market update, page-7

The sad news is that this is definitively a downgrade, no matter which way you analyse it - and a significant one, at that.

Trouble is, and this is an indictment on the quality of many of BSA's announcements to the market, is that this latest "market update" is as vague and unambiguous as it reflects a company - like many - struggling with deteriorating business conditions.

The announcement says: "Earnings before tax, reflecting project deferrals, reorganisation costs and new business development costs, are now expected to be broadly in line with FY11"

The hard numbers don't lie; Pretax Profit reported for the last three half year periods are as follows:

DH10: $4.399m
JH11: $3.691m
(for a FY2011 full-year Pretax Profit of $8.09m)
DH11: $6.752

So, for the FY2012 Pre Tax Profit to be "in line" with FY2011 implies JH2012 Pretax Profit of just $1.338m.

...which is a whopping 64% down on the previous corresponding period. Clearly not good.

Of course, those keen students of accounting standards might point out that BSA in the JH2011 result pointed out that it had incurred $0.421m in "acqusition, integration and advisory costs", as well as $1.966m in "losses related to NBN contracts".

So it can be argued that the FY2011 result needs to be adjusted for the above Individually Significant Items (ISIs). In that case, the half-year Pretax Profit histroy becomes:

DH10: $4.399m
JH11: $6.078m
(for a FY2011 full-year Pretax Profit of $10.477m)
DH11: $6.752

In this case, for FY2012 Pre Tax Profit (after adjusting for ISIs) to be "in line" with FY2011 implies JH2012 Pretax Profit of $3.725m.

This equates to a 39% fall on the previous corresponding period, which is clearly not as bad as the case prior to making the above adjustments, but is still a very material downgrade, no matter what way one looks at it.

Sorry. I hate to be the harbinger of bad news but there seemed to be a bit of confusion in the interpretation of what the announcement really meant.