Groundhog Day17 Dec 2023 11:57
I’ve been on the outside looking in at PFC several times before, although today the position looks perilously dire and I’m hesitant about taking another punt.
As has happened before, after taking a dive, the sp looks like a bargain as the order book looks good but cash flow is a major issue and assets have to be sold to cover ongoing costs in the interim. Since 2017 this familiar cycle has never quite led to a full recovery and the net effect has been another step downwards for the sp where, over the last nine years, the baseline has moved from roughly 650 to 380 to 100 and now 17p, leaving gaps that will probably never be filled.
When I took my third or fourth punt at PFC, after the SFO case was settled two years ago, I was again careful to take profits as it rose and to exit when it fell: I’ve learned that trading and averaging up as a share rises is much smarter than averaging down as it falls.
In August 2018 the company had made a convincing comeback: there seemed to be general acceptance regarding an SFO fine and this was baked into the sp at that point. A cautious article at the time spelt out the position
https://www.investorschronicle.co.uk/shares/2018/08/29/growth-eludes-petrofac/
The article basically says: ‘The company's shares have been in recovery, but are not yet supported by the backlog. Shareholders were presented with a new strategic goal: a book-to-bill ratio of at least one. In other words, the group wants to reverse its current trajectory and grow the top line [ie revenue].’
It strikes me that today’s position is due to a failure, for whatever reasons, to achieve that aim. So what, after all this time, has changed to end this ever diminishing spiral?
A cynic might observe that PFC's best years were when corruption was apparently a key part of doing business and, perhaps because it has been sanitised, it can no longer compete as effectively as it once did in certain markets.
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