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Shares in Interserve are up another 14% this morning, extending yesterday’s 30% rebound from profits warning lows (down up to 40%), its second in a month and third for the year.
A major contract win (5yr, £227m, facilities management for UK Department for Work & Pensions) offers hope after management highlighted a worrying deterioration in Q3 market conditions, employment cost pressures, margin contraction, operational issues, contract slippage, additional provisions and lower cash generation/higher debt that may jeopardise banking covenants.
The contract win is also reminiscent of fellow troubled support and construction services company Carillion, which picked up two new contracts just days after a July warning sent its shares sharply lower.
Successful bargain hunters from yesterday will be rubbing their hands, hoping more such announcements are on their way to help the shares fill the latest gap down.
In the same vein, they may also be wondering whether a depressed share price (record lows yesterday) makes the company similarly vulnerable to bid speculation, something that sent Carillion shares up over 50% just two months later.
Mike van Dulken, Head of Research, 20 October
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
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