Sunday 8 March 2015

Fugro annual report 2014

Fugro, 2014, annual, report, front page

From what I could see the share price jumped up by over 15% on the day of the release. I do not know what that was all about because I was frankly put pissed off when I read the report. What was then in it that made me soooo happy?

The report can be found in full here and if you want to take a look at my latest summary then please click on Fugro operating report Q3 2014.

I know that my strategy gives me the bottom feeders but I still get pissed off when things turns this bad. In the previous report see link above I even mention that the management painted a very dark picture but then I did not really see it... now I saw it and I did not like it! I was then considering that they had very nice revenue and had even managed to increase it during the year but little did I know...

Let us start with the income statement the revenue for the full year is looking really good! The growth of the third party costs is however very disturbing since that was around 300 million € ok, around 90 comes from change in bookkeeping but the additional 210 million are just bad. Oh, and now we also see the impairment cost of 509 million €! The one-time cost that the last time was mentioned as occurring but never mentioned in figures so here we go! 509 million euro! This then gives us the shareholders a loss of 550 million euro.

Fugro, annual, 2015, report, income statement

When it comes to per share this loss gets a little bit more visualised... at least to me... we have a company that are being traded today around 20 € per share... at some point it was even down to 10 € per share carrying a loss of 5 euro and 70 cents! That is wooow! 25% of the company value on the stock market they book as a loss AND the share price goes up by 15% how is that for insanity? Yes, yes, I know the market expected something even worse but considering that the market is built up of average intelligent and average efficient people (just like me) I still wonder how that combination makes an entire market efficient and their overall response following any logic and reason. I guess it follows the same logic that when I take three C bonds and smack them together then I get a tripple A bond coming out...

Fugro, 2014, per share, loss

Over my three years on the stock market I am used to these kind of reports because just like I said I buy the bottom feeders that only look good because I analyse their last year report. The real reason why I was unhappy with this report is due to the response of the management. I consider it to be too drastic, too soon and creates in my eyes a different company then what I thought I invested in.

The list of things that upset me:

  • Restructuring Seabed Geosolutions in progress and Fugro actively seeking options to reduce its stake.
  • Process underway to find a partner to create a strong subsea services player. Options include a divestment of (part of) the subsea business.
  • Headcount reduction of around 6%. 
  • The fleet (GeoTech) will be reduced to 9 vessels, from 12.
  • Exit the well intervention market and Fugro is pursuing a sale of the Synergy vessel. 
  • To de-lever the balance sheet, Fugro expects to enter into sale/ charter back agreements for two new geotechnical vessels.
  • Personnel was reduced by 40% of aerial mapping staff (Survey division).
  • Eight local offices around the world were closed and the restructuring of the airborne fleet from 26 to 7 aircraft.
These kind of things I often look upon as a show for the idiots. The manager wants to show that he is the big man with the big Klöten (dutch) trying to impress the market. By the look of it, it also worked but for long term gains I just do not know.... Sometimes a company can use bad times to kick out the rotten eggs that got employed in the last positive business cycle but what I see above is much more than that. 

Conclusion: Fugro is neither healthy nor are they going to do well in the immediate future. The response to this illness I simply find that to be too much and I really wonder what the future revenue losses will be from this in my eyes desperate re-organization and down-sizing. On the other hand I must also admit that I did not think that the oil price would remain low for as long  as it has and by the look of it will (80% of revenue comes from oil and gas industry). I will of course remain as a shareholder since I am too stupid to figure out how the sell button works at my brokers place and I am looking forward to the manager of Fugro proving me wrong in the next couple of years. 

To find out more about Fugro please see analysis of Fugro.

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