Several years ago, after either losing money or making little profit, I got lucky! Someone told me to read the annual Berkshire Hathaway letter, written of course by Warren Buffet. Follow this expert and you won't go far wrong. Rule number 1 is indeed 'do not lose money' which means avoiding companies making losses and incurring massive debts. There is a big difference between Company directors saying, "well we have produced a little jam and we will make more tomorrow" and those saying, "we have never learnt how to make jam, but we promise you we will make a lot of jam tomorrow."
We are told in this BB that the company could sell its one profitable division and wipe out it debts. But if it did this it would be left only with loss making businesses. The truth is that this business currently has an unmanageable level of debt. Even if turnaround is possibe it will take years. There must be better opprtunities out there.
Before investing in this company, I would advise everybody to read this year's Berkshire Hathaway letter. It runs to several pages and will take hours to read, but it will be the best investment of your time. It will save you thousands of pounds.
A fair assessment, I think. Personally I won't invest (again) in IRV as there are far too many risks and not enough potential reward - I am reminded of a quote from Uncle Warren: "rule number 1, never lose money..." Too much chance of that happening here (and down another 6% on the day as I type this).
I would say avoid IRV like the plague, unless you like gambling and can afford to lose the lot.
There is upside at Interserve (IRV) but Liberum is concerned about the myriad risks facing the support services company.
Analyst Joe Brent retained his buy recommendation and target price of 180p on the stock after terrible [full-year] results as expected that saw him cut earnings per share forecasts by 12%. Interserves debt refinancing deal saw warrants issued over 20% of the business, reducing the upside for investors.
We believe that the balance sheet needs addressing and we expect that will be achieved by a mixture of disposals and rights issues, but we think it may take time to arrange a rights issue, he said.
We still see significant upside, albeit arguably 20% less than after the grant of the warrants on the banks.
I am sorry schwee but the analysis is not spot on and when the credibility of any post has disappeared when read the last few lines and it is talking of 9pence, as opposed to 90pence, being a gamble. That lets you conclude what the motivation is. Same as with anyone claiming its the next Carillion.
Very happy with my top up this morning.
Now lets let the CEO get on with the turnaround plan and in improving things.
You do however make an interesting point regarding the value of the Equipment Services Division.
Your analysis is spot on except for one thing. IRV does have a jewel in its tarnished crown in its Equipment Services Division. Selling that would more or less wipe out its debt.
So far IRV has refused this obvious opportunity, so the Board must be confident they can stabilize the other divisions so that they could eventually go for a rights issue to repair the balance sheet and repay the usurers.
About 6 months too late Dougie with those comments.
May I suggest you read the RNS where it says its got its money and surviving. So no its not another Carillion. Capita also got its money just in case you didn't realise that also so its also surviving and not another Carillion.
The CEO at Interserve has an excellent track record of delivery. I think she will deliver on the turnaround plan.
No need to post by the minute or indeed sometimes at all. Review on the 6 and 12 monthlies and on any company updates.
The company made a £75 Million profit last year. That's what it says. The exiting of the EfW business and finance restructuring costs make up the bulk of any write-offs and one-offs that have accrued thereafter.
As stated all already known and factored in and I'm actually surprised that it actually didn't go up this morning.
Interserve has its money which means the banks will have done tehri own due diligence and number crunching and see it surviving. Now its on with delivering the "Fit for growth" strategy.
Well, I have done my own research. Latest accounts show a massive loss in the Income Statement and even a large outflow of funds at the operating level in the Cash Flow Statement. Then look at the Balance Sheet and you will see that debt has nearly doubled in a year. Worse, intangible assets are about five times greater that net equity, which means that tangible assets are highly negative.
Financially, this company is a basket case. What evidence is there that the company can suddenly become profitable? When you buy a share you are often buying future earnings, but in this case it is a great act of faith to believe this might happen. Even then, it will take years of earnings to wipe out the debt. At 9p per share, you could argue you were taking a gamble, but at 90p per share there is no justification for holding this share. Get out now while you have the chance.
I expected a rise ahead of results following the old "buy on rumour, sell on news" so wouldn't be surprised to see a drop on Monday. I did always believe management would be given a chance to implement their strategy but for me this remains an opportunist trading stock given ongoing volatility and problems among their peers. Not one for the faint hearted, which I became having bought at 105p and seeing it drop back into the low 80's...
I dunno, but I missed it too, a 28% rise and no news or even rumours. Over on LSE someone suggested that the shorters are covering their positions as the trading update will be better than expected - but who knows? I'm just happy that my losses on this are somewhat reduced!
"Opportunity in Interserve debt deal, says Peel Hunt
Support services company Interserve (IRV) has arranged new banking facilities meaning it can go ahead with its recovery plans and a possible debt-to-equity transfer, says Peel Hunt.
Analyst Andrew Nussey retained his buy recommendation and target price of 140p on the stock after it announced an agreement in principle on new banking facilities of £834 million to September 2021, which he said provided comfortable headroom. The shares rallied 13% to 99.3p yesterday on the news.
Although expensive, it provides Interserve with an opportunity to execute its recovery plans such that all stakeholder interests can be maximised, he said.
Our revised estimates - full year 2019 earnings per share reduced by 50% to 24p - reflect the arrangement and full warrant dilution. However, the implied 3.7x 2018 price/earnings is attractive given the potential self-help earnings per share recovery trajectory.
He added there was the potential for a material debt-to-equity transfer given the free cashflow and disposal opportunities. "
I think this deal is better than many feared and represents a reasonable vote of confidence in the directors. I see reasonable scope for upside once the news sinks in albeit this will remain a volatile share for some time.
Debt up to £834m and finance expense £56m pa........
Interesting restructure - main equity holders obviously would not go for a rights issue and debt holders did not want to just inject equity - they wanted to keep it on the IV drip in the hope that their debt could still come good
I would assume bits of the business will be sold off in the next year to try and repay the debt pile.
Refinancing apparently agreed, with 20% of company shares being given away at 10p, and some increase in funding costs:
"UPDATE ON REFINANCING
Interserve announces that discussions with lenders and other financial stakeholders have continued to progress well, with agreement in principle on major commercial terms now reached. These commercial terms remain subject to credit approval from all providers before the new facilities are finalised. In addition, the lenders have agreed to extend the covenant test deferral date and the maturities of the financing facilities agreed in December 2017 to 30 April 2018 to enable the successful execution of all documentation required for the refinancing.
The additional facilities comprise cash facilities of £196.6m plus bonding facilities of up to £95m. These new facilities will mature in September 2021. Existing debt and private placement loan notes will be amended to be co-terminous with the new facilities. Borrowings made under the incremental short-term facilities agreed in December 2017 and which now expire on 30 April 2018 (under which the Company has drawn £45m of the revolving credit facility) will be repaid out of the new facilities, once these are in place. In total, this means that the company will have cash borrowing facilities of £834m immediately following the refinancing completion and through to September 2021, subject to certain step-downs in the new facilities over the period.
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. The increased cost of bonding instruments already issued will be circa £3.2m, of which the cash impact is less than £1m.
Additionally, as part of the proposed deal terms, the company anticipates that it will issue warrants to the providers of the new cash and bonding facilities to buy shares at 10 pence per share (the nominal price of each share). If exercised, this would provide the warrant holders with an interest of up to 20% of the post-issue share capital.
We have, as part of this process, engaged extensively with the Trustee of the Interserve section of the Interserve Pension Scheme with respect to the new refinanced structure and their security protection. This has been agreed with them, subject to the finalisation of the required documentation.
Debbie White, Interserve's Chief Executive, said:
"Today's announcement is a significant milestone for Interserve and a major step in securing a firm financial platform to underpin the Group's future. We are encouraged by the support from our lenders in respect of these new facilities, which will allow the new management team to execute our business plan, focused on delivering a great service for customers, driving growth and restoring value."
OWT, you say, do your own research. We I did a few months ago when I had this as a 'strong sell' at 99p. Now the shares trade at 57p. I am afraid this company has all the negative attributes as Carillion had and it must be odds on that it goes the same way.
This one looks a bit daffy ducked, too. I mean Jesus, how can you lose so much just doing a bit of cleaning? A market valuation of 91m GBP with debts forecasted at 600m, I wouldn´t fancy many peoples chances of success with this one.
I have a feeling there are many more of these type of companies out there.
Nigel Somerville on share Prophets blogs avoid.
He quotes Warren Buffet Two rules (1) Don't lose money ( 2 ) Don't forget rule one .
But i recall he bought Tesco a few years back so don't get how you do that ?
Like Carilion and capita, IRV i read ..... were / are paying out more in dividends then they generate from operations i do not understand how that's a good idea ?
"Interserve, the British outsourcing company, has presented a rescue plan to banks in an attempt to secure fresh funding, with fears over its future raised by the demise of rival contractor Carillion.
Interserve, which cleans the London Underground and manages the Ministry of Defences estate in the UK, has already warned on profits and delayed a test on its banking debt covenants until the end of March. It has secured £180m of additional short-term funding until then.
On Thursday, the company met with eight banks including Barclays, Lloyds Banking Group, RBS, MUFG, Sabadell and HSBC to present a revised business plan and request fresh funding for the company. The proposals are under consideration but no decision has yet been reached. Interserve declined to comment................."
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