Ralph Norris sacked himself but had no choice at the end of the day
But Tony Carter and Alan Jackson have been collecting huge Director fees while as this has been going on. They don’t seem to be showing much remorse. Disappointed in both.
Especially disappointed in Carter. He at least had some industry experience from his early days. He’s gone down many notches in my estimation ....not quite on the stay away from list but getting close to it.
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
Senior Management not much better. The notional HR person and poor old Michele who was handed the Building Division last year as a bit of a hospital pass (no other takers)
First NZ Capital new price target of $8.40 (down from $8.50) with Outperform rating. Clearly they think that the latest news is already priced in.
Well if you put rose glasses on then there is little change to forecast profitability from this. B&I wasn't making money and when it's closed down it won't make money but the risk of signing up new big unprofitable deals is gone. Take other business units guidance as advised by fbu and there a profitability stream to support the share price. B&I is only one part of the construction division so the revenue loss is not -25%. There remains a chance of future rightbacks if they overprovisioned. A sensible new CEO would max out the provision to minimise any chance of understatement and max the chance of having a slush fund to boost future profits.
But this announcement confirms the rot is deep in b&I what is the chance it's spread either within the wider construction division or into the other divisions? Only time will tell on that one.
Ralph Norris sacked himself but had no choice at the end of the day
But Tony Carter and Alan Jackson have been collecting huge Director fees while as this has been going on. They don’t seem to be showing much remorse. Disappointed in both.
Especially disappointed in Carter. He at least had some industry experience from his early days. He’s gone down many notches in my estimation ....not quite on the stay away from list but getting close to it.
Very bad call on approving AIR exec's to sell shares immediately before a so called investor day a couple of years ago that included an express downgrade. Wonder if John Key will soon be Chairman of AIR...should we be worried by this ?
Originally Posted by gbogo
First NZ Capital new price target of $8.40 (down from $8.50) with Outperform rating. Clearly they think that the latest news is already priced in.
They had a $9+ target price on this before that. Absolutely ludicrous that this complete unmitigated fiasco of breathtaking proportions would only impact their valuation by 10 cps. I think whatever assumptions they've put into their creatively constructed discounted cash flow analysis are fundamentally flawed, (a DCF valuation is only as good as a whole lot of assumptions made supporting it, garbage assumptions go in - garbage valuation comes out)
I put their valuation in the same category as the scandal when they had AIR valued at $2.10 when the market was pricing it close to $3.
FCNZ love FBU but I think what's really going on here is they want the underwriting and investment banking work that could be forthcoming with a capital raise and or debt issuance. Fact of the matter is, FCNZ have been consistently wrong with FBU and FBU have been recidivist destroyers of shareholder wealth.
Last edited by Beagle; 15-02-2018 at 08:52 AM.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
B&I is only one part of the construction division so the revenue loss is not -25%.
Don’t want to be splitting hairs but Infrastructure had earnings of $31m (down for $35 previous year), Higgins had $39m (Kaikoura work nearly complete) and Construction South Pacific $37m. Means B and I must hold the balance of the $2246m
Cannot understand the valuation vs NTA. People are paying a huge premium for future cash flows with a bad margin of safety.
I have been watching this fiasco with interest as someone involved in the construction industry (don't work for Fletchers). Their QSs have obviously made some huge mistakes, but I also have some sympathy with the company noting it's become incredibly tough in commercial construction and they're now willing to leave it to others.
I saw someone joking previously in this thread about sub-contractors holidaying in Saint Moritz - this isn't too far off reality. Subcontractors have been enjoying the windfall of a boom more than head contractors and there are several factors that have played into this.
There has been a big shift among large developers and government projects from NZS3910 contracts (construct only) to NZS3916 (design and build) or NEC contracts, with the latter two placing a disproportionate amount of risk on contractors, and many not yet fully understanding the amount of risk they're taking on.
Subcontractors prices have been heading up while maintaining a flat level of risk, but head contractors margins have been getting squeezed while also taking on greater risk. So Fletchers are probably right in saying it's better for walk away from future projects in this current climate (and made some terrible decisions in what they've signed up to previously).
I was involved in a government tender under a NZS 3916 contract where we had to declare our margin and basically open the book while also assuming all the design risk for a fixed price lump sum. We tendered a 10% margin and the client (govt) said commercial margins are presently 4-7%. We held firm. If you're accepting a 4-7% margin with that level of risk, you're likely expecting a 2-3% final margin in a best case scenario.
Many companies have been accepting this, essentially expecting a break-even or low single figure margin in the hope of building a moat for future work. A very dicey game to play, and as Fletchers have found out - the house always wins.
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Originally Posted by gbogo
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