Costain Share Discussion Threads

[disruptor1664] 18/8/2020 12:06

I would suspect there were lessons to be learnt from that contract... Let's hope the new board do just that.

[lucicavi] 18/8/2020 09:54

Super move

[skinny] 18/8/2020 09:53

You're a better man than I am, Gunga Din! :-)

[imastu pidgitaswell] 18/8/2020 09:27

I'm expecting to get a kicking from either ADVFN or The Times for doing so...

:-)

[sophia1982] 18/8/2020 09:24

Many thanks for posting this

[imastu pidgitaswell] 18/8/2020 08:35

Of all the excuses for getting your financial results out late in this extraordinary year, the continuing traffic jam on the A465 is one of the more random.

Like the Schleswig-Holstein question in the 19th century, many have long forgotten the roots of the ruck over the £400 million Heads of the Valleys road reconstruction between Merthyr Tydfil and Abergavenny. Not so investors in Costain, who have had this tarmac albatross round their neck for the best part of the past decade.

In short, a dispute between the construction company and the client, the Welsh government, over the ever-changing specification and spiralling cost of dualling the A465 is about to come to a head, with a final arbitration on what Costain is owed or not owed.

A settlement is so financially significant to Costain, possibly running into tens of millions for a company whose profits in a good year are never much more than £40 million, and so imminent that it has said it cannot issue its half-year figures.

Couple that with a £49 million write-off on the abrupt end of a contract to build a gas facility in Cambridgeshire after a bust-up with one of its key clients, National Grid, and the wider view of investors on construction stocks has been confirmed: they remain in the only-touch-with-a-bargepole category.

The broader context is the collapse two and a half years ago of Carillion. Corporate historians will recall two hospitals, a dual carriageway near Aberdeen and the redevelopment of Doha for the 2022 Fifa World Cup finals did for Carillion and lifted the lid on the debatable boardroom stewardship of a £5 billion-turnover company.

The backdrop is that such construction failures — historically endemic in the industry — are supposed to happen less frequently because, as the sector keeps insisting, lessons get learnt and procurement and management of such contracts is handled in a much more grown-up way these days.

The A465 and National Grid contract failings are hammer-on-thumb moments for a company that bangs on about its strategic success in staying close to a handful of key infrastructure clients with which relationships are strong.

Costain is a brand that punches well above its weight: even now, after a £100 million fundraiser in the spring and with £140 million of net cash, it attracts a stock market value of only £160 million.

Its prospects are rich. The government has vowed to reconstruct our post-Covid economy with a “new deal” policy of build-build-build. Much of Costain’s latest £2 billion order flow is tied to £1 billion of work on the first phase of the HS2 high-speed railway.

Costain is no Carillion and, embarrassing as it is, delaying its results because of an unquantifiable financial pothole on a rural road in Wales is probably the right decision. But a cratering of Costain’s share price yesterday on the news is more evidence, if any were needed, that investing in construction companies should come with a Health & Safety Executive warning.

[disruptor1664] 17/8/2020 23:12

BAB.L are a still a good option for people looking for potential in this sector.Work is a lot safer in civil defense if you don't have the strong will for COST. L and are trading relatively cheap. Do you see this dropping into the 40's? I'm still sat here waiting for the 50p entry point :)

[maxplus2] 17/8/2020 22:27

Thank you.

[ch1ck] 17/8/2020 12:22

Irrational share price reaction to strong news Time to pick up more shares I think

[imastu pidgitaswell] 17/8/2020 10:54

Not following the question?

COST think the Welshies should cough up for costs incurred, the Welshies don't. Most of it based around who is responsible for the additional costs above the contract price. Hence the arbitration.

Or did you mean something else?

[maxplus2] 17/8/2020 10:45

It's not clear why is the arbitration going in relation to the A465 Heads of the Valley road contract ("A465 contract")?

[imastu pidgitaswell] 17/8/2020 10:08

It's a big(ish) number whichever way it goes - and will be reflected in the H1 results. It doesn't really matter going forward whatever happens.

The best info on it is in the announcement - not much to add to that. Note that over £40m of it is basically cash that has gone out (with a few million more to go) and therefore the cash numbers they quote are after that cash has gone; if the arbitration is favourable (which they believe it should be - but they would say that, wouldn't they...) then all of that cash comes back. That (I think) would make a significant difference.

[maxplus2] 17/8/2020 09:53

What's so important about the arbitration decision in relation to the A465 Heads of the Valley road contract ("A465 contract") to be delivered shortly? Will it have negstive impact?

[buywell3] 17/8/2020 09:12

Very iffy market just now and way overbought re RISK

Stimulus overdone has bought out the looney tunes brigades

Wait

Wait till the main markets hit new lows and then buy if you have the balls for it

Get a main Index chart number in your head and STICK to it --- IMO lower lows will come

[owenski] 17/8/2020 09:06

Must admit, these days I'm going for businesses that have been resilient during this time period, I'll watch Cost to see if buying appetite returns at some point, but even so, not entirely sure if I'll buy.

[buywell3] 17/8/2020 09:01

But the risk of lockdowns in selected areas grows by the day

Which is one reason why the chart is the shape it is

[skinny] 17/8/2020 08:53

Can you post this with the basic chart link?

[skinny] 17/8/2020 08:47

Oh - I didn't realise that.

here is the same chart as a 'basic'.

[imastu pidgitaswell] 17/8/2020 08:37

skinny - that img src etc thing doesn't work any more - for non-premium users (cheapskates) like me. I can't post non-ADVFN links easily either. Hence why I suggested you might do a thread.

I can only do a link to an ADVFN basic chart.

[buywell3] 17/8/2020 08:26

market does not like the RNS today it seems