Interserve cheap, but not cheap enough, says Liberum

Liberum analysts reckon a rights issue is needed to recapitalise the business, which swung to a loss in the first six months of 2018

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Interserve’s share price has lost 90% of its value over the past few years

Liberum has chopped its price target for Interserve PLC (LON:IRV) following the construction and support services group’s half-year results last week.

The £100mln company crashed into the red in the opening six months of 2018 as it carries out a major overhaul of its business, a process which has seen it exit non-core businesses and renegotiate onerous contracts.

Half-year loss

For the six months ended June 30, Interserve posted a pre-tax loss of £6.0mln, compared to a profit of £24.9mln in the year-ago period.

“There were crumbs of comfort at H1; EBIT was in line, the Energy for Waste guidance seemed on track and net debt was better,” read a note to clients.

“However, there are plenty of worries; EPS was hit by the higher interest charge and EfW could still surprise negatively. This is a highly leveraged and risky situation and a rights issue is needed, despite the prospect of disposals.”

The City broker kept its ‘hold’ recommendation in place but cut its price target to 63p from 90p.

Interserve shares dipped 1.1% to 61.9p in mid-morning trading.

Quick facts: Interserve

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