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Hi All,
PHE Is a stock I have been following closely and as such know it quite well. I have been looking to buy some as of later however I came across The Align recommendation on Twitter that EQT may be a better alternative.
Would anyone please care to give a high level summary of the difference between the two?
It seems EQT have development sites already in place but dont own the technology which I am not sure is the same/similar to PHE's DMG?
Hi all,
Been looking to get into oil and gas stocks for a while and this has caught my attention. Can someone please explain what the relevance of the FID is? it seems like once this is given its up from there. Understand it means final investment decision but what exactly does that mean
Kenj and MAJ,
On the A465 project its hard to know what will happen. IMO they will agree to some form of financial settlement and clearly the Welsh government is anticipating this but in terms of value who knows.
Large Scale infrastructure projects like this are notoriously difficult and very risky. See the AWPR and the Queensferry crossing for Balfour Beatty and GT. The latter project has led to GT exiting large scale infrastructure projects all togther.
Exlcluding OJEU rules IMO there are only maybe 8 to 9 other firms with the scale and capabilities of costain to deliver large scale infra projects. All of them aside from BAM Nutall (technically has BAM Construct as a sister company) focus not just on infra but building as well. IMO this is only a good thing for Costain as they can demonstrate that they are pure specialists in this sector.
With regards to consultancy I agree that this is a highly profitable line of work. Your risk is virtually non existent, you don't have to build and you can just cream it from your staff rates. I used to work for Balfour Beatty at Major UK airport and a few years back we had an opportunity to carry out a Construction Manager role (rather than principal contractor) for a huge development project for a fee and effectively our profit from the contract would have been equal to the the profit from our normal construction revenue which was almost 6 times higher than the fee!
I think if you are looking to hold onto this for at least the next 18 to 24 months minimum then I think you are onto a winner. Expect a few bumps along the way though!
Just a bit of useful insight that I may be able to part.
I work as a Quantity Surveyor for top UK Contractor (not Costain) so I have a good understanding of the construction industry.
In relation to your first point I assume by 6/7% profit margin your referring to pre-tax profit and not gross profit which is the measure that all contractors measure profitability by? 6/7% margin is extremely and virtually impossible in the current construction climate. Generally margins are extremely low in construction due to the inherent risk of the activities. If you are making circa 2% margin then as a contractor you are doing well anything and performing at industry expectations. Anything more and you are doing very well. Some contractors like Watkin Jones make considerably more than this but this is largely due to development acitivities which are extremely profitable and not all major contractors have significant development divisions. See the construction index below for a list for the data for the top 100 contractors in the UK
https://www.theconstructionindex.co.uk/market-data/top-100-construction-companies/2019
You highlighted several loss making incidents as one offs. Although that may indeed seem the case the very nature of construction makes it difficult to predict margins from year to the next. Often Clients pass on too much risk to Main Contractors who often have little choice but to accept in order to win a project. This is generally the main reason behind huge losses and unfortunately this is a trend that continues so there is no gurantee that losses will stop occurring from one year to the next.
That being said I think the current SP is extremely low and definitely worth buying at. I think yesterdays RNS was positive, especially considering that 50% of the company's revenue is no affected by COVID-19 which is a stark contrast to many other Main Contractors. At mentioned the UK government is wanting to spend Billions on infrastruture in the UK and Costain are well placed to do this an an infrastructure specialist, unlike many of their competitors who still remain invested in general building which Costain exited years ago.