great company gets into temporary trouble . . . We want to buy them when they're on the operating table" warren buffet moment was just before the financing deal with lenders was announced. So, imo, we've seen the bottom.

[unclejr] 05/6/2018 11:49

Despite the transaction costs (Probably $1.5-$2M) the remaining proceeds are entirely for Interserve.

[aendjo] 05/6/2018 11:46

We will not see a dividend here for the next 3 years, assuming everything goes well. I think the company is crazily undervalued though. I respect cc’s views though so I will have to look at the numbers again...