Birse Share Discussion Threads

[ttg100] 07/11/2005 12:55

excellent balanced thoughts
many tks guys as I also have been looking at them.
now decided to hold fire for a bit and look at some
others as think some consolidation to come in sector.

[mitchy] 07/11/2005 12:49

muckshifter - good luck to you as well.

Results 16th December.

[muckshifter] 07/11/2005 10:39

Mitchy,
Although the best shares I've ever owned were both construction companies coming out of dire situations (7p to £1.6 in less than 10 years + great dividends, and 46 pence to £2.5 in about 15 months with in addition 30% dividend on my original investment, IIRC), I don't feel the time is right for Birse yet. Their cash situation is truly diabolical, IMHO, and after a telephone conversation this morning I would cut the survival probability to 65-75%.

Also, although I've never mentioned dividends in any post, I expect Birse to stop paying a dividend at the next results for perhaps a couple of years.
The reason I expect this is that they simply cannot pay their bills on time at the moment, and I think the clause allowing them to pay one of their "hire purchase" settlement payments to citibank in shares is clear acknowledgement of that situation. They are therefore extremely vulnerable, and cannot afford, IMHO, to risk increasing their vulnerability by increasing the strain on their cash.

7 pence did not represent a value I place on Birse, it was simply a price at which I might start to investigate them again.

Best of luck with your investment anyway!
Regards.

[mitchy] 07/11/2005 09:10

muckshifter - thank you for outlining your position in that way, it helps me understand your thoughts and why you are negative on Birse.The surprising
thing to me though is that I agree with most of your assessment and yet we have arrived at different conclusions.Everyone who has posted here,in fact,see Birse as a good long term bet once their debt is reduced and they avoid making anymore mistakes....we all seem to agree on that !
I find your estimated value of 7p a bit difficult to agree with though .
If they hold their dividend of 1p Birse would then give a dividend yield of
over 14% ! It was either you or someone else who argued that they wont hold their dividend to which I answered with the question "why would they reduce
their divided NOW after the money sucking litigation is behind them"?
To which nobody gave a convincing reply.

I am going to continue to hold - the results in December will give us a much better view of where they really stand and i'm gambling they will be very bullish - the Olympics is already generating business which will only grow - interest rates may well hold at these still very low levels even after the rise in oil prices.

To me that all adds up to a very safe bet .I don't invest in high flying tech stocks as a rule..to risky.I look for solid safe companies with proven track
records who are at a low ebb with lots of room for recovery.That's what I see in Birse.

[relko] 06/11/2005 20:29

In post 203 The Bounty Hunter wrote:

Why would bie want to spend such large sums on legal costs, which are more than the compensation payable to Citibank. Is it because their balance sheet has outstanding debtors relating to the Citibank project? and therefore, the total loss is maybe £7m plus the £2.1m and this was unacceptable to bie?

The fact that BIE may, indeed probably was, carrying forward debtors relating to the Citi contract, is a point which this board seems to have overlooked.

If this were the case and the recoverable was required to be written off as part of the Citi deal...........well

Presumably if this was the case, BIE would have been required to include this information in its Press Release. Can anyone confirm?

[muckshifter] 06/11/2005 14:07

Mitchy, my answers are as follows:-
1) Probably in due course. I feel that their chances of survival over the next 2 years are probably 80-90%, after which, or even during the second of those years, their position, strength etc should improve, provided no further disasters occur.

2)Compared to the bigger contractors not as well (perhaps a 4), but within their peer group probably a six, or even a seven.

3)Probably, but again its a question to me of when, whether the works come in in an orderly way, do the orders create a big immediate cashflow requirement at an unfortunate time, are the record orders spread over a longer period etc, as the company's problem is very much one of cashflow.

4)I see the debt as presently very significant, and potentially overwhelming if, for example, suppliers became nervous and began to tighten the screws on payment, or a major contract went very badly.

5) Yes, I do see their trading practise re payments as significantly different to those of other contractors. Contractors I've worked with as a major sub contractor on Civils based conditions of sub contract include: Balfour Beatty, Kier, Taylor Woodrow, Mowlem, Birse, Morrison (AWA), Amec, McAlpine, Henry Boot, and a few more. Birse were the only one who tried to consistently add one month to the payment period defined in the standard sub contract document as part of the sub contract deal. The danger with this is clearly shown by the effect that closure of the Southern Building division had on cashflow.
In terms of late starts, I would think Birse are one of the worst sufferers, from contacts with them and others, although this problem is widespread.

6) I think they are presently overvalued, but would watch them carefully if the shares fell to 7 pence ish for a buying opportunity, as I've made good profits on the shares before. If I had to call them a short or a long, I think I would say a short at the moment, but as I don't do shorts, I haven't put any detailed thought into that opinion.

7) I have no position either way, and haven't owned Birse shares for several years.
Regards.

[mitchy] 06/11/2005 12:08

toob / muckshifter

without spending the next few hours covering everything in your posts can we do a question and answer session to clear the air?

1) Do you think Birse has a future? (if no then disregard remaining questions)
2) As compared to other contractors how does Birse rank in terms of prospects from one to 10?
3) Was the chairman telling the truth when he said they are seeing record
orders coming through?
4)Do you see the debt in BIE as a)minor b)significant c)overwhelming d) terminal
5)Would you say that BIE's trading practices of late payments and contract starts as being significantly different from any other contractor?
6)Would you say BIE is a short or a long?
7)From 1 to 10 rank how much you believe in the long or short position you hold.

[alfred] 04/11/2005 10:07

Don't like that questionable £7m included in debtors.

But potentially a good business - if they ever get it right!

[elsabutch] 03/11/2005 19:28

have been in building trade 25 years and your only as good as your last job
the building trade will always have its ups and downs let hope they get olimpic contract it will hopefully give them a boost the divi is consistant and i hope it stays that way otherwise i lose 2 hols per year

[toob] 03/11/2005 16:58

mitchy you are either an inept ramper , or an optimistic fool.
why do I say this?.Because this is your position.
1.the past record of the bie management is irrelevant.
2. bie's actions at this time ( as explained by muckshifter) are irrelevant.
3.Their cash outflows are irrelevant.

What the hell is relevant to you. How can you call this a buy?

[mitchy] 02/11/2005 22:26

The Bounty Hunter - BINGO!...((high five))
..end of the worst of times...start of the best of times..!


Intrims December.

[the bounty hunter] 02/11/2005 19:46

Good lively discussions today. My view is that good returns are possible in this industry - low margins on high volume and bie should be capable of making £12m. I'm looking at bie as a recovery play - it has taken longer than I expected. I was not happy with the ongoing dispute with Citibank, but glad this chapter is over. Cash position is probably not fantastic, but think if they can deliver on contracts, this sitaution should resolve itself in the next 12 months.
In 12 months we may be looking at different beast. One has to recognise the fragile state of recovery plays, but when they go right, they can give rich pickings.
Good luck to all.

[eithin] 02/11/2005 16:58

VS - apologies, have a calendar in front of me with divi date as 1/11. Accept wrong and divi 4/11.

[muckshifter] 02/11/2005 13:14

Mitchy,
I would be interested in any Chairmans statement that you can direct me to, that doesn't put the best possible gloss on the situation, even in the case of a company which subsequently went bang.

For most of the past two years I've been writing occasional "bear" posts on the Jarvis board where about 99% of the other posters have been taking any bits of positive gloss or spin as an indication that the future is wonderful, while the share price dropped steadily from £2 to 2pence (the present equivalent)and the company very narrowly escaped bankruptcy (and subsequently just about acknowledged this) on four occasions.

I happen to know Birse and this industry, which I work in, quite well. At the moment, the transition from the old style "return a tender, win the job and start, on the start date mentioned in the tender documents, within a month", to ECI, which on one job I'm working on (not with Birse) has now taken 2 years and will probably take another 9 months because of public enquiries, and similar procurement methods, such as PFI, design and build etc, is causing cash poor contractors serious problems because of its unpredictability.
An example of that predictability is a job I tendered with Birse for the first time at least 3 years ago which we have had to revisit as a subbie at least half a dozen times and there is still no start in sight.

Another contractor who I've been talking to for six months on a job we priced for them / with them (and this is a far bigger contractor), really has lost interest as the start date recedes while his actual workload increases. To start up too many delayed jobs at once, would put cashflow and staff resources under pressure for any conractor, never mind one who is short of cash - but he doesn't say that in his statement does he?
Regards.

[vs] 02/11/2005 12:28

This company has paid a dividend of 1.0p in each of the last 5 years and the price of the shares in that time has varied between 7p and 17p.

To infer that the price of 12p suggests that the "market considers the current level of the dividend can not be maintained" is rather misleading. The fact that Birse has a patchy record and has been accident prone is probably a more valid reason.

[relko] 02/11/2005 12:22

mithchy
Surely one of the reasons why BIE shares yield 8.3% is obvious.
The Market considers, the current level of dividend can not be maintained and is pricing in "the future" as you put it.

[vs] 02/11/2005 11:58

I'd suggest reading the results RNS more carefully.

Dividend

The Board is recommending a final dividend of 0.625p per ordinary share (2003/
2004: 0.625p) maintaining the total dividend for the year at 1p per ordinary
share. Subject to the approval of shareholders at the Annual General Meeting
the final dividend is payable on 4 November 2005 to shareholders appearing on the register at the close of business on 7 October 2005.

[eithin] 02/11/2005 11:50

Anybody received their divi yet, due yesterday!!!!!!!

[mitchy] 02/11/2005 11:32

muckshifter (apt) - a large percentage of the dividend revenue will be
re-invested in Birse on the 4th November.

Perhaps it would be a good time to remind you of the chairmans notes on outlook
in his last statement.... :-

Outlook

The Group continues to improve the overall quality of its business although it
remains exposed to the uncertainties existing in respect of the Citibank
Litigation and for the Group in respect of the Build business. Our strategic
withdrawal from the loss making sectors of the Build market and the consequent
restructuring of Birse Build have to date gone broadly to plan. In our core
engineering operations the transition to new customer procurement practices has
suppressed production volumes in the year and also reduced demand for the hire
of heavy duty plant. This lost production will, however, be recovered in future
periods. Therefore, with record order and enquiry levels in our core operations
combined with the quality of contract awards secured in the year we continue to
add impetus to the Group's underlying forward momentum.



.."Therefore, with record order and enquiry levels in our core operations
combined with the quality of contract awards secured in the year we continue to
add impetus to the Group's underlying forward momentum"



Your comments about ECI's are valid but are covered in the results statement and already factored into the share price You seem to be concentrating on the past whilst I and the chairman and the market are looking to the future.Stop looking in the past muchshifter...there's no future in it!

[mitchy] 02/11/2005 09:15

muckshifter - why would they lose the dividend NOW when they held it through the worst of the problems?...think white and get serious!

[aughton 3] 02/11/2005 09:14

i suppose they might be attractive bid target IF they have removed all skeletons from all cupboards.(their client base is AAA rated, so a foreigner could do worse , if he wanted to get a bit of olympics or m25 . if so he will have to move pretty quickly to be in time to benefit).


Mitchy could you be right?

[mitchy] 02/11/2005 09:08

yes Relko,that dividend..that 8.33% dividend yield(at todays prices)..who the hell needs it go anywhere with a yield like that ?!

I think you and muckshifter aren't giving them enough credit for how they have handled the recent problems...but there again they don't need your credit when they have a triple AAA rating...rights issue??...idiots.

They may have been forced to adopt harsh measures to survive and lost a couple of friends and bruised their image along the way but Birse are good at building bridges!

[muckshifter] 02/11/2005 08:58

Also in the statement Birse have negotiated a limited right to substitute shares for money in the payment terms agreed. This, together with the "hire purchase" terms of payment, including cumulative interest, is very clear confirmation of my point above, ie. they have no cash and are in danger of defaulting on the agreed payment terms - so they are allowed a one time only facility to make one payment in shares, as I see it.
This makes absolute sense from Citi's point of view, as the alternative would constitute default and could bring Birse down, with the result that Citi would get no further payments.
Frankly, unless a minor miracle occurs, I expect the dividends to be drastically reduced or stopped for a year or two.
Regards.

[relko] 02/11/2005 00:07

Cann't help wondering about the timing of that settlement with Citibank - only a few days before the declared dividend is due to be paid. Could BIE actually afford to pay shareholders the divi without reaching prior agreement with Citi?

I agree with you muckshifter who describes the position as dire.

Those viewing the company through rose coloured spectacles, seem to ignore that the shares currently priced in the market at 12p, were originally issued by the company at a par value 10p, and the Group's retained reserves are actually "retained losses". So BIE seem incapable of self-financing future projects in the way most of its competitors would.

IMO the Board have "messed up" big time on the Citi issue, but credit to them for "cutting and running" before it was too late.

I would now expect the Board to keep its head down. Window dress the Interims to show a stong underlying performance before exceptional items in order to get a rights issue away within the next 6 months (say).

As I have said previously, can't see BIE going anywhere for a couple of years now.

LOL to all.