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Interserve – another old board rat deserts the sinking ship (with a bag of goodies)

By Nigel Somerville, the Deputy Sheriff of AIM | Saturday 2 December 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Fully listed Interserve plc (IRV) has announced the departure of its support services managing director, Mr Bruce Melizan. He has stepped down from the Board and will stick around until the end of January to effect a handover. A second announcement describes the severance package….I wish I had one of those!

We learn that Mr Melizan will continue on a full salary, pension, car and other benefits  until the end of January. Fair enough. But then he gets a whopping £357,213 in lieu of 12 months’ notice, statutory redundancy pay of another £9,046.50, £7,500 towards legal fees incurred by him in connection with his departure – all topped off with the nice cherry of £20,000 towards outplacement support. Total bill almost £400,000.

There may be more too, since the remuneration committee is still to consider bonus payments for 2017, and then there is the 2015 Performance Share Plan.

This is because he has been made redundant as a result of a restructuring of senior roles.

We are told that this is all in line with the company’s remuneration policy – nice work for those who can get it. But bearing in mind that the company, having denied it was in a battle to keep the banks off its back in connection with potential covenant defaults (in September) only to say the very next month that there was a realistic prospect of not making the cut with reference to the net debt to EBITDA test.

I guess if the covenant test was a close thing, saving £400,000 might just help get the company over the line, so it looks to me that either a failure is a foregone conclusion or the company has turned it around. If it were the latter, I reckon we’d have heard of it via RNS…..

As such, there are surely nasty things afoot for the company’s shareholders, for the banks won’t care about them.

Waxing lyrical about Mr Melizan, company chairman Glyn Barker said:

I would like to thank Bruce for his significant contribution to Interserve over the last 14 years. Bruce's capability in developing strong customer relationships, leading key acquisitions, driving organisational change and focusing a 50,000-strong workforce on operational excellence have helped to shape today's organisation. We wish him well in the next phase of his career

I’m sure Mr Melizan will appreciate that (even if the “helped to shape today’s organization” statement can be read either way), but a £400,000 payoff might be rather more appreciated. But it is odd that the chairman focusses on his ability to drive organisational change when that is exactly what the company seem to be doing right now. Well, whatever.

The shares closed off by another 1.25p, the level achieved when it was conceded that covenants may be in trouble. The only question for me is how bad this will get before new CEO Deborah White (no relation to her namesake of Milestone Group) manages to get a grip.

For now, I’m keeping well away – at least until the banks are happy.

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