Construction industry in Nigeria is arguably one sector that is enjoying a boom. The Chief Executive Officer, Costain West Africa, Mr. Phil Wharton, in this interview with LAYI ADELOYE, speaks on the industry‘s prospects and challenges.

Costain West Africa, Nigerian subsidiary of the international conglomerate, has gone through some tough times some two years ago. Along the line of taking over as the helmsman of this company, what have been your biggest challenges?

You are absolutely correct. This challenge was so tough that the company was almost on the brink of going out of business. The first twelve months were survival months. Moving forward and keeping the business going in the first twelve months have been a huge challenge. We have to generate cash here to keep the business going, which was the immediate challenge when I came in.

One key area that baffled Nigerians during the company‘s problems was despite being a member of big international player, Costain United Kingdom, it left Nigerian subsidiary in doldrums

Because they were in trouble themselves in the UK, they had major financial troubles. It had just gotten a new chief executive officer, who decided not to leave enough troubles in his own backyard and engage in someone else backyard as well. So, he decided to cut down on the whole of international business, not only Nigeria. He shut down the whole international business or divested, as he did in Costain in West Africa.

He assured shareholders and prospective investors of impressive returns on their investments as the re-branded Costain West Africa will strive to re-assert its dominance

position in the industry, even as the company has achieved substantial triple digit growth in revenues and a return to profitability.

Well, the offer was a very successful offer, with over 240 per cent over-subscribed, We have already laid the foundation, in 2007, for the business to go forward and the offer was a last part of plans to get the finance to put plans in action. Since we stated this in our offer, we have been using the money as we said we would use it in the offer prospectus. We have used major part of the money to acquire new equipment. We have got substantial working capital. We have paid all our debts and we have got enough money in the bank for potential acquisition as to grow the business.

You said the IPO was the last on the trump-card of the solutions. What are the other strategies employed before and after the IPO?

Fortunately, Costain has not lost its reputation on quality it has about carrying out work on time. The problem was that between 2005 and 2006, there were unpaid debts by some state governments it did work for. This affected its profile. From 2006 to 2007, we have been convincing customers and prospective clients to come back that nothing will short of delivering quality and the work will be delivered on time. We have recruited more professionals. A lot of people, who have served the company for between 30 and 35 years were ready for retirement. So we brought in fresh blood. We brought in new people who have got enthusiasm. And this will help the company tremendously. These are a combination of things that created the platform to go forward.

In strategizing, how did the operating environment in Nigeria helped or created a debacle on your ways? In other words, how do you see as the operating environment?

One of the strategies we put in place in 2006 was that one of the major problems Costain was having had to do with non payment of money by the federal and state governments. We put in the policy of only working with private clients. In that way, we guarantee our payment from those clients. So probably, the most important things on how we carry out our work is how you pay. We had completed contracts for states and federal government that were not paid for. But at the moment, we are not working for any state, apart from one, that is Kano State. We are not bankers. If you don‘t pay your bills, we won‘t work for you.

Are there industry specific problems on your way as an operator.

Yes, there is lack of trained artisans in the country, and that, only construction firms can sort out. The government can‘t solve that. We have to sort out a unified building construction training scheme that trains our artisans and reward probably those skills.There is a great lack of skills within the construction market. We need them in various shades. And that is going to growth of the market on producing quality across the market. Some of them produce quality, while some don‘t.

Recently, Costain has been making the news in papers of starting this project getting this contract and all those things. Now what have been secrets behind the new tempo?

As I said earlier, we started laying the foundation in 2007, with respective plans. The foundation has come to fruition. In the last two months, we have had almost N25bn in new orders. All these, as l said before, are mainly from the private sector. Only one of them is for Kano State, where we successfully completed the N6billon water project last year for a water treatment plant. We have just won the next one in Kano, which in the next one or two months, hopefully in August/September, we will begin. We have actually done the design work.

Abandoned project is a major issue in Nigeria. Now coming on stream again in a fresh mode, how do you want to distinguish yourself among the big companies that take up contracts and abandon them?

We only have abandoned contracts, only where our clients did not pay us. And we have a firm policy now, we will work to the value of the money we have been paid and then we will stop work. So if Costain is abandoning a project in future, it will only be because of none payment by the client. We will not abandon any project for reason. We used to have probably some projects going on for four or five years: two in Delta State and one in River State and three out of those were because of non payment. One particularly was the one Delta State we have been on that for about five years.

We have not been on site for six months we have nobody on site. We removed everybody. Delta State owes us a lot of money and we won‘t complete that contract until we have been paid. We are not a bank we do not finance projects.

How much are you being owed in Nigeria currently?

At the moment, I will put it at between N400m and N500m. The money has been owed the company for a number of years.

What mistake of the past will you not want the present management to repeat?

The biggest mistake will be, and again is, coming back to work for federal and state governments. However, we will only do that if the projects have been signed the contracts fees paid ahead.

After the public offer, the price of your stock started moving up. Recently a decline set in, although it is moving up again. Can you give us the overview of the intricacies that really form part of the upward and downward movements?

Okay, it is a difficult one for me because most of the time, these things are determined by activities at the Nigerian Stock Exchange, and not the company. I will infer that when the stock price goes up, it was before the new share came into the market. With only 159m shares at a time and with a lot of people trying to buy those shares,, it was natural that it should go up. People were scrambling to buy those shares. When additional shares came into the market, which was almost 850 million, then as you would expect, there was a leveling of price.

I mean those share were put in the market at N11 and N13 and the price dropped to mid about N20 or plus. It is still showing a considerable gain signal at between N11and N13. Speculators over the last few months have been trading in the shares to make quick profit .If you look at a cross section of the stock exchange our share is the most traded share in the last two months.

But now, this seems to be dying down. I believe that we will start to have long term investors. So we will start to hold into the shares. The good news is that we are securing new contracts. The fact is that our trading result in 2008, ending on March 31, is in line with our projection in the prospectus. I anticipate that our share price will stabilize and climb back on a steady increase, notwithstanding what is happening in the general stock market at the moment.

I wanted to talk about what is happening in the stock market. I mean the bearish trend. Market is a very difficult place I mean it is designed to do what necessarily is happening within business. The reason at the moment, the world‘s second largest stock exchange stabilized for weeks ago. I believe there is a long way to go in the Nigerian stock market. I would not blame much because it is expected to happen after few years of rapid growth. These have been leveling up now, some adjustment. I believe the market will start climbing up gradually. All the indications are pointing at the right direction. The oil; process and all that is still happening, so I believe the market will pick up.

Looking at a large construction company, Do you think they can still survive without Federal Government contracts and other things linking at our environment here.

Looking at the moment, I don‘t rule out working for government or state ut the terms of payment has to be strictly laid out and adhered to at the moment we are working for Kano. And we have a good arrangement with them, and it is working. Quality contract must be followed by good work.

Now coming down home, I want you to tell me your positioning strategy.

Our strategy is to complete our work on time.

Our Strategy first of all is to complete jobs on time. Our other strategy is going into the house building sector in our own right as costain. Building houses for the whole public. We are going to that because there is a huge demand in Nigeria .We have residential Landing in Lagos and Abuja .We are starting our building project in Abuja by September. So that is a big part of our plan. On top of that customer will generally enjoy business part of the proceed of the public of have been used to reequip the business.

The equipment will be here in the next few month the furniture too and rest .And then at the moment ,we provide furniture for our own project-kitchen, wardropes and the rest. And we are going to provide for the retail market too. Our plan is to open a rental outlet where we can sell these product .those are two main areas that we are going to develop in near future.

We have also linked up with a lot of engineering companies in Nigeria. We are in discussion with a number of potential partners. We are in talk with foundation Engineering Company in Nigeria. It is being around for over 67 years. We are in talk with some Chinese, some European companies to bring our business back to live.

There is need for efficient highly skilled company and contractors within Lagos, Port Harcourt and other areas.

For those who are jittering about investing in your company what is your message for them?

They don‘t have to be jittery. We are working hard for you to enhance your share values and to restore dividends everything gives as planned in 2009. This is a good company and it is managed by highly efficient hands now.