Interserve moves to reassure investors as ex-shareholder claims it ‘could be next Carillion’

The “large”, unnamed ex-shareholder told the BBC that he wasn’t sure Interserve could survive much longer without a fresh injection of cash, which he doesn’t think will be forthcoming

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Carillion collapsed earlier this year, sparking fears for the wider outsourcing industry

Interserve PLC (LON:IRV) has moved to reassure investors after press reports earlier in the day suggested the construction and facilities management group could be “another Carillion”.

The company hit back on Tuesday afternoon, refuting the speculation and claiming that it remains on track to deliver a “significant operating profit improvement” this year.

READ: Interserve exits industrial contracting sector

It was responding to claims made by a large, unnamed former shareholder who told the BBC that he was “doubtful if the firm can survive” without a significant cash injection, which he wasn’t convinced would be forthcoming.

“We could be looking at another Carillion,” he said. “I don't see how they can raise the £500mln or so needed. The management team and its track record are not good enough to make a case for investing new money.”

Despite counterclaims from two other sources that fresh money would be secured and that Interserve was in no danger of going bankrupt, the share price plunged by more than 20% to 29.4p in morning trading.

The company’s response has helped to reverse some of that, with the stock changing hands for 38.6p not long after – a 1.9% loss for the day.

Problems for outsourcers

Still, only in 2014, those same shares were worth more than 700p, valuing the company at close to £1.2bn.

Interserve’s market cap is less than £70mln today, with the share price under pressure in recent years amid concerns over the prospects for outsourcers.

Intense competition has forced companies to underbid one another, leaving them with little room for movement when projects overran and costs rose more than expected, which they inevitably would.

Fears for the sector came to fruition earlier this year when Carillion, another outsourcer with a wealth of government contracts, collapsed.

Capita PLC (LON:CPI), G4S PLC (LON:GFS) and Serco Group PLC (LON:SRP) have all taken whacks as well over the past couple of years as the City tries to figure out which company could be next to wave the white flag.

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