I raised the following question with IR last week:
"In reference to today’s market update, I presume that the impairment relates to the following disclosure from the 2007 prospectus.
O’Donnell Griffi n Pty Limited ACN 003 905 093) (“ODG”) has entered into four subcontracts or sub-subcontracts relating to its participation in the Perth Southern Suburbs Railway Project. Formal dispute resolution clauses have been invoked under two of these contracts, one counterparty has made an application for adjudication under the Construction Contracts Act 2004 (WA) in respect of variations and “show cause” notices have been issued by one party and responded to by ODG. It is expected that there will be litigation relating to some or all of these contracts, but it is not yet possible to form a view at this stage as to any liability which ODG may have to any counterparties.
Can you please identify the asset on the balance sheet that is impaired. Also, impairments do not normally have cash flow implications, however given this is a litigation issue, I would like to know if there is any cash flow implications for the business from this litigation"
Received the following response:
"The impairment charge to a receivable that we announced last week does relate to the section of the Prospectus you highlighted. The impairment will not have a negative cash flow impact. I hope that answers your questions. Sincerely, John Gardner"
I presume this means that they had previously recorded the revenue as a receivable as it had not been received. Thus, the impairment writes off the receivable.
Anyway, happy that it has no impact on cash flow, unless litigation is successful and this will be a positive impact.
NFK Price at posting:
37.8¢ Sentiment: Hold Disclosure: Held
