earnings calls go unanswered in nomad's land

January 13, 2010 - Fairfax

Problems just seem to follow some small-cap companies.

PROBLEMS just seem to follow some small-cap companies.

That is certainly the case with Nomad, whose activities include making and installing accommodation for mining companies.

Punters have been hit again following the announcement this week that Nomad won't make a cent from $250 million of sales in the current year.

Yesterday, managing director Alan Thomas stepped down, and executive director Wayne McGrath resigned from the board.

The market greeted this news by cutting Nomad scrip by 52 per cent; it fell from 70.5 to 33.5, valuing the company at $46 million.

Nomad loves making earnings forecasts. The problem is, they have often been astray. In small-cap land it pays to examine closely company reports. Along the way, Nomad has filed some that investors might have received with a question mark.

One that springs to mind was lodged in 2007 that trumpeted that Phil Guy, the then managing director, and other executives had finalised new long-term employment agreements. The interesting part was further down, under the heading ''expansion of the share register''.

The ''expansion'' turned out to be a disposal of shares by some executives, including Phil Guy. He took $6.6 million off the table at $2.80 a share.

The second report of interest was released in February 2008. It was a strong interim report. But another question mark arose when directors talked about ''significant contract variations'' that had affected operating margins and cash flow.

Assisted by a $40 million acquisition, Nomad went on to produce what looked to be a good 2008 result. Directors were tipping higher 2008-09 earnings of $33 million. Guy declared the shares were undervalued.

But from then on, even with the acquisition, Nomad's results just didn't measure up. In January last year, Guy resigned for ''health and family reasons''.

Five weeks later, it was revealed that Nomad's earnings had declined 21 per cent in the first half of 2009. Full-year earnings came in at $20 million - $13 million after a goodwill write-off - rather than the initial $33 million forecast.

Management was at it again in October when Thomas said he expected Nomad to report earnings of $10 million to $12 million for the current year. This week - 13 weeks later - that figure became a $2 million loss.

Nomad is now looking for a new chief - its third in less than four years.