Nick's Blog: 2015

Draft #1

Step #2

Annual Report Links for Opus International

Opus International 2014 Annual Report

Opus International 2013 Annual Report

Opus International 2012 Annual Report

Background information on Opus International (and what they actually do!)

If you need anything commercially built, then Opus International is the company to contact! Opus International operates today in New Zealand, Australia, UK, Canada and the US. With 40 consultancy offices between the countries, Opus International is able to reach to more than 37 countries across the globe. Opus International has over 3000 designers, architects, planners and engineers working for them across the globe.

Opus International is divided into 9 core services they offer which are:

- Buildings (e.g: Architecture, building services, landscape architecture & urban design and structural design)

- Transport (e.g: Bridge design, road & rail design, transport planning, marine engineering and maritime engineering)

- Water (e.g: Stormwater management, wastewater management, water asset management and water treatment)

- Environmental (e.g: Environmental training and management, contaminated land, rural services)

- Energy (e.g: Energy distribution, energy generation, energy management, oil and gas)

- Resources (e.g: Infrastructure development and infrastructure management)

- Telecommunications (e.g: data centre infrastructure, fixed network infrastructure, mobile

and wireless infrastructure)

- Research (e.g: Environmental society & business and transportation)

- Laboratories (e.g: Aggregates, bitumen, concrete, pavement investigations, pavement investigations and offshore testing)

As an example, Opus International are heavily involved in the Christchurch rebuild from the 2011 earthquake and David Prentice estimates this initially was only going to take 5 years, now has been blown out to 10 to 15 years. (source)

Initially Opus International didn’t start out trading under the name we see them today. The company was formed from an old division of the government in 1885 called “The Ministry of Works and Development”. The work primarily achieved was constructing the New Zealand roads and rail networks. In 1988, “Works & Development Services Corporation” was formed from the commercial division of “The Ministry of Works and Development”. A year after, in 1989, the office in London opened its doors and secured two high profile underground projects. In the same year, the consultancy division of “Works & Development Services Corporation” was formed. 1996 saw the business sold to Kinta Kellas Plc in Malaysia who rebranded the company to “Opus International Consultants”. From 2000 to 2013, Opus International opened the Australian office and saw significant growth with them purchasing 4 existing companies. Opus International purchased 2 companies in the UK and opened an office in Canada, which they then later purchased another 3 companies within Canada and the US.

A milestone for Opus International was that it was listed, in 2007 on the stock exchange. I believe this was done purely from the growth of the international purchasing they had been doing around this period.

Like most of the larger companies, Opus International has 6 values which they publicly hold themselves accountable to when dealing with them: People first, True to our word, Best minds together, Going further, Making it happen and In to win. Also, whilst on a positive, Opus International also appear to be involved in local fundraising and volunteering on a regular basis which is personally, a commendable thing.

Reading through the company’s outlook on the 2014 annual report, visiting their completed projects on their website and knowing their areas of expertise in this sector I would think that Opus International would be a financially safe company. The last 3 to 4 years have seen share prices go up and down which is expected a little, however since Feb 2014 ($2.15) and as of today, 25^th November 2015 the share price is for Opus International is sitting at $1.17.

*I was able to locate all of this information from the Opus International website and through the 2014 annual report.

My KCQ’s on the 2014 Annual Report

On page 3, Opus have published a highlights page covering earnings per share, revenue, EBIT and NPAT for the last 5 years and also including full amount for the calendar year return on equity, revenue, EBIT and NPAT. This page gives you a good snapshot of what’s happening in the company without needing to go through the financial statements if you were to use this info as an FYI of course however..

I had to look up EBIT and NPAT, which are, for my reference: EBIT = Earnings Before Interest & Tax. NPAT = Net Profit After Tax.

Up to page 18 is a good insight into the company for an investor for Opus Internationals plan, outlook and market summaries for other countries on how Opus is performing. There is also there is a brief blurb of the board members, non-independent directors, the executive team and words from both the chairman and CEO which felt personalised.

I’m loving that they have an Outlook “going forward” plan – however doesn’t seem specific enough, I’d really like to see their projected or estimated revenue or even a specific number related to: Expansion through acquisition and organic growth. What is the plan to “Build critical mass in existing markets”? Does “A high performing, client-centric culture” mean they aren’t high performing and client-centric currently?

Opus has all statements available: Consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes to equity, consolidated statement of financial position and consolidated statement of cash flow. Reading the further pages, Opus have also included Parent Company statements of all the above. – what is a Parent Company?

Income statement: I wish you could click on the note number and it takes you right to it for easy navigation.. Appears Opus has grown since 2013 to 2014 as the operating expenses has gone up? Or are operating expenses costing more as the market evolves. The revenue, earnings per share and net surplus after tax have increased too.

Comprehensive income statement: The figures match! 26,240. What on earth is “Net gain on hedge of net investment”?

Changes to equity statement: 941 shares issues for 2014 compared to 156 in 2013. What is an employee benefit? Shares went up however the dividend paid went down between 2013 and 2014. Why? Surplus comprehensive income rose by 15K.

Financial position statement: They sold investments in joint operations, did they lose a joint operation or just downsize. Almost by 10k? What happened? Almost 20k more, year on year in bank borrowings, why haven’t they used the money in surplus for this instead of borrowing more? Has there been some staff turnover? The liability for employee entitlements is less this year. How is a long term bank borrowing a non-current liability?

Cash flow statement: they’ve sold property, plant or equipment. What happened and why? 2,328 worth. What is a drawdown of long term borrowings?

I was able to find the answer to most of my questions, however I believe that a handful of them will be covered in future weeks with Maria Tyler.

Most Important to Me

From the annual report, the Comprehensive Income Statement is of interest, specifically what assets they have and what’s happening in this department. I love the “Going Forward” plan and that they are focussing on key areas which will inevitably expand in the coming years. What specifically is of interest in this field to be is the environment outlook. They estimate that water demand by 2050 will be 55% more from the demand we faced in 2011. Solving water pollution, access and sanitation are super important, especially as I have a young family – I want them to grow up with clean and accessible water.

Key challenges faced by Opus

There has been challenging market conditions from increased competition, tighter margins and a reduction in government spending. In 2014, Opus lost a contract which was set to sing a tune at 4.5 million NZ dollars. David Prentice (CEO) also mentioned on the “Meet the CEO’s” television program that they are finding it challenging to “find the right people with the right qualifications for the right jobs”. (source)

What it’s done to meet the challenges

Opus have reduced some operating costs by downsizing the management team from 14 to 7 and executive team from 12 to 8 people.

Links to articles for Opus International

Cementing the fact Opus International is in challenging a place over the years but also I have attached a success story in winning a large contract in waterproofing roads.

“Opus reports successful year despite challenges”

http://www.nzherald.co.nz/opus-international-consultants/news/article.cfm?o_id=600652&objectid=10785580

“Opus faces mixed bag for the start of 2015”

http://www.stuff.co.nz/business/industries/67952806/Opus-faces-mixed-bag-for-the-start-of-2015

“Opus faces tougher times in NZ, Australia”

http://www.stuff.co.nz/business/industries/66295252/Opus-faces-tougher-times-in-NZ-Australia

“Opus wins $3 million project to waterproof New Zealand roads”

http://www.scoop.co.nz/stories/BU1509/S00298/opus-wins-3-million-project-to-waterproof-new-zealand-roads.htm

Happiness with the Firm

All in all, I’m happy with the firm, Opus International. I personally love home renovating and construction is a genuine interest of mine. I found what Opus International do to be quite easy for me to understand as I know where they fit into the construction puzzle. Specifically making big commercial projects come to life. I’m a culture based person and they appear to have 6 values which I’d assume they would all hold each other accountable to which drives engagement and results.

Top 3 Blogs

Beverley Nyirenda

https://accountinginsightsblog.wordpress.com/

I love Beverley’s layout. Her inclusion of graphs because, I’m a visual learner is quite appealing to me and her updates are quite easy to read and understand. I’m interested in following Beverley’s company while she is working on it as it’s quite interesting they have only made small profits.

Renae Gordon

http://ladyofledgers.blogspot.com.au/

Renae’s blog is easy to understand, written in a very engaging way. The amount of pictures, memes and what not are keeping me engaged. Renae’s company is quite similar to mine but based in the UK, I even googled Morgan Sindall vs Opus International to see if there had any media articles from where our companies may have been fighting over contract work as Opus also has offices in the UK !

Christyn Kelly

http://christynjade.blogspot.com.au/

Hong Kong Stock Exchange, who wouldn’t want to know about this in a summary! Christyn has a tough company and being in a different currency is quite a challenge too. The amount of hours I can see she’s put into understanding her company is sensational – and who doesn’t LOVE a cat meme!

Step #4

Chapter #1

OK – let me begin this Step with saying, I absolutely cannot get into reading. All through school back when I was a young whipper snapper (not really that long ago..) I struggled to connect to reading. Yep. There it is. I’ve always been a visual / auditory learner. I love watching lectures and taking notes, that’s how I learn best. I’m a bit concerned with this Step also, as I find it hard connecting to readings but I’ll give it a red hot go!

I enjoyed reading the introduction, I don’t like how the author has used manipulation – that to me is a dirty word, especially in financials. The author, how about we start calling him Martin from now on as we all know it’s him.. so.. Martin, does summarise quite well in the next two paragraphs accounting and specifically enjoyed reading “account is supposed to help us connect to reality, to what is actually going on in a firm”. I believe this is the truth about financial statements – they don’t lie, unless of-course they’re manipulated.. yep there’s that word again.

Looking at accounting other than profit really strung a chord with my learning – throughout my path in this course so far (being week 3 looking back at chapter 1) – it is so much more and mentioning this early on in the course I can totally relate to. At this point in time, what other things would Martin look for in a business if its not all about the numbers? What are some of the examples? There are a lot of businesses in this paragraph, almost enough that it’s overwhelming for me – I think keeping this to 10 – 20 as an example would suffice, he sort of lost me in this section but I understand the message he’s trying to present. I wouldn’t really have any idea what I’m looking at – looking at an annual report or such, I’m still following. I love the pictures! 1.1 was a good read and introduced me to the 4 types of businesses which can be configured, this would be the highlight of this section for me.

I feel it would be worth to mention in the 1.2 this section that most programs do the “double entry” for us these days. Martin is taking me on sort of a tangent at the moment talking about typewriters.. don’t get me wrong, it’s interesting but I don’t think it needs to be included in this book on accounting. Reading further, I think I might redact what I’ve said perhaps? It puts things into perspective when Martin wrote that they need to physically cut and paste things physically to amend errors! Wow! Olden days!

I found the 5 elements of accounting section to be quite insightful, not overwhelming, broken up and just enough to give me a good idea what each of the elements are about with examples. Very engaging reading this section.

Alright – end of the complete chapter. My summary: I enjoyed reading this chapter, it was unlike anything I have read before and as I’ve previously mentioned I’m not a reader, but I was able to connect with Martin. I enjoyed reading the examples he provided and I actually feel, without knowing much about financial statements and accounting at the moment that I didn’t really have too many questions during this chapter.

Chapter #3

Martin has introduced me with a great analogy at the beginning of this chapter and I’m feeling engaged and motivated to keep reading! I’m finding it hard to write key concepts and questions for this reading as I’m engaged with Martin, going from storytelling to analogy use and actually covering the important information like telling me a balance sheet is at one specific day in time. Martin is really ringing my bells with the piece on non-controlling interests. This by far is my main take out from this chapter.

It helped me a lot to read this chapter after I had watched the lecture, transferred my firms annual reports over to excel and read their report. A lot of the terms and statements Martin talks about are all within the report and truth be told – I’m not learning a whole heap from reading this chapter. The finer details which Maria didn’t cover are, of course appreciated so far!

Another analogy, this time about a barometer, love it! The concept of ratios and how they fit into accounting pretty cool and the historical “where they came from” was a great insight too. Concept! The value of $20 money in the future to having $20 money now, this is interesting for me as it relates to a few things… buying shares in a company, the company then going down will reduce your $20, if they increase then you get more than $20 if you were to sell that at a later date. This also ties into a section I’ve been doing in Economics on speculation! Or.. market speculation. Is there a way you can forecast or work out a dividend paid per share? How is per share calculated? If I was to purchase shares in my company and McDonalds.. how do I find how much shares are each and what do they come in? Can I just buy shares for $20? If you were an equity investor and the firm wanted to buy back shares from you, would you be angry? What would be the benefit of doing this from an investor and firm point of view? Whats amortisation? Why would Ryman Healthcare borrow from banks to pay dividends? That doesn’t make sense to me.

An interesting chapter, I needed a break half way through as I was reading later at night so I made myself a tea to finish the chapter. I enjoyed this as it cemented the knowledge I already have around financial statements.