Clive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me from diversified infrastructure consulting firm Coffey International for an update is Managing Director Roger Olds. Roger Welcome to FNN. Coffey International consists of a group of 13 companies providing everything from engineering and consulting through to staff training. How did the company become so diversified?
Roger Olds: Well Clive we actually started 50 years ago as a specialist geo technical company, and then about ten years ago we decided to diversify. And we diversified around services, sectors and geography. But we maintained our focus on being specialists, so we have actually grown out of the ground and added complimentary businesses in the construction base and gradually moved up the food chain to be from what we would say concept to completion. So we are really a group of specialist companies that are growing around the world and maintaining that sort of niche area of specialist work.
Clive Tompkins: Looking at your most recent financials to the 31st December, operating EBITDA rose 83 per cent to $36.3 million on revenue of $418 million, what were the drivers?
Roger Olds: I think infrastructure and international development were probably the two strongest sectors but in the first half all our businesses performed well. I think even though the economy was starting to, you know not be in great shape for some sectors last year, for us they were still going quite well. It was only towards the later part of the half when we started to see mining take a turn, but the real strengths around it were certainly international development and infrastructure. And by infrastructure I mean civil roads, rail, activities, ports things like that.
Clive Tompkins: And how are your more recent acquisitions performing?
Roger Olds: The one that I would say is outstanding in the last 12 months though would be MSI that we bought in Washington, part of international development, and that certainly, you know as acquisitions go, has been a bit of a stunner so it’s really come in quickly and had immediate impact. But overall they’ve been a very successful part of growing Coffey to what it is today.
Clive Tompkins: So what does this half look like so far?
Roger Olds: Well 2009 I’ve always said was going to be a tough year, and I guess it’s probably proving to be that. As I say the mining sector certainly started to come off at the end of last year. It came off very suddenly, exploration was the first to see it, where small miners and mid cap miners who were in exploration really ran out of money and there is no appetite for money to come back into that sector at the moment. So that was probably where we saw it first. We acted pretty quickly, it was mainly in Brazil and Garna where most of our exploration activity has been. And we were forced to sort of immediately remove staff who were in that work, and our exploration work tends to be field crews so you have large crews of people supporting it, so unfortunately we had to lay people off from those sectors. I think in the rest of the business, international development is still going strongly, as I say not affected by recession. Property has been affected, that impacts on our project business, environment’s business and to some extent geo-technics. And infrastructure is sort of good but still waiting to see the government spending flow through, and projects are waiting basically to see whether they’re going to get federal funding or not. I think it’s going to be an interesting but tough year I think for most people.
Clive Tompkins: Notwithstanding the contraction, are you likely to win any new contracts?
Roger Olds: Yes actually, despite the mining turn down our guys are quite optimistic about their fortunes over this period, I guess the coined phrase “don’t waste a good crisis” comes to mind. And you know our competitors, generally private single sector focused, are obviously doing it much tougher as a total organization. And we’ve gone into new markets for example Saudi Arabia, which you don’t normally think of as a mining country, are very active and very heavily -well cashed up. They like Australian reputation around mining, so we’ve gone into Saudi, we have other business in Saudi as well and we have had immediate results. And China is the other area that I guess we have now opened up – looking into the Chinese investment community, and we all know about Chinese interest in Australian resources. So both of those are quite new business for us and do open up opportunities but our traditional markets are also still there but obviously not only small companies but big companies are cutting costs. There is an efficiency focus that provides opportunity, but Brazil and Africa are still sort of in business but it’s tough times for sure.
Clive Tompkins: Last question. Your international development business is not typical work for a company involved in building infrastructure. Can you tell me more about it?
Roger Olds: Well international development, people do sort of ask about it because it is sort of a bit unusual, we’ve probably classified it as social infrastructure to help people understand. The work we generally do in Australia, physical infrastructure, building roads and rails and buildings and so forth. The social infrastructure work is really about building communities, and most of our work is funded by government through aid programs into developing countries. We currently work in about 70 developing countries around the world, we’ve been in the business for probably more than 30 years and it’s an area of activity that doesn’t get a lot of publicity so it’s not something that the average person knows a lot about. But we have actually built a global business, as I said earlier, that has got now an exposure in the U.K. market, the U.S. market and now the European market. Most competitors have stayed in their own countries, so you know it’s been quite internally focused historically and we several years ago focused on building a global business and I guess to now see it there and delivering strong results is a very pleasing part of what we’ve done. And it hasn’t all been upward sailing you know, we bought a company in 2000 that went upwards then it went backwards, and as I said earlier the diversification’s allowed us to support that business, build the strategy and now build the business and when other parts of our business are now coming into leaner times its actually going strongly so it is a good part. It’s also a very, you know in the days of triple line, triple bottom line or quadruple bottom line, the work we do in these areas, supporting developing communities, reducing poverty, creating economic development is very powerful and the overlap with mining is quite interesting. You know with mining companies and other resource companies going into developing countries, often the license to mine is critical and I guess that’s an opportunity we see ahead, of actually having the knowledge and where with all to go into those countries and actually and get a better economic outcome for everybody, so that’s a bit of a snapshot of it, its quite diverse, people are quite amazed at the sort of projects it does…but yeah, it’s certainly been again an area where we’ve stayed specialists, stuck to our specialist model and built something quite unique I guess.
Clive Tompkins: Roger Olds thank you for giving us a better understanding of the business.
Roger Olds: Thanks Clive, thank you very much.
