The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Most are just keeping their heads down - there is a definate move away from the big capital projects so those coming into the business are just as likely to be software engineers as they are civil engineers.
The sharesave scheme is generous - 20% discount on share price at date of entry onto that years scheme - and heavily over-subscribed in 2019 as the shareprice came down - but a lot of people are wishing they had taken the money instead of the shares once the scheme matured.
I think it will be a different outfit that will buy us eventually - and ASCG will get a nice little return on their investment relatively quickly - I wouldn't be surprised if it isn't a contractor, but a consultant that buys the business - Costain are actually doing some nifty things in asset management, data manipulation and other consultancy services. I think once that side of the business starts to show a reasonable sustainable profit is when you will see it either re-list as an FM/Consultant, or be bought by the likes of WSP, Atkins or Jacobs. And of course Keltbray pick up that side of the business that still wants to build things. All IMHO
But that means there has to be something financially positive to say..................................
The fact we have just placed an order for 2 TBM's, or won a consultancy commission to advise on Public Relations for the Welsh Government isn't going to set the Stock Exchange alight!!!
IMO I don't think we will see a return to 80-100p + until after the next set of results, when the board can demonstrate they have returned the company to profit - or not.
And you think Costain's results were bad.................
https://www.constructionenquirer.com/2020/09/17/kier-plunges-to-273m-loss/
A long time before the construction industry starts to make decent returns.
The contracts that have gone tits up were bid well over 5 years ago - and the Cambridge Lab job was the result of a subbie going out of business even longer ago. Focus now is on a very specific type of project, and pretty much only for Government/Utilities. Should see less **** ups in terms of bidding, it now needs the construction teams to deliver and not mess up on site.
Loosing more than 5p/week - £1.2m fine from HSE - straight out of the profits!!!
https://www.constructionenquirer.com/2020/07/27/costain-fined-1-2m-after-steel-cage-collapse-on-road-job/
They are preferred bidder - the contracts haven't yet been signed and if they can't agree a price with the Client then they won't get the work - look at Taylor Woodrow on the A30 in Cornwall that Costain took. I work for the company, and the vision and strategy that the exec board has is to move away from complex infrastructure to higher margin, less risky work - i.e. smart technology, not diggers by the side of the road.
You are quite right to point out that the directors have taken a pay cut of 30% - 4 days after Kier put a blanket 20% reduction across all their staff, Balfour Beatty directors took a 30% hit as did O'Roukes. What wasn't reported in the press was that senior managers also took a 30% hit, and all staff earning more that £45k were hit by a 20% cut - all other staff have a 10% cut. And of course no COL rise, recruitment, promotions and so on.
While I agree that Costain aren't in danger yet, with only £40m in the bank, they are going to have to call on their agreed facilities fairy soon - the £80m in the project bank accounts can't be released as the subbies have to be paid first under the terms of the contract with the Clients, and this takes time.
But ultimately if the work slows on site then the money doesn't come into the business and the company is still carrying a lot of overheads.
A question..... if the Government, quite rightly is spending squillions on the C19 problems, will RIS2 and HS2 still go ahead on its current timeframe? SMP work for Costain is already drying up, the RDP East scheme is on a go slow (circa £1bn) and if the government wants to pour money into quick wins for UK PLC, then highway schemes are not the way to go. The Roads in a Year slogan that was adopted a few years ago was pie in the sky - the consultants that design the schemes struggle to get anything out in less than 2, factoring in all the environmental studies, surveys and optioneering.
IMO it will be a while until Costain sees 2% again, let alone 6-7%. The only way it can achieve those margins is to bin the construction of major projects in road, rail and water and focus purely on it's fledgling consultancy business, where returns can be much higher, but the revenue will be down to a quarter of what it is now.
Message all staff woke up to this morning - reflects what I said about not getting the money in.
The Covid-19 situation continues to develop rapidly and our priority is to do the right thing by society, our people, our clients and to protect the financial strength of the Company. We need to keep people safe and do everything we can to continue to support our clients in operating as best we can.
As a result of heightened restrictions announced by the Prime Minister last week, we have now reviewed all aspects of our operations, including the risk assessment and implementation of COVID-19 safe working procedures, in consultation with our clients to establish what work is able to continue and have set out what actions we will need to take if we cannot continue to work. Of critical importance is that where we can continue to work, we have taken the necessary actions to safeguard our team in line with the Construction Leadership Council guidance, including any necessary resource reductions.
Unfortunately, while some of our critical activities can continue, many cannot as we are unable to adhere to the guidelines around restricted movement and social distancing. This means we will be taking action to adjust our workforce. We are in ongoing dialogue with all our clients to explore opportunities where our highly skilled and experienced team can further support them with many of their wider needs, and in preparing for an accelerated return to normal business. We are also taking ‘self-help’ measures to ensure Costain stays in the best possible shape to respond strongly once this unprecedented situation stabilises.
Our decision making is guided by doing the right thing by society, our people, our clients and to protect the financial strength of the company. While our objective remains to keep everyone working for as long as we are able, we are likely to have to use the Government’s Coronavirus Job Retention Scheme and place some people on Furlough Leave. Importantly this will enable us to avoid the need for any compulsory redundancies, safeguarding our teams’ jobs so that we can return to full strength within what we expect to be a short period.
In addition, the Board has exercised its discretion and given the current situation has made the appropriate decision to pause the annual pay increase and 2019 bonus payments, stop overtime and implement salary reductions. We will also temporarily pause all promotions and market adjustments. The Board has also agreed to take an immediate pay cut of 30%. In addition it is proposed that from 1 April 2020, the senior leadership population’s salary will reduce by 30% (ie all those employees who are participating in the Annual Incentive Plan “AIP” in 2020), those others who are in a structured bonus scheme will have a salary reduction of 20% and those earning more than £45,000 will have a reduction of 10%. Exceptions for overtime may be applied on an individual contract basis on agreement with the contract lead and the client. These proposed measures will be for an initial period of up to three
So, as a contractor does the work, submits an application for payment to the Client, gets paid but at the same time pays his staff/suppliers, what happens when he doesn't do any work for the client due to the coronovirus, but still has to pay his staff and last months suppliers.............£100m isn't going to go very far
@coiga - It's not as simple as Government announcing infrastructure spending - first it has to be in sectors that Costain operate - Housebuilder incentives are not going to work. Second they have to be accepted onto the tender bid. Third they have to demonstrate best value to win. Then, and only then can they start to make money. An average tender costs circa £150k to bid - the mega projects can be upwards of £1m. So that is money out of the door and potentially none recoverable.
And a hit rate of winning 1 in 3 is tenders considered good - so a lot of money goes out of the door even if the Chancellor decides to turn on the taps
Bottom out at £1-35??
So any thoughts on how the delay to RIS 2 will affect revenue?
A nice hatchet job in Construction Enquirer this lunch!
They will, but their Highways turnover is based on winning a place on the SMP RIS2 framework as one of the integrated delivery partners, and if you look at the company report you will see that the majority of the profits come from the Highways sector. THe thing that might make up the difference in infrastructure division is HS2, but it will be a massive shift in staff/upskilling needed.
Because they have just finalised a temporary deal to provide services to Birmingham City Council
Personally I think that in their push to embrace the technology market they have taken their eye off the less sexy stuff. While maintaining their £ turnover in the traditional fields, they want to decrease it to circa 50% of all turnover (technology and consultancy) in their 5 year plan - that’s a massive increase in new areas of the business and is dragging the cream of talent in the business to the new opportunities.