IRV – Interserve – drops 30%

IRV (Interserve), the international support services and construction group, provided an update on its exited EfW (Energy from Waste) business and “on certain financing arrangements”. Shares plunged around 30% to 238p as at the time of writing.

IRV announced that they will increase the provision for exceptional charges on account of the termination of the Glasgow Recycling & Renewable Energy project. Their debt will also rise.

In the latest full year accounts nearly a year ago, IRV had PBT of £80m, and net debt of £309m. I follow the rule suggested by Robbie Burns of requiring net debt to be no more than 3X PBT. IRV fail on this score. The situation is sure to be worse then they report on 28th Feb.

I have long been highly sceptical of government schemes, alternative energy, renewable energy, recycling, turbines, and all the rest of it. It’s all too faddish and unproven for my liking. Governments throw money at projects one minute, companies pounce on the opportunity to soak up all the dough, only to then see politicians either fiddle with the scheme or drop it entirely in pursuit of the next new shiny adventure. Companies are left holding the baby, and much taxpayer money and capital is destroyed in the process. Let that be a warning to you.

This seems to be what has happened to IRV.

I have a passing interest in IRV because I bought in Mar 2014 at 635p, and sold out in Jan 2016 at 489p. I can’t find my buy rationale for the company offhand. I documented my sale, though: the Stockopedia Rank had declined to 79, I found a more interesting company, and “I got fed up with this share”.

The sale was a good one in light of the subsequent share price action. IRV proved to be a value trap. IRV is on a PE of 5, as of yesterday, according to Stockopedia, so clearly the market had an inkling that the company could deteriorate further.

I am not tempted to buy at the moment. The bulletin boards note the ponderous debt situation, and the divi looks threatened.

I am going to predict that the shares will be lower in 6 months time than they are now. Catch you then.

As with most disasters, it is worthwhile keeping tabs in case there is a turnaround opportunity.

238p

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About mcturra2000

Computer programmer living in Scotland.
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One Response to IRV – Interserve – drops 30%

  1. Pingback: Follow-up on IRV and TCG | Mark Carter's blog

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