Interserve shares hit new 30-year lows on financial concerns
The outsourcing company’s shares fell another 20% following news reports.
Shares in Interserve have hit fresh 30-year lows on concerns about the outsourcing company’s financial future.
On Monday, shares in Interserve fell over 10% following an update from Renewi which said that Interserve missed a deadline on a joint venture plant.
The stock was down another 20% on Tuesday after BBC News reported that an Interserve shareholder doubted the company could survive as it potentially seeks to raise cash to shore up its finances.
However, two sources close the company denied that Interserve is on the brink of bankruptcy, according to the BBC.
In a statement Interserve said that its three-year transformation programme was on track and it continued to expect a significant operating profit improvement in 2018, in line with expectations.
Russ Mould, investment director at AJ Bell said Interserve, which employs around 75,000 people, needs to reassure investors on its funding plans and its ability to win new business, while maintaining its competitive position.
He said Interserve is weighed down by debt, which limits the company’s room to manoeuvre, particularly when it comes to winning new business, which can be lengthy and expensive.
He added: “If management decides the company needs a cash infusion from investors they need to move quickly as the lower the share price goes the harder it can get to raise the sum you need as you need to issue more and more shares, potentially diluting existing shareholders.”
Concerns about Interserve’s finances has raised speculation the group could go the way of rival Carillion, which collapsed into liquidation in January.
In August, Interserve said it swung to a loss in the first half of the year as it scrambled to lower costs.
The company made a £6 million loss in the half-year ended June 30 compared with a profit of £24.6 million in the same period a year earlier.