Interserve (not good)

[monabri]

In Feb 2017, Dividend Champions records Interserve's twenty years of dividend growth, and 1.9 times cover.

Another nail in the nutty notion of a buy-and-forget HYP.

V8

Yep, that's about the time I bought in.

[monabri]

Oh I see they've won a new contract....that's nice

https://www.londonstockexchange.com/exc ... 47600.html

[jackdaww]

Support Services. Say no more.

Investing in this sort of government low margin outsourcing field should come with a warning: suicide bidding or hidden bad contract costs will blow the company up eventually.

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quite right.

and there have been warnings posted on these boards in recent years .

sadly for them , possibly influenced by other posters, some people have not profited from those warnings .

But didn't those warnings come after the s.p. had dropped like a stone and holdings worth precious little? We bought our shares in 2009 and they did well for a while till the sky fell in and at that point hardly worth selling. One hoped that they would eventually recover at least to some extent but that is clearly not going to happen now. Even less worth selling now.

How did those who had limit orders in to sell this morning get on?

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no , i sold carillion, kier mitie and interserve in 2010, at a small gain .

i would have sold at a loss rather than risk a bigger loss of capital , and hence income.

this after a well known poster on here highlighting the dangers of low margin contractors. (grateful thanks).

warren buffet , like pyad advocates LTBH , but he obviously keeps an eye on things and gets out quickly if a mistake is realised. ( eg tesco) .

[bluedonkey]

I'm pretty inert when it comes to selling but I did stir myself to sell IRV.

Bought 10.12.2010 at 200p
Sold 19.1.2018 at 123p

The proceeds went into Aberdeen Asia Income IT (OT).

[Crazbe7]

Is it really the Support Services sector that has caused the demise of Carillion and the on-going problems at Interserve? Would seem to be the construction arms of both that have contributed far more to their business failure.

For Carillion PFI contracts with extensive risk transfer to them and poor management. Add a few problems with Middle East construction contracts - most needing the on-going support of a local JV partner or local sponsor - and you have a big losses.

For Interserve poor performance on numerous waste to energy projects, with extensive risk transfer to them and poor management on what are essentially bespoke plants on each occasion. Very few have made money for the contractor. It can't have gone unnoticed that Costain and Balfour Beatty have had their own problems with waste to energy projects. Why bother unless you have the right technical partners and understand the contract risk you are taking. Interserve clearly didn't. Blinded by the promise of higher margins.

With Support Services being such a wide ranging sector opportunities exist within a HYP - all at 5%+ yield. Is it a sector we should ignore?
Not recommending any of these.

Andrews Sykes Group
Babcock International Group (for the brave?)
De La Rue
Essentra
G4S
Maintel Holdings
Pay Point
RTC Group
S Three


Off HYP topic
The whole construction sector has now been hit by Interserve and Kier's Rights issue. Balfour Beatty now down over 20% from 300p high point. Neither Kier or Balfour Beatty currently a HYP share, but once the dust from Brexit has settled, ones to tuck-away as HS2 and more UK infrastructure gets built. Now not chasing turnover but concentrating on increasing margins. All bets off we have a Corbyn Government though.

Crazbe7

[jackdaww]

Is it really the Support Services sector that has caused the demise of Carillion and the on-going problems at Interserve? Would seem to be the construction arms of both that have contributed far more to their business failure.


Not recommending any of these.

Andrews Sykes Group
Babcock International Group (for the brave?)
De La Rue
Essentra
G4S
Maintel Holdings
Pay Point
RTC Group
S Three


Crazbe7

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paypoint isnt not a low margin contractor.

[Bouleversee]

Of that lot I hold only Babcock and De La Rue, both of which have done badly. I don't think we need a Labour govt. to achieve wealth redistribution. It seems to be happening anyway.

[bluedonkey]

Morgan Sindall is often grouped in with these companies, unfairly I think. In my view it is a very conservatively run company with little or no debt and a reluctance to chase turnover. It has been in HYP territory in the past, though not at present.

[Bouleversee]

Morgan Sindall is often grouped in with these companies, unfairly I think. In my view it is a very conservatively run company with little or no debt and a reluctance to chase turnover. It has been in HYP territory in the past, though not at present.

I'm pleased to say I hold those as well and they have done well over a number of years. I was beginning to wonder whether I should get rid of them if they are all tarred with the same brush but your message is reassuring.

[miner1000]

For what it may be worth, Babcock got pretty positive press recently in the IC. It is more focused on defense contracts and services and less exposed to dodgy construction contracts. If the yield is still good I might buy some once the market settles down.

Miner

[jackdaww]

IC had kier on a buy tip in september .

its halved in price since .....

i sold out of badcock recently , it seems a very difficlut sector .

[Dod101]

Kier is a hold according to the IC in the current edition. Written when the price was 480p, now just over 400p. The sector in general should I think be avoided. There may be the odd decent company within but I do not and never have held any.

Dod

[monabri]

https://www.londonstockexchange.com/exc ... 12374.html

"It is currently intended that a portion of the New Equity will be offered to existing Interserve shareholders and new investors through a public offering of the New Equity (the "Public Offering"), although the implementation of the Deleveraging Plan is not conditional upon a successful Public Offering."

I dont think the queue will be that long



https://www.proactiveinvestors.co.uk/co ... rts/211631

"On the plus side, the idea offers existing Interserve shareholders the option to mitigate being diluted to a level even an advocate of homeopathy would find derisory but on the negative side, the shares being offered are shares in Interserve …"

[SlickMongoose]

Disaster of a sector. I think the combination of minisule margins and high debt is always one to be avoided, even if the yield seems good. Do any of these companies not fit that mold? Babcock have slightly higher margins than the rest, as they do slightly more specialist work, but they have plenty of problems still.

but on the negative side, the shares being offered are shares in Interserve …"

Ouch.... to be fair that is a pretty big negative.