Ann: 2015 AGM Chairman and Managing Directors Address, page-16

@mars,

Apologies for reverting only now, but I have been in transit abroad for the past few days, and only access the interweb thing occasionally (like now, as I wait for a flight).

Arithmetically, you are right, but in a practical sense I suspect that before we get to zero EBITDA on a steady state basis, a lot of other things would have happened first, notably a dramatic adjustment in the fixed cost base of the business.

This is the shoe that has not yet dropped.

The remuneration rates of employees is reflective of a bygone boom era when the world went mad. On average, BOL employees today earn 40% more that they did 7 or 8 years ago, before the resources boom.

Not only that, but employee productivity is 20% lower today (measured - crudely as the number employees per available crane... and because crane utilisation levels are at comparatively low levels, productivity per utilised crane is even more than 20% lower))

Put in classical economico-speak:

Five years ago, Capital and Labour shared in the fruits of the business.
Today, however, Capital is clearly subsidising Labour.

Part of my judgment call on this situation is that at some stage an equilibrium point will be reached (or, at least, the pendulum will start to swing more to the equilibrium position, even if it doesn't quite get there.)

Because of the stay-in-business capital requirements of the business, notions of zero EBITDA on a steady state basis probably mean you don't have a business any more.

But this is a moot point, I think, because before we get to zero EBITDA I think some of the self-moderating mechanisms kick in, namely that employees - when faced with the choice of:

not-a-bad-gig-at-Boom-albeit-not-as-good-as-it-was-during-the-boom-days,

or

no-gig-at-all

will choose the former.


Indeed, the most recent financial results of the company bears early signs of this happening.

As I have said before: Don't get me wrong, quality-wise, this is no ARB or REH.
ARB and REH are 9.5 out of 10 quality businesses.

Trouble is, ARB and REH are priced like they are 9.5 out of 10 businesses (probably 11 out of 10 in ARB's case).

BOL is probably a 4 out of 10 business.
But being priced like a 2 out of 10 business.

I'm not too stressed by the share price and I have no idea why Invesco got out with what looks like indiscriminate attitude to the share price... maybe they got bored waiting; maybe it the stock breached their market cap materiality triggers, maybe they think the company is going teets up. Who knows why people buy and sell stocks?

(I've being buying all the way down from 13.5c...that's cigar butt investing for you).