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Interserve Construction value was as low as £20m

16 April 2019 | By Neil Gerrard

Valuations carried out at the time of Interserve’s administration showed that its construction arm was worth as little as £20m, effectively ruling out the possibility of a sale to a third party.

That’s according to documents filed by Interserve Plc’s administrator EY in Companies House. Both KPMG and investment bank Houlihan Lokey were appointed to provide market values of Interserve as at 31 December, despite the fact that EY viewed a formal marketing process of Interserve as “detrimental to the value of the group”, as well as being likely to take too long to complete.

KPMG estimated the entire Interserve group’s value to be as low as £790m and as high as £943m, while Houlihan Lokey calculated it to be as low as £507m and as high as £664m. Within that, KPMG’s valuation of the construction arm ranged from £20m-£25m, while it estimated RMD Kwikform was worth £310m-£375m. Houlihan Lokey put the construction business at £42m-£54m and RMD Kwikform at £264m-£324m.

Once adjustments for Interserve’s pension deficit, provisions against its troubled energy from waste contracts, and other costs were taken into account, KPMG produced an adjusted estimated value for the group of £414m-£717m, while Houlihan Lokey put it at £255m-£480m.

EY’s report said: “The valuation evidence… showed that, after accounting for the indebtedness of the group, the group’s equity value was assessed to be significantly negative. This therefore demonstrated no value in the equity of the group and rendered it highly unlikely that marketing would have led to a third party offer in excess of the group’s indebtedness.”

Interserve entered a pre-pack administration on 15 March and the group was sold to a newly incorporated company controlled by the group’s lenders. Since then, it has been “business as usual” for the group, with staff and suppliers paid as usual.

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