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Interserve says work prospects good but M&A still on the menu
September 3, 2014 / 3:15 PM / 3 years ago

Interserve says work prospects good but M&A still on the menu

LONDON, Sept 3 (Reuters) - Support services and construction firm Interserve has a list of work prospects to support future growth but does not rule out opening its cheque book to add to recent acquisitions, its chief executive told Reuters.

The British firm, whose work ranges from building airports and schools to cleaning London’s underground and placing people in jobs, has spent around 400 million pounds ($659 million) on buying businesses in the past three years, boosting earnings.

The latest was a 250 million pound deal for Rentokil’s Initial arm in February, which has materially opened up the UK private sector market for the firm’s facilities management unit.

“I would say we’ve got firepower for investment,” Interserve CEO Adrian Ringrose said in an interview.

“I‘m not signalling that we will, I think we’ve got a number of organic growth opportunities, but I think we are a business that has shown its propensity and its capability to grow inorganically as well. If it feels right strategically ... you should expect to see us make the odd acquisition.”

Analysts at Berenberg have said the company still has up to 150 million pounds to spend on deals that would broaden its product offering.

“Within our current arrangements we have that sort of level of capacity but for the right thing to support growth we can go and get more,” Ringrose said.

The firm has signalled that margins across its support services, construction and equipment hire divisions are unlikely to grow for the foreseeable future, placing more emphasis on contract wins and any further acquisitions to deliver growth.

Bolstered by Initial, Ringrose said he was upbeat about the firm’s prospects to grow its share of private sector work such as cleaning and catering, while increasing services with existing customers and expanding in higher profile welfare, healthcare and justice sectors all offered big potential.

Interserve wants to grow in care in the home services and is also one of a host of firms including Capita, Sodexo and MTC Amey bidding to win a portion of contracts worth 450 million pounds a year to run UK probation services.

The probation contracts, which will be subject to a 25 percent market share cap for each bidder, are expected to be awarded in October with work due to start in early 2015.

In August Interserve posted a 36 percent rise in first half pretax profit and said it had a future workload of up to 7.5 billion pounds, compared with 6.4 billion at the end of 2013.

Shares in the firm, which operates in more than 40 countries but makes over 90 percent of its revenue in the UK, were trading at 662.5 pence at 1351 GMT on Wednesday, up 16 percent on a year ago, valuing the firm at almost 1 billion pounds.

$1 = 0.6074 British Pounds Editing by David Evans

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