how low can you go!!, page-19

Hi All

There are a couple risks highlighted above and believe they need to be answered before considering an investment in Coffey International. Risks are as follows:
1. Are further write-offs likely?
Given $52 million was written off during 2011 financial year and $37.4 million was written off projects business unit this financial year, then it is a high probability the remaining $102 million in goodwill could be written off at some point in the future. Specifically the international development business has $34 million in goodwill still, given the rest is for the geosciences business and is performing well, it is unlikely the geoscience component will be written off. In addition, the international development business lost more revenue between 2010 and 2011 than project management, so not sure why project management has had goodwill written off and not international development.
2. Are further capital raisings likely, to lower debt or other performance bonuses available for previous takeovers?
Remaining debt is $77 million after repayment of $30 million late last calendar year.
Not sure if there are any performance bonuses lurking around, haven't investigated report in great detail.

Will dividends be paid this year? Positive cash flow last year was $11 million dollars. With $30 million paid of debt, this could add approximately $3 million to cash flow. Cash flow of $14 million would be about 9 cents per share. Given historical payout ratio of 80% theoretically COF could payout a dividend of up to 7.2 cents per share. (this is assuming earnings have not deteriorated further from last year).

Given the write offs and need to repay debt, dividend payments are unlikely in the next annual reporting period, due in August 2012.

Takeover value. Incorporating debt of $77 million and market cap of $93 million, COF total business value is $170 million.
Is there a takeover in the wings? Unlikely given potential to write off more goodwill and level of debt.

With the above issues, at current prices I am still positive on future value. Dividends in 2 to 3 years will return to previous levels of up to 10 cents per share and grow further beyond.  Only question is whether there will be buying opportunities at lower prices in the future.

Best of luck
Lost