Hi Roy, A good analysis and on face value looks fair. It comes down to whether the reasons management gave last November were true reasons or management spin to cover poor project management - or something worse.
Every company in the project industry experiences project delays - that is the nature of the industry. I would be surprised in Norfolk didn't lose at least $2.7M in unexpected delays every half year. They didn't provide any further details for this "extraordinary" item.
And what does "unrecovered labour costs from falling demand in traditional markets" mean? - no details provided. ODG is predominantly a project company - this extraordinary items sounds like "labour wastage from project delays or inadequate project work". For a company with a turnover of $500M, losses of 2.8M for labour wastage seems reasonable - but hardly an extraordinary item to add back to get a normalised EBIT.
The drop in profitability was unexpected and poorly explained - and the market reacts badly to this type of news. If you are correct and the full year report shows a turn-around, there should be a decent SP bounce. But if there is another poor result, I expect the SP will drop further. The present stagnant SP indicates that most investors are waiting on the sidelines.
I hope you are correct - patient shareholders who have held deserve a reward.
NFK Price at posting:
54.5¢ Sentiment: None Disclosure: Not Held
