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Interserve Rises After Announcing Higher Dividend: London Mover

Interserve Plc rose in London as the U.K. builder and provider of services from training to cleaning announced higher pretax profit, raised its dividend and said it will expand in Latin America and the Middle East.

Interserve climbed 3.5 percent to 335.2 pence, the biggest advance since July 10. The company increased its dividend by 6.7 percent to 6.4 pence per share, “reflecting our confidence in the medium-term outlook,” it said in a statement today. Pretax profit advanced 8.3 percent to 32.6 million pounds ($51 million) on “strong” support services growth.

Interserve, which was involved in projects for the London Olympic Games including the aquatic center, reiterated its guidance for stable performance this year and said it will continue to develop internationally. It operates in Middle East countries including Oman, Qatar and Dubai, as well as Latin America and is now looking at Brazil.

“We’re in Chile and in Panama and we export into one or two other territories in Latin America but clearly our focus is in Spanish speaking Latin America,” Chief Executive Officer Adrian Ringrose said on a conference call. “Brazil is a possibility. It is clearly slightly different, but the scale of the market is one that we cannot ignore and we are not ignoring.”

Public sector services

The company’s sales climbed 2.8 percent to 1.21 billion pounds in the first six months. Interserve won more than 1.4 billion pounds of work in the period, with 800 million pounds from support services, 500 million pounds from construction and 100 million pounds from equipment services. For next year, the company has 1.1 billion pounds of work.

Interserve has expanded into India, Singapore, Chile and Panama in the last couple of years, Ringrose said,

Panama’s economy is projected to expand 7.5 percent in 2012, making it the second straight year that Panama would lead Latin America in growth, according to the International Monetary Fund.

The Brazilian government plans measures including investment in roads, ports and airports to spur the largest emerging-market economy after China, President Dilma Rousseff said in July. Brazil’s economy will grow 1.8 percent this year, according to the latest central bank survey.

U.K. Services

The company’s U.K. support services unit derives about 65 percent of its revenue from the public sector and 35 percent from the private sector and expects the breakdown to remain at the same levels, Ringrose said on the call. The division’s projects include support for the U.K. Department of Work and Pensions welfare programs and work with the U.K. Ministry of Justice for outsourced prison services.

“The underlying economics of the government situation remains very, very challenging,” Ringrose said.

Interserve revenue in the U.K. construction division rose by 0.4 percent in the first six months of 2012, as the company focused on small projects and on clients that have repeated business requirements.

“This strategy has served us pretty well,” Ringrose said.

Britain’s economy shrank 0.7 percent in the three months through June, the third straight quarter of contraction.

“One can never stop worrying about a business,” Ringrose said. “We could be in a lot worse place than we are. It’s a fairly challenging market backdrop.”

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