Market jitters post-Carillion collapse hit Interserve shares

Market jitters over the stability of outsourcing firms following the high-profile collapse of Carillion sent Interserve’s share price plummeting this week.

The company’s share price was volatile today after falling to the lowest level in more than 30 years on Monday following a statement from joint venture partner Renewi which revealed that Interserve had experienced delays on an energy-from-waste scheme.

A “general souring of sentiment” towards outsourcing firms after former rival Carillion spiralled into liquidation caused nervous investors to sell their shares, according to analysts.

AJ Bell analyst Russ Mould said: “A number of factors are working against Interserve.

“The first is a general souring of sentiment towards support services firms who specialise in outsourcing…most spectacularly Carillion…have all hurt investors to varying degrees over the past few years.”

“I would argue that there is some justifiable nerves of the stability and finances of Interserve, but nothing much has changed from the concerns we had at the beginning of the year,” Michael Hewson, senior analyst at CMC Markets, added.

The company implemented a “fit for growth” transformation plan after issuing a string of profit warnings last year, and insisted on Tuesday that the proposals to save £15m were on track.

However, the BBC reported that the firm would seek to raise capital from investors.

Mould added: “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…there is still a lot of work to do, and with markets more nervous than they were three, six or twelve months ago there may be less likely to embrace risky situations such as this one.”