Recently, I have been asked if there is a perfect financing structure for a construction company.
Im Gegensatz zu Immobilienentwicklern tun sich Baufirmen deutlich schwerer Finanzierungen von Banken zu erhalten, da sie keine entsprechenden Sicherheiten anbieten können. Insofern ist das benötigte Eigenkapital – von den Anforderungen lt. URG abgesehen – stark cash getrieben und kommt der Optimierung des working capital eine besondere Rolle zu.
Obviously, there are limitations to this when it comes to paying workers. Consequently, the needed equity share greatly depends on the labour costs of the company.
Based on a cash perspective I see an equity portion which equals 4.5 times monthly salaries as sufficient.
Bei einer reinen GU Baufirma mögen somit 8%-10% EK-Anteil reichen, bei einer Baufirma, die alles selbst baut, kann der PK Anteil bei 60% liegen und die erforderliche EK Quote bei 25%.
It goes without saying that banks and leasing companies would prefer more. However, given the low margins and the high fund intensiveness of this industry I don’t see a higher portion justified.
Let’s have a look at empirical examples. Strabag quotes 25% as target equity share. PORR is clearly below. It will be interesting to see what SW Umwelttechnik does with the continuously growing equity share. By the way, congratulations from my side – results in recent years have really been promising.
What can construction companies do to improve their cash position?
I name the following:
- Machinery including cars should be leased in a special company and be rented to the operative construction company.
- Optimizing payment structure. Negotiate short payment periods with your building owner/developer and longer periods with your suppliers. Frequently the payment period is not the big problem for the developer as the project funds have been reserved anyway.
- Handle claim topics as quickly as possible. It is not easy, but waiting does not help.
- Optimizing Aval Management, especially with regard to performance guarantees an guarantees based on 1170b ABGB
I will come back to the last two topics in separate blogs. In a fortnight it is time for a real estate topic again – how to buy plots in times of rising prices.