Interserve Share Discussion Threads

[aendjo] 09/10/2018 14:50

@Fenners, IRV has been loss making for the past two years. It’s an undisputed fact. Readers here will be very familiar with the reasons and with plan in place to restructure the company.

Disposal of loss making businesses will generate cash but may well be a loss on books - although a lot was already written off in 2017. Also an undisputed fact.

EBIT will be probably 100 to 150m.
Forecasted cash generation for the next 2 years is 100m per year.
Market cap is 75m.

To me, that looks cheap. Of course it is a recovery play - so there is debt, no dividend and a negative or low P/E. I’m patient.

[fenners66] 09/10/2018 14:47

" taking drastic action" - no it is not.

Even cfc who has been very supportive of the board - for what seems like a year or more now... has said it is not happening and certainly not anything like as quickly as he believed !

As I said months ago - they sat down and agreed themselves bonuses instead of sorting out the balance sheet.

Months later and there is a "potential" £4.5m disposal .....

[windrushg] 09/10/2018 14:18

Risk / reward ratio is I agree too compelling. Of course the company is making losses fenniers66, it is taking drastic action and cutting out dead wood so we expect CAPITAL losses for a while to make IRV lean and focused etc. This is their strategy known as 'Fit for Growth'. The underlying earnings are real though and will increase thereafter.

[patience a virtue] 09/10/2018 12:03

It seems now is a good time to invest in this. Risk reward ratio is too compelling. Dyor.

[aendjo] 09/10/2018 11:53

@CC - I think we just need to sit it out. I cannot explain CTO share price either - it would appear well undervalued to me. I will move in onto that when IRV bounces back above 120p (unless CTO bounces first!).

In regards to progresses in construction vs services - it is not just the 700m in construction contract wins in 2018 to date, but also the largest ever support services contracts were mobilised in first half of 2018 [for Department for Work and Pensions (3000 employees, 800 sites) and Department for Transport (1000 employees, 1147 sites)].

Refinancing secured through to 2021.

Market cap 75m. Price to EBIT << 1.

I don't know if it is a takeover target yet but someone with deep pockets could make a lot of dough here.

[aendjo] 08/10/2018 23:04

Just keeping head above water. The NHS is truly one of the greatest achievements of this Great Britain.

[bertiebru] 08/10/2018 22:48

aendjo. Many thanks for your detailed reply. I,m glad things are going better in your trust.

[fenners66] 08/10/2018 22:38

da vinci You have chosen to answer the question - I asked

"what do you value a share with zero prospect of dividends and likely loss before tax at ?"

Your answer "they are not worth anything! I "

I just ask the question - because CC2014 said that there must be some value ascribed to dividends and profits.


As far as market irrationality is concerned not sure all of you have seen a proper market crash before , when that happens - and we are talking about companies that are paying dividends and making a profit - that historical data gets forgotten and the market starts to factor in unknown bad news and likely doomsday scenarios such that forecasts get reduced and share prices go with them,

Even the companies seemingly unaffected get dragged down too as their relative valuations begin to look to high - or are sold to lock in gains.


The fact that share prices are getting more volatile and even good news is getting punished for not being good enough has me worried that the market is capable of talking itself into a correction at the moment.

As for IRV I cannot see a dividend being paid for 3-5 years and I can see when they account for all the exceptionals another loss before tax/attributable to shareholders - for all the window dressing of "underlying profit".

[aendjo] 08/10/2018 21:25

Bertie, I fully understand your position. There were definitely a number of local strategies implemented in my Trust, but we’ve been out of crisis mode (in regards to rota gaps) since August for doctors and February for nurses. I’m talking about 220 strong staff for the unit I’m responsible for. Maybe we’re an outlier... but I don’t think so.

The number of nurses coming in from EU has been plummeting though. That’s a fact. A big component of that was English testing (which was recalibrated with some success fairly recently), a decade of public sector pay freeze and the weakness of the GBP, alongside the cost of living in the UK (especially London and East Anglia) which made it less attractive for nurses to come work here. Not to mention food and weather (which are both improving, to be fair).

I should add, no need to be sorry about expressing a very legitimate opinion. BTW, the crisis you refer to is very real. It primarily stems from lack of social services and an aging population - with frail elderly patients being looked after in tertiary trusts and occupying (for weeks) beds originally destined to elective surgery (length of stay of a few days). Fully staffed operating theatres often run idle due to the fact that there are no available postoperative beds for electives... wasting tens of thousands GBP per wasted theatre day and causing waiting lists to grow longer and longer... This imposes financial and operational strain on tertiary trusts that are experiencing, nationwide, overwhelming pressure on their emergency services and profound inefficiency in their elective patients flow.

In answering why your opinion might differ from a first hand experience - we made a fair bit of noise (with the newspapers you mentioned) when the Government tied our hands, making it harder to hire essential workforce from wherever it might have been available. Personally, I haven’t contacted the newspapers to let them know we’re faring better now. Again, we may be an outlier... but we’re a big Trust so I believe the sample size is relevant.

Off topic. Apologies. Re: IRV, I’m confident in a big jump from here.

[windrushg] 08/10/2018 19:46

Irv and others are at the moment suffering a lot of collateral damage from the Brexit 'cat and mouse' talks. Both sides know though that a 'no deal' would be bad all round for both sides. Both sides,know it would be inconceivable for that to be allowed to happen. The pragmatic likelihood is that they will reach a sensible compromise. Hence the recent positive statements over the last weekend that a deal should be signed off by November.I would expect a large retrace in the share price at that time followed by a steady increase from there as positive newsflow on the company's progress on F4G filters through! If all goes to plan,this will probably end up being a multi-bagger! For those reasons,I intend to stay long whatever the short-term share price may be!

[bertiebru] 08/10/2018 19:33

Aendjo, I do not understand why what you are saying about NHS recruitment does not at all agree with what I read in the national press online and the BBC. I read that the NHS is already under the sort of pressure that one normally only sees in winter, that there is a shortage of nurses and doctors, that very junior doctors have to look after everything at night with no senior doctors there to offer advice, and that very inexperienced young doctors even have to carry out operations for which they do not yet have the experience.

Each morning I look at the main news pages of the Times, Telegraph, and Guardian online to try to get a balanced view of things and the impression that I get does not tie in with what you say. Sorry about that.

[aendjo] 08/10/2018 18:49

Bertie, that’s a good point but then again, no. I do lots of hiring in healthcare and despite a very steep reduction in inflow of new European workers (especially lower wages) those that are here are staying and tge Government is lowering barriers for those coming from outside the EU (the net result is that we have no gaps in our doctors and nursing rotas as of today - unprecedented). Another consideration is that to provide resilience to GDP the Treasury will have to increase internal spending - that means infrastructure and sorting out probabation. Without Carillion, Interserve is very much in a prime position to get huge jobs there.

[bertiebru] 08/10/2018 17:35

Are the construction doldrums not because of Brexit? Are people not presuming that construction companies may win contracts, but end up without the workers to carry them out?

[eodfire] 08/10/2018 17:30

I'm not sure if fenners knows what he's on about either. He needs to look at gsk or rdsb if he wants divi. Recovery share! That's right, irv is potential recovery share....

[cfc1] 08/10/2018 16:55

well what I do know is that its Q4 and deals get done in Q4. I do expect some bigger news as we head into the end of the year.

[fenners66] 08/10/2018 15:54

"share values get supported by dividends and profits."

Agreed , so what do you value a share with zero prospect of dividends and likely loss before tax at ?

Also market looks forward and if it decides to go irrational for a correction - then the historical profits and dividends get thrown out of the window to be replaced by forecast ....

[cc2014] 08/10/2018 14:36

Don't do that to me Fenners. P/E moving from 10.6 to 5.9 is enough of a market correction for me. Yes, I understand things can always get more irrational but there has to be a point where company share values get supported by dividends and profits.

FTSE now down 65 today. It's fallen from 7550 on the last trading day in September to 7250 right now. Not very pleasant.

[fenners66] 08/10/2018 14:18

It may have gone irrational - but if there is to be a market correction - the irrationality has not really started yet.

Market does seem nervous to me every announcement is being poured over for a negative and marked down every time one is found.

[cc2014] 08/10/2018 13:25

I'm not sure what to say Aendjo.

IRV have gained enough wins in the last three months to ensure their turnover on construction is increasing and whilst it may be too early to get over-excited at the margins, the rest of the construction sector is reporting better margins, so surely even if the margins are weak they will be higher then the contracts they are finishing off now. Also, if you've gots lots of work, it's easier to try and improve your margin than if you don't have enough to feed the beast.

Perhaps the city boys and girls are concerned about the direction of travel? Perhaps wins in support services would do more for the share price. Perhaps expanding into construction which is the area where all the losses have come from isn't seen as very clever.



What I can add is I am struggling with the market reaction to shares in the construction sector. It doesn't seem to matter what results they report, how upbeat the trading statements, how positive they are about the future, the share prices are struggling over the last 3-4 months.

If I look at my favourite construction stock and biggest investment (CTO), the house broker has the following P/E's
2015A 10.6
2016A 7.5
2017A 6.9
2018F 6.4
2019F 5.9
And that's for a company with £22.3m net assets, £5m net cash. The only bug-bear is the pension deficit but with rising bond yields it's going to fall fast. They've nearly halved the P/E in 5 years! and they are still going! So, in order for me to make money the company has had to double it's profits. I'm up on this trade, picked a good one I think, but by all rights I should be looking to retire now, not sitting at this desk bemoaning what brokers are up to.

If you are looking at a house broker who keeps reducing the P/E multiple and this is indicative of the whole sector, what can we do? Nothing. Nothing but wait for the profits to flow through. Wait and wait, until the P/E gets so low everything becomes a takeover target.


I don''t have the balls of steel you have with your trade but I certainly share your frustration.. Any position in the construction sector is being treated unfairly imho. Housebuilding is to a lesser extent the same.


Again what can you do though. With LLOY at 58.4 and AV. at 470 as examples P/E's are getting bashed everywhere. They are even bashing P/E's on stocks which are quoted on LSE but do little business in the UK.

It's all gone irrational if you ask me and the market has become very inefficient. We can exploit the inefficiencies but my patience is being tested.

[ebomber] 08/10/2018 12:59

Are we in the final countdown to a rights issue?

[aendjo] 08/10/2018 12:21

Morning CC. Puzzling indeed.

I was looking at the Construction Enquirer League - from January 18 to September inclusive, Interserve Construction has picked up 700m worth of contracts, with 203m in September alone.

There's another big job rumoured to be in the pipeline ("a 33,000 sq ft extension of Wigan’s Wrightington Hospital, featuring educational and medical research space, has secured planning consent with Interserve understood to be in discussions to deliver the project" in the news just now). They also have completed a big job at the proton beam centre at the Christie - before schedule and under budget - which won building of the year 2018 for greater Manchester.

What I particularly like is that those 700m are spread over 90+ contracts - they have been true to their word by targeting smaller (sub 10m) contracts, were it is perceived the margin to risk profile is most profitable.

Despite the constant stream of good news, the share price is continuing to go south... time for a big bounce in my opinion.

[cc2014] 08/10/2018 12:07

Morning guys. I feel for you. Given the volume on Friday, the volume today is very surprising. There's no follow through either way from the bulls or the bears.

It's gone so illiquid today it could be pushed around in either direction pretty easily, but what's surprising me is that nobody is. A new first for IRV.

FTSE is currently down another 40 today. Fingers crossed that the buying will pick up for you when the FTSE finds its mojo