Further to my trading suggestion last week. Interserve have announced final results today. Turnover looked light at £2192.6 million +12% v £2339 million (F) but they do have good revenue visibility with a record future workload of £6.4 billion and 75% of this year consensus revenue already secured. There was £2.5 billion of new business won in the year, including work with the BBC, University of Sussex, HMRC, The Royal Navy, Ministry of Defence, DWP, Magnox, Jaguar Land Rover, the Lusail Tower in Qatar and the Emirates Engine Maintenance Centre in Dubai.
Earnings came in at 47.7 pence +5.3% v 46.1 pence (F), dividend 21.5 pence +4.9% v 21.3 pence (F) with a 14.7p final (2.5% yield on final at 600 pence), so headline numbers look fine at first glance. They have moved to a small debt position of £38.6 million v £25.8 million cash last year. In their statement Chief Executive Adrian Ringrose said:
"In our UK Support Services business we delivered our medium term objective of finishing the year with margins of five per cent. Our Construction division remained resilient and Equipment Services delivered strong results, while continuing to expand into new markets."
The other surprise with these figures and the main talking point is the proposed acquisition of Initial Facilities for a cash consideration of £250 million funded by debt and an equity placing of 9.99 per cent of issued share capital. Initial Facilities comprises the facilities services businesses of the Rentokil Initial plc group with operations in the UK, Ireland and Spain, with the UK and Ireland representing 92.2 per cent of revenue in the year ended 31 December 2013. It provides a comprehensive range of facilities services from specialist single services, including cleaning, catering, security, mechanical and electrical building maintenance, energy management and statutory compliance, to fully integrated TFM. Initial Facilities has a strong record in serving a broad customer base within the private sector, incorporating services to many professional service businesses, national retailers, transport operators and a variety of industrial businesses, including the London Underground which currently represents approximately £50 million of revenue per annum. Initial Facilities has over 22,000 employees in the UK and Ireland and approximately 3,000 in Spain. For the year ended 31 December 2013, Initial Facilities reported an operating profit of £8.8 million, a profit before taxation of £8.4 million and…
they have announced a very brief Interim management statement in which they confirm trading in line with expectations, good new business wins and visibility and the completion of the Initial acquisition with the integration being on track. So all steady as she goes so there shouldn't be too much for Mr. Market to get worked up about either way today I guess.
The shares still look reasonable value, despite the 20%+ rise in the price since the end of February, as they trade on around 12.5x this years earnings with a yield of close to 3.5% nearly 2.5x covered, so one I am happy to continue holding.
Website: Compound Income?
