Costain took the biggest hit from the City this past week, and understandably so
The revelation that Austrian contractor AE&E Inova had filed for insolvency - owing Costain 拢22m in already booked revenue - sent the contractor鈥檚 shares into a dive, dropping from 210p to 196p in a day as the City digested the news.
One City analyst felt more than a little miffed by the firm鈥檚 former attitude of breezy confidence. 鈥淲hat we took from [chief executive] Andrew Wyllie was that energy-to-waste was the big go-go sector and that they couldn鈥檛 lose money,鈥� he griped.
鈥淲e鈥檝e all had clients go bust. But when they talked about this sector it was as though they couldn鈥檛 lose.鈥�
The underlying company, however, is sound, commented Cenkos analyst Kevin Cammack in his extensive note on the subject. 鈥淭hree years ago this would have [been a problem] for sure; Costain鈥檚 balance sheet was weaker, the management untested and the strategy vague.
鈥淭he good news today, and testimony to the improvements the management has delivered, is that the group can take this on the chin, without repercussion.鈥�
Others are not so sure about Costain鈥檚 management, particularly about one Andrew Wyllie. 鈥淗e鈥檚 got this slightly larger than life attitude,鈥� one watcher commented. 鈥淭he
last thing you need as a relatively small contractor is an ego. And I think he鈥檚 got an ego.鈥� Garvis Snook, anyone?
For Costain鈥檚 competitors, the only direction since the weekend has been down, dampened by the reality of the Irish bailout and fears over much larger eurozone dominos toppling - not to mention the prospect of nuclear war in Korea.
However, our analyst is being kept awake at night by the prospect of Spain defaulting like Ireland. 鈥淜orea was a bit of a damp squib,鈥� he says. 鈥淚鈥檓 much more worried about
Spain defaulting. If that happens then it鈥檚 total meltdown.鈥� And who says analysts are too focused on the markets?
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