Interserve buy opens up public services market

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SUPPORT services group Interserve has bought training company Business Employment Services Training Limited (BEST) for up to £18.25m, giving it access to job seekers in South and West Yorkshire.

BEST provides training and development for job seekers and employers across South and West Yorkshire, a region which employs three million people across 100,000 businesses.

Interserve said the acquisition will increase its front-line services, particularly in the Department of Work and Pensions’ Work Programme, and will help turn it into a key public service provider.

Interserve’s managing director strategic partnerships Bob Vince said that BEST bears no relation to Welfare to Work firm A4e, which has been hit by potential fraud claims.

“Our approach is we get payments when we get people into work, which is a completely different programme to A4e. We don’t see any problems at all.”

Interserve is paying an initial cash consideration of £17.5m for Leeds-based BEST.

A deferred consideration of up to £750,000 will be payable subject to agreement of completion accounts.

BEST’s pro forma annual revenue is £17m, generating operating profit of £3m and its gross assets are valued at £2m.

The transaction is expected to be accretive to headline earnings per share in the first full year of ownership.

BEST’s managing director Michelle Manson and operations director Andrea Cook will stay with the business following the acquisition.

Mr Vince said all other staff will be kept on after the acquisition, except the chairman and finance director who are retiring.

BEST provides services in Government-sponsored programmes, the majority of its business being related to the Work Programme.

Its patch across South and West Yorkshire has an unemployment rate of 8.7 per cent, similar to the national average.

Mr Vince said BEST has performed well on its own, but there is huge scope for growth under Interserve’s ownership.

“BEST is a really good operational business, but it was a small private company,” he said.

“Interserve can come along with bigger resources and help the business to grow.”

Interserve is already involved in the Work Programme through its Rehab Jobfit joint venture, which has contracts in Wales and the south-west.

The BEST deal will make it the third largest UK provider in the DWP’s Welfare to Work scheme.

Adrian Ringrose, chief executive of Interserve, said: “The acquisition of BEST reflects our strategy of developing as a top-tier public services provider, delivering front-line services.

“It builds on our existing relationships with both the DWP and the community in Leeds and the surrounding area, provides a foundation for offering more broadly-based community services and enhances our role in training and skills development.”

Analyst Victoria Prior, at Interserve’s house broker JP Morgan Cazenove, said: “The acquisition strengthens the group’s exposure to the DWP, particularly in the welfare to work market. The acquisition is in line with the group’s strategy of selective bolt-ons to support organic growth and looks to be a good fit with the business, in our view.

“We anticipate that the acquisition will be immediately earnings accretive.”

Analyst Andy Smith, at Charles Stanley, said: “The acquisition complements Interserve’s existing operations within its Work Programme scheme and we believe is similar to Staffline’s acquisition of Fourstar in 2011 which has progressed well.

“We maintain our ‘buy’ recommendation on Interserve.”