Ann: Half Year Results Commentary , page-30

It takes a while to turn around a train wreck, particularly when it occurred at the end of what Roger Olds marketing people branded ‘Coffey’s incredible journey’. As we all know, that journey involved breaking out form Coffey’s core business of geotechnical engineering into many new work areas including project management, rail, etc. All done via acquisition at pre-GFC top-of-cycle prices and with merger integration done poorly, not really knowing how the new businesses operated. The foray into project management was a particularly effective destroyer of shareholder wealth, with the goodwill being represented by highly entrepreneurial and individualistic high-flyers who didn’t fit into Coffey’s very disciplined engineering culture, and who walked at the end of their restraint periods. The grief left in their wake made it tough for the other parts of the business. I share others’ positive views on this thread that the business is slowly turning around. The Coffey brand in geotech engineering is still strong and it’s great to see them get back to basics. It’s a slow story though. Coffey shareholders have been badly burned over the years and the market will take a lot of convincing that Coffey has learned its lesson and can rebuild a sustainable business model in a tough macro environment.

I became a top-20 shareholder in Coffey about 10 years ago after they had posted a significant loss and were suffering from a poor acquisition relating to water treatment technology. They decided to close it down and re-focus on what they were good at. It was a no-brainer to see that shutting down the dud part of the business would see them surge back into profit, as the rest of the business was doing fine. I sold out 3 years later with lavish returns.

I can see a similar picture here emerging, and am steadily building holdings in the low 40s. But don’t expect the turnaround to be measured in months or weeks.