0950 Tuesday 4 December 2018

In the recent economic climate in the UK, the home building and contractor sector has come under much scrutiny. Everyday seems to bring fresh directions and opinions on a possible Brexit deal/no deal/or no Brexit at all and with many companies within the sector being tied so closely to the GBP it is inevitable that their share price is painfully sensitive at the moment. On Friday, Kier announced its intention to raise £264m in a rights issue and as well as causing the share value to plummet over 20%, it also sent ripples through the sector. One of the companies to come under close analysis was Interserve.

Eyes were drawn to Interserve in late November as it was revealed that the firm was heading for bigger than expected debt for the year by over £50m and expected total debt for 2018 to be on or around the £650m figure. Upon news of the debt, stock value fell by 7% taking the stock to a 30 year low with fears that the firm may fall. These fears were fueled further this weekend when an article advised subcontractors of the firm to seek payment assurances from the contractor’s client directly should Interserve fail. Rudi Klein, the head of Specialist Engineering Contractors Group (SEC), said that he had advised “Well you can turn down the job. But if you feel you have got to do it tell the client they need to pay you directly if Interserve can’t pay you and agree that with Interserve to make it kosher legally, or get the client to set up a project bank account”. Since the publication of the article, IRV.L has fallen a further 15% taking their total share value down over 50% for the last month alone.

With worries that Interserve will follow the same collapse as Carillion earlier this year, those holding positions in the firm may want to cut their losses before such a failure should take place.

To get further analysis on Interserve or the building sector in general, please contact one of our brokers directly on 0121 454 0770.

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