quarterly out, page-12

Mrgw,

It is good to have constructive discussion on this thread. It is annoying when people simply state that “there must be something wrong” or any post from “gogood” which has been negative ever since he joined. At least you are explaining why you have concerns and it is good for healthy constructive discussion. HAVING SAID THAT…… I disagree with your concerns regarding cashflow and here is why…..

1st quarter revenue of $45m was stunning. A 52% increase on the previous quarter, with only 6% of that being due to acquisitions. Amazing. When you have rapid growth like that, and the lag in time for receiving payments, of course it is going to have a negative impact on cashflow (in the short term anyway). You can’t expect payments to be made of that magnitude within a week or so of the work being completed. With that amount of organic growth, I can’t see any time soon where cash receipts are going to be higher than revenue, unless there is a dramatic slowdown in their growth, which none of us really want.

Other than the time lag in receiving payments, we also don’t know what initial up front payments have been made towards working capital requirements for the next quarter. Remember the 3rd quarter of last financial year had positive cashflow of only $500k. We found out after that this was due to a large drawdown for working capital requirements for the upcoming $8m apache contract (which ended up being $13m).

With that in mind, what if they have made a large drawdown on a project for the next quarter that we don’t know about? Would you rather they didn’t take on that project to make this quarter’s cashflow look better, or would you rather they take on the work? I know which one I would prefer.

I really hope that the BRR interview Lange will advise everyone of how much is currently outstanding in trade receivables, which was included in the Patersons update yesterday. It really is quite a staggering amount, and that was what made me think they are already nearly half way to their current profit forecast for this financial year.

The only thing we didn’t get yesterday was an update on the acquisition of Subsea engineering. Hopefully that will also be included in the BRR interview.

All in all I thought this was a wonderful quarterly report, and I am as bullish as ever on this one. In any sort of market conditions we would be looking at a SP of at least $1 based on these fundamentals. But then again, what is “normal” anymore??