Interserve Plc (IRV) plans to expand its overseas business and may make acquisitions, Chief Executive Officer Adrian Ringrose said today after the U.K. support services and construction company reported a rise in pretax profit.
Interserve has a “reasonable war chest” to expand its main businesses of U.K. public services, Middle East energy services and infrastructure, with about 100 million pounds ($154.2 million) left from the disposal of some U.K. project assets and 250 million pounds of debt facilities, Ringrose said in a telephone interview.
“There’s a fair amount of capacity available to us if we find the right targets,” he said. “We have the management capabilities and the market opportunities to expand.”
Interserve agreed to buy Topaz Oil and Gas Ltd. in July for $46 million to expand in the Middle East. In January, it announced it would pay $41.3 million for oil and gas services business Willbros Middle East Ltd. and subsidiaries. Ringrose said that he sees Interserve slowly becoming more international.
A third of the company’s profits come from outside the U.K. and the proportion has been steady in the last couple of years because of strong U.K. growth, Ringrose said.
“Further internationalization is a big part of our future growth strategy,” as infrastructure markets in the U.S., South Africa and parts of the Gulf are exhibiting “quite strong growth,” Ringrose said.
Revenue from the company’s new U.K. justice and rehabilitation services business will begin in about one year if it wins 10-year contracts for which it is bidding, Ringrose said.
Interserve reported today that its Landmarc Support Services subsidiary won a contract extension worth about 110 million pounds with the U.K. Ministry of Defence until July 2014.
First-half headline pretax profit rose 7.6 percent to 36.8 million and revenue gained 8.6 percent to 1.07 billion pounds, the company said in a statement.
Interserve shares climbed 3.8 percent to 550.5 pence at 11:18 a.m. in London. That pushed Interserve’s 12-month advance to 71 percent, giving the company a market value of 715.9 million pounds.
“There is scope for earnings enhancing acquisitions,” Joe Brent and William Shirley, analysts at Liberum Capital, wrote in a note to clients, after the results came in “slightly ahead” of their estimates. They reiterated a buy recommendation and raised their target price for the stock to 600 pence from 550 pence.
To contact the reporter on this story: Rachel Savage in London at firstname.lastname@example.org
To contact the editor responsible for this story: Douglas Lytle at email@example.com