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Strong half year results despite EfW exceptional charge

10 August 2016

A rise in revenue of 2.4% to £1.6bn posted by Interserve resulted in operating profit increasing to 2.1% for the six months up to 30 June this year, compared with the first half of 2015.

As a result of this, headline earnings per share increased by 1% to 31.3p and the interim dividend rose by 2.5% to 8.1p.

The company also reduced its net debt figure to £275.6m from £308.8m at the end of 2015.

Interserve described its performance as showing "strong cash generation and resilient performance" within its core businesses.

Numis said the company had demonstrated "good performance across most areas of the group excluding the Energy from Waste (EfW) projects - where there has been no change".

It also said the reduction in net debt was a "key positive".

"We retain estimates, target price and view that Interserve is the most geared recovery play special situation in the sector," the Numis analysis stated.

JP Morgan said stability of the company's £70m provision for its EfW contracts was a positive, "following a disappointing trading update back in May".

It also described the Interserve Middle East cashflow performance as "excellent".

Following the positive results, JP Morgan has raised its FY16E FCF forecast to £39m, with a 9% yield.

Interserve chief executive Adrian Ringrose said the performance represented a "strong cash performance", increased revenue and headline operating profit.

"We are taking action to exit the Energy from Waste sector," he said.

"Our assessment of the aggregate impact of exiting this sector is in line with the £70m exceptional charge we announced in May."

He further stated that the company's positive outlook for the year remains unchanged, despite the current political and economic uncertainties.


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