Once-beloved Nomad building up project-management skills

MICHAEL Bourke is a brave man.

By InvestSMART · 21 Jul 2010

By InvestSMART ·
21 Jul 2010

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MICHAEL Bourke is a brave man.

He has just taken the job as managing director of Nomad Building Solutions, which means he's charged with trying to correct the fortunes of this once much-loved small cap.

Indeed, this was such a favourite of the small-company cavalry that in 2007 its $1 shares were propelled to $3.40 valuing the show at $400 million.

Nomad is a supplier of modular buildings, including accommodation camps to the mining industry, which was an appealing enough theme, but it was a one-year wonder. The shares have been on the skids with earnings downgrades, banking concerns, some ordinary management and now about $6 million of losses on $230 million of sales for the year just completed.

It's friendless. Fetching 14?, it's valued at $19 million. There are no substantial shareholders left on the register.

Michael Bourke, 47, is the third person to occupy the managing director's chair since the float in 2006.

He has experience with AECOM, a big global engineering and project delivery company, Emeco Canada where he developed a mining fleet rental business as well as jobs with WMC Nickel and Iluka.

Asked yesterday about the job, Mr Bourke said: "It's got some challenges, but it doesn't scare me operationally or project-wise."

So, what did he find when he got there?

"There's quite a bit of good building capability and a strong culture of being able to build things, which is comforting. But there was a lack of project management skills going into the larger-scale mining projects, and that has obviously resulted in some travails."

He said Nomad had some very good key clients, including Rio Tinto and BHP Billiton. But he agreed that cost estimation problems required remedial action.

"There needs to be more rigour, obviously, but they're good at that. They do build things, so they understand the componentry and the need to get the costs right in that context."

He said that, typically, Nomad had been running short-term projects, with a construction time of four to six weeks. "A time-span issue was the biggest change. The company took on bigger projects with build times of nine to 12 months, and that caused some problems."

Mr Bourke is now keeping a close eye on project controls and delivery of a $46 million facilities contract for the Gorgon LNG project.

A stock for the brave.

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Frequently Asked Questions about this Article…

What does Nomad Building Solutions do and who are its customers?

Nomad Building Solutions supplies modular buildings and accommodation camps, primarily to the mining industry. The article notes it has had major mining clients including Rio Tinto and BHP Billiton.

Why did Nomad's share price and valuation collapse from its 2007 high?

After peaking in 2007 (when $1 shares reached about $3.40, valuing the company near $400 million), Nomad experienced earnings downgrades, banking concerns, management issues and execution problems on larger projects. Those factors contributed to recent losses and a much-lower valuation (the article reports a current value of about $19 million).

How serious were Nomad's recent financial results?

According to the article, Nomad reported around $6 million of losses on about $230 million of sales for the most recently completed year, which underlines material financial strain despite substantial revenue.

What operational problems did the new managing director Michael Bourke identify?

Michael Bourke said Nomad has good building capability and culture but lacked project management skills for larger-scale mining projects. He highlighted cost-estimation problems and the shift from short 4–6 week jobs to much longer 9–12 month builds as causing delivery and control issues.

What experience does Michael Bourke bring to Nomad Building Solutions?

Bourke, 47, has worked with large engineering and project-delivery firms including AECOM, developed a mining fleet rental business with Emeco Canada, and held roles with WMC Nickel and Iluka. He is the third managing director since Nomad’s 2006 float.

What is the significance of the $46 million Gorgon LNG facilities contract mentioned in the article?

The $46 million facilities contract for the Gorgon LNG project is a major project Bourke is monitoring closely; given past issues with larger, longer-duration projects, successful delivery and tight project controls on this contract are important for restoring confidence.

Are there shareholder or corporate-governance red flags everyday investors should know about?

The article notes there are no substantial shareholders left on the register and that the company has seen management turnover (three MDs since 2006). Combined with previous banking concerns and execution problems, these points are potential governance and investor-concern flags.

What should everyday investors watch if they are monitoring Nomad Building Solutions?

Investors should watch project controls and cost-estimation improvements, delivery outcomes on large contracts like the Gorgon LNG job, future earnings or guidance for signs of recovery, and any changes in major shareholders or banking arrangements—these are the issues highlighted in the article.