Pinned straw:
You're probably right there @Bondie - It does take me back however to darker days, around a decade ago, when BSA called a trading halt to announce a significant contract win - to help build the new RAH (Royal Adelaide Hospital) and then the costs blew out and they ended up way behind schedule and in dispute with the main builders JV who had awarded BSA that contract - so sometimes trading halts get called to announce significant cost blow-outs and/or penalties that have been triggered on existing contracts rather than to announce the award of new contracts.
I'm not currently holding BSA (I was back then) but I obviously still hope that this time it's a contract win, not a contract loss or issues with an existing contract.
Another electrical contractor went into Administration over that RAH build: Jobs gone as electrical contractor PSG Services, working on RAH, convention centre upgrade, collapses [03-June-2014, Adelaide Advertiser]
Further Reading:
Ottoway Engineering secures $22.8 million new RAH Contract from BSA Limited [10-Apr-2013 - BSA Subcontracted Ottoway Engineering to assist with their $93m RAH contract]
https://www.abc.net.au/news/2016-02-01/construction-delays-at-new-rah-wont-impact-opening-snelling/7129496 [01-Feb-216]
MARKET UPDATE ON NEW ROYAL ADELAIDE HOSPITAL [BSA announcement to the ASX on 12-July-2016]
https://www.listcorp.com/asx/bsa/bsa-limited/news/deed-of-settlement-agreed-for-rah-project-2044018.html [17-Dec-2018]
https://www.abc.net.au/news/2015-09-22/royal-adelaide-hospital-blowout-steven-marshall/6795606 [22-Sep-2015]
https://ipa.org.au/ipa-today/new-royal-adelaide-hospital-case-study-blow-outs-red-tape-union-influence [26-Jul-2017]
Excerpt:
[Old image - it's been open for a few years now]
Did you know that the seventh most expensive building in the world is being built right here in Australia? No, it’s not a giant apartment block on the Gold Coast. It’s not a flashy new casino. It’s not even the recently announced hotel and apartment complex that will be attached to MoNA in Hobart.
It’s the new Royal Adelaide Hospital (nRAH)—a project that is 18 months behind schedule and $640 million over budget. This makes the 800-bed hospital—a public-private partnership—the most expensive building in Australia and the largest capital investment project in South Australian history.
But why has this project blown-out? Aside from the optimistic assumptions, project scope changes, ignorance of the technical demand and safety concerns, the nRAH has gone through legal action between the SA government and the builders and unlawful industrial action and anti-competitive behaviour by the CFMEU. In this way the nRAH is a contemporary example of why desperate reform is needed in the delivery of state-based major projects.
Coming soon – the seventh most expensive building in the world!
Construction of the new hospital began on February 2011 and it was anticipated that completion would be completed in April 2016. But the SA government failed to finalise the hospital project on time and missed an additional two set completion dates in May 2016 and June 2017. And recently SA Health announced dates for public tours of the nRAH in July.
Globally the nRAH is the seventh costliest building—ballooning to a cost of $2.3bn. Compared to the final cost, the original estimate of $1.7bn places the cost overrun of the nRAH at 35 per cent of the initial projected cost in real terms.
The world’s most expensive buildings
Source: Emporis
Where did it go wrong? Since the beginning of the nRAH’s construction, every design flaw, delay and mistake has pushed back deadlines. Construction costs alone doubled from $244.7m to more than $417m. These included the unforeseen remediation costs from contamination claims ($69m), site modifications and defects with building specifications ($34.3m), the setup of a transition team (February 2017) to deliver a long-delayed move from the current RAH ($180k per day), the poorly thought out plan for the emergency section with sick patients faced with dozens less overnight beds available, and outpatient facilities not fit for purpose to meet expected demand with almost 40,000 appointments not being accommodated per year.
There were concerns over the $422m rollout of the electronic patient record system not being ready when the paperless hospital opens. As the ward floors were not sufficient for storage, there were temporarily storing those records in the hospital’s basement car park. In the end, most were being housed off-site which could become a serious patient safety issue with long waits anticipated for records to arrive directly to medical personnel.
Missing the completion deadline of April 2016 triggered the state government to issue a default notice against the construction consortium and withheld service payments of approximately $1m per day to the hospital’s builders. A legal conflict between the South Australian government and its builders ensued over the construction defects that transpired with the builder seeking more than $500m in compensation for the delays. On February 2017, both the state government and builders reached a settlement to conclude legal action.
Union threats and non-compliance by the CFMEU
According to the Office of the Chief Economist, 8.1 per cent of Australia’s GDP stems from the construction industry which employs hundreds of thousands of people.
The contemptible costs of building in Australia has been beset by the influence the CFMEU. The CFMEU has played a pivotal role in driving up the labour costs of building the nRAH and decreasing the overall productivity of its construction.
The CFMEU through their anti-competitive practices of complicity, pattern bargaining and price fixing has instrumented EBAs which are characteristically above award rates. Moreover, the CFMEU has instituted pay premiums for semi-skilled workers and submitted atypically a high number of additional payments in their payroll costs.
Notwithstanding the building costs and delays of the nRAH was the “Armageddon” threats from the CFMEU to disrupt its construction. The CFMEU were fined $57,500 by the Federal Court for making threats to sway the head contractor from enforcing a Fair Work Commission order requiring employees on the nRAH project not to take industrial action.
The two senior CFMEU officials involved were alleged to have stated: “If you try anything there will be Armageddon” and “all hell will break loose and we will take this national.”
Australian Building and Construction Commission (ABCC) Commissioner Nigel Hadgkiss conveyed disappointment in the CFMEU’s conduct and imposed $1.1bn in penalties against the CFMEU and its representatives. He expressed: “unfortunately, the conduct we’ve seen in this case is not isolated, but instead reflects a widespread contempt for the rule of law that pervades the industry.”
The implementation of EBAs by the CFMEU have undoubtedly initiated higher labour costs into the development of the nRAH. The aforementioned workplace disputes and illegal practices by a minority have placed the nRAH project to not only encounter a substantial benefits shortfall but also it is the public, particularly the Australian taxpayer, that loses out.
Recommendations
The mismanagement of the nRAH project represents a clear failure by the state government to control financial costs, risks and uncertainty in project delivery. The major issues presented emphasise the SA government’s ineptitude to design a fit for purpose hospital to cater for patient needs sufficiently, to effectively manage workplace relations, and uncooperative union influence. The result is an expense bill with limited accountability for a poorly executed project.
We must reform how the state government undertakes a large-scale project. They need to:
- Provide greater transparency and oversight throughout the project life-cycle by offering regular status reporting and ongoing performance monitoring available to the public, including key performance indicators and project figures.
- Ensure that internal management of projects utilises continuous improvement for better risk management and contingency practices.
- Enhance collaboration between departments for best practices and lessons learnt to encourage more informed decision making and communications amongst stakeholders.
- Curtail inefficient and any unlawful influence of unions and uncompetitive union-inflated EBAs by increasing the maximum penalties under the ABCC legislation.
- Introduce guiding principles through a Code of Practice in tender decisions to ensure the tender process is open, transparent and accountable.
- Institute penalties for bureaucrats involved in contact administration that act in an unethical manner in awarding tenders and fail to conduct a high standard of due diligence in the competitive bid process.
Only by adopting these recommendations will we lower building costs, keep projects within scope, and prevent significant delays to project delivery.
--- end of excerpt ---
Source: https://ipa.org.au/ipa-today/new-royal-adelaide-hospital-case-study-blow-outs-red-tape-union-influence [26-July-2017]
You were spot on with that assumption @Bondie of BSA announcing they will likely lose the nbn contract, and good sleuthing regarding BSA Key middle management recently updating their linked-in profiles to "open to work", as well as noting the increase in shares for sale.
I did read your comment that: If correct, this will be a car crash of some magnitude and assume the end of BSA.
You summarised the situation up very well.
According to one of the slides in BSA's H1 of FY2025 Investor Presentation on Thursday, they have a variety of clients:
However, 83% of their revenue is derived from just one client, the nbn:
And that's massive revenue concentration risk in terms of their reliance on a single client for so much of their work.
Their outlook statement shows how dire things are, little wonder they've withdrawn EBITDA guidance:
While the existing nbn contract doesn't complete until later this year, they have noted that, "The contract has no volume guarantees however to date, BSA has not received any notifications from nbn around volume changes through to the expiry of the current term of the contract." Meaning there might well be reduced nbn work for the rest of the remaining contract term seeing as the contract is now most likely in run-off and nbn are likely to want to allocate most of their work to their new service providers (not BSA) rather than their old ones, or at least BSA is aware of that possibility despite no offical notification yet from nbn of reduced workflow for the remainder of the contract this year. I imagine they won't get any official notification of reduced work flow for the remainder of their contract, they'll just be allocated less work.
That quote is from Tuesday's New-NBN-Co-Field-Services-Contract-Update-(18-Feb-2025).PDF announcement which came out alongside this one: Director-Resignation-David-Prescott-(17-Feb-2025).PDF which was dated Monday 17th despite being released on Tuesday 18th.
David Prescott walking out the door (with zero notice and no explanation) leaves them with a single director on the Board, their Chairman, Nick Yates, according to Commsec, which would be in breach of ASX and ASIC rules if true.
Source: Commsec, before they updated it to reflect David Prescott quitting the Board last Monday.
According to Australian regulations, an ASX-listed company (considered a public company) must have a minimum of three directors on its board, with at least two of them ordinarily residing in Australia.
However, according to page 5 of BSA's 20 February 2025 Appendix 4D and Half Yearly Accounts for the 5 months ended December 31, 2024:
The names of the Directors of BSA Limited during the whole of the half-year and up to the date of this report (unless otherwise stated) are as below:
- Nicholas Yates – Non-Executive Chairman
- Christopher Halios-Lewis – Non-Executive Director
- David Prescott – Non-Executive Director (resigned 17 February 2025)
- Brendan York – Non-Executive Director
So that does leave them with the minimum 3 directors after Prescott's exit, it's just strange how Commsec haven't got Mr York or Mr Halios-Lewis listed as current directors of BSA and that BSA hasn't done anything to get that corrected.
Commsec lists both Christopher Halios-Lewis and Brendan York as both having resigned from the BSA Board on 23-Dec-2021:
So not sure what happened there. Clearly Commsec is wrong, because the ASX has taken no action against BSA for not having enough directors.
Anyway, back to the market's reaction to Tueday's news:
BSA were sold down -83.84% on Tuesday, which is very close to the total percentage of BSA's annual revenue that the nbn represents - being 83%.
They were sold down a further -9.38% on Wednesday, and another -6.9% on Thursday, followed by a 2 cps SP rise today which is a +14.81% rise off that low base (of 13.5 cps).
If you look at the buy and sell orders left in the market tonight:
...highlighted there in green, it appears like the buyers are back in control, however I do note that the larger volumes are down around 11.5 to 12.5 cps, not up at 15.5 cps where the closed today.
BSA is a small company - who only have 74,979,615 shares on issue, so their market cap was $75 million 9 days ago (on Wednesday 12th Feb 2025 when they closed at $1.005/share) and based on today's $0.155 close, their market cap is now down to under $12 million. So they've gone from being a microcap to being a nanocap.
Yet for such a small company, they have some interesting institutional ownership:
NAOS have a great track record of picking losers and them refusing to sell out, or at least holding on for far too long, refusing to admit their investment thesis is busted; masters of thesis-creep, hence their pitiful after-fee returns within their three LICs, so it's little wonder they own almost one third of BSA. NAOS' appointment to the BSA Board is Brendan York (pictured below) who is a portfolio manager for NAOS Asset Management Limited and Chief Financial Officer and Company Secretary of Enero Group Limited (ASX: EGG).
NAOS also have Brendan sitting on a number of their other investee company boards: He is a Non-Executive Director on the boards of Big River Industries Limited (ASX:BRI), Non Executive Director of Saunders International Limited (ASX:SND), Non Executive Director of BTC Health Limited (ASX:BTC), Non Executive Director of Mitchcap Pty Ltd, and Wingara AG Limited (ASX:WNR) and Non Executive Director of MaxiParts Limited (ASX:MXI), all companies that NAOS hold decent chunks of.
Lanyon Asset Management is a small boutique fund that has a highly concentrated portfolio of high conviction companies.
David Prescott, pictured above, is Lanyon's Managing Director & Portfolio Manager and yes, that's the same David Prescott who resigned from the BSA Board on Monday.
We shall see in the coming days if Lanyon have been selling down their 16.5% stake in BSA. The trouble with low-liquidity microcaps (now a nanocap) like BSA is that you can't exit a position like that without absoluting poleaxing the share price, because the buyers just aren't there. Perhaps that's what we've seen on Tuesday through Thursday with BSA's -86.36% share price decline over those three days. Particularly as 66% of the company is/was owned by these two fundies (NAOS & Lanyon) and a media billionaire's private investment vehicle (Birketu).
Birketu is the private investment vehicle of billionaire Bruce Gordon (pictured above) who owns and runs WIN Group. Gordon's Birketu is currently the largest shareholder at Nine (ASX: NEN), with a 14.85% stake. He also indirectly owns an additional 10.2% of NEN through equity swaps held with Macquarie Group. Birketu's appointment to the BSA Board has been Chris Halios-Lewis (pictured below) who is currently Chief Financial Officer and member of the Executive team of the WIN Group and Birketu and is also Company Secretary for all WIN and Birketu companies.
I imagine one or more of those three have been selling down, and my money would be on Lanyon since Prescott has walked, and if so, we'll see the appropriate notices ("Change of..." or "Ceasing to be..." notices) lodged on Monday or Tuesday because they've only got two business days to lodge those notices if their percentage holding in the company moves by 1% or more in either direction.
I used to hold BSA but I got out when I worked out that they weren't one of the best businesses on the ASX in my opinion, so there were not enough reasons to stay invested in them. They seemed to have trouble pricing or properly identifying and evaluating risk appropriately, so had multiple loss making contracts over the years, they often pivoted into new growth areas - like the nbn back in the day - but put far too many eggs in those baskets and failed to sensibly diversify their revenue, plus their Earnings were all over the shop and they often had negative cashflow:
It's alarming that their BV (book value) reduced every year between 2019 and 2023, and was actually a negative book value for 2022 and 2023. Their book value last year was only 2 cents per share. Better than negative 13 cents/share the previous year, but still not good!
Their ROE wasn't actually too bad most years, albeit lumpy, but somebody stuffed up with the data entry at whoever Commsec rely on for their stats and numbers (probably S&P) so they've probably made a fat finger error when typing in BSA's 2024 ROE and that has resulted in the graph above (top right) rescaling and being useless. Here are the ROE and ROC numbers for BSA according to Commsec - at the bottom of the following table:
Not sure how accurate those are, but the first 6 years there look about right, and they're very lumpy. What's more alarming however is that their NTA per share has been NEGATIVE over the past 3 years, and that was WITH the nbn contract. And their BV was 2 cps last year vs an NTA of negative 3 cps, suggesting that their book value included 5 cps of intangible assets such as goodwill/brand value, etc. which are always subjects to writedowns in these situations. I would be looking at their NTA as a more realistic number in the event of a break-up or VA, and their BV can be largely ignored because the intangibles will be worthless. In fact, in the case of a break-up or Administration, even NTA numbers usually prove to be overly optimistic because everything is sold off at firesale prices.
BSA are simply not what I look for in a company to invest in these days. Too much bad stuff, and bugger-all good stuff. And now with that client-concentration-risk biting them on the arse big time I reckon their future is very bleak indeed.
I really don't understand the attraction of BSA to NAOS, Lanyon and Birketu. What were they expecting would happen with BSA based on their track record? It's a head-scratcher.