Four Key Reasons for Interserve’s Troubles
Shares in Interserve dropped over 15% in January just a day after the Carillion collapse after rumours emerged that a Cabinet Office team was set up to monitor its financial health. Open data on central, local and NHS trust spending with Interserve from 2011 to June 2017 reveals how the company’s problems occured.
- Total spend is down
Total spend with Interserve was £461.7m in 2013, but was down to £427.7m in 2016. It’s a big drop, but on its only the surface of Interserve’s woes.
2. Interserve is making less per customer
In 2013, our data shows Intercom had 70 customers in government. By 2014, it had gone up over 50% to 106. This was linked to Interserve’s largest acquisition ever, it bought Initial Facilities for £250m.
While acquiring new customers could seem like a good thing, the amount Interserve made per customer dropped 33% from 2013 to 2014. It hasn’t improved since, with spend per customer hovering just over £4m in 2015 and 2016. This means Interserve’s struggling to make the kind of revenues it did from its clients before the acquisition, but now has many more contractual obligations.
3. Big customers are spending less
Nearly half of public sector spend with Interserve comes from three big central government clients, the MOD, DEFRA and the Home Office. Spend from the last two has dropped by 41% and 97% respectively from 2011 to 2016.
4. Even when spend is growing, it’s growing slowly
Spend is still growing from the MOD, which makes up 24% of all public sector spend with Interserve. However, while spend grew by 127% from 2011 to 2013, it grew by only 3% from 2014 to 2016.
The acquisition of Initial Facilities hurt Interserve by spreading it too thinly across government buyers. Accompanied by a steep drop in revenues from two key customers and sluggish growth in for their biggest buyer, the data shows how Interserve’s current problems trace back to 2014.
