(Adds analyst comment, details, background, share movement)
By Esha Vaish
Oct 10 Support services and construction company
Interserve Plc has decided to keep its RMD Kwikform
business after a strategic review because it brings the firm
more international exposure.
Interserve also said RMDK, which contributed 32 percent of
group operating profit last year, was a highly cash generative
business, underpinned by operating margins of over 20 percent.
The business provides support structures while new buildings
are being constructed.
"Whilst some of our end markets face some near term
uncertainty, the structural drivers for global infrastructure
remain strong," the company said in a statement.
"RMDK is a global business, providing an important element
of diversification to the rest of the group's predominantly
UK-based earnings profile," it added.
Shares in the company, whose other activities include
providing care services and repairing historic buildings, fell
5 percent to 337.25 pence at 0750 GMT.
Numis Securities analyst Howard Seymour said although RMDK
was a strong business some investors would be disappointed by
the decision to keep it.
A sale could have fetched about 300 million pounds ($373
million), helping Interserve to get rid of its debt, said
Seymour, who has a "buy" recommendation on Interserve's stock.
Interserve had net debt of 275.6 million pounds as of
end-June and has forecast net debt of 300 million to 320 million
pounds for the year to end December.
Interserve also said it would incur non-recurring charges of
about 17 million pounds ($21 million) over the next 12 months to
carry out strategic changes at RMDK, which would include
restructuring operations in a number of smaller, less attractive
The British company could also face a slowdown in its home
market, with major business surveys showing that Britain's
economy appears to be losing steam following the country's vote
in June to leave the European Union.
Peers Mitie and Capita have already warned
that customers have been reluctant to sign off on major
contracts since the Brexit vote, prompting analysts to warn that
Interserve could also be hit.
($1 = 0.8042 pounds)
(Reporting by Esha Vaish in Bengaluru; Editing by Sunil Nair)