question time for camden , page-20

"Going bust" is pretty unlikely in the foreseeable future. Coffey has been cashflow positive for some time.

Having a closer look at the last half-yearly- specifically the cashflow statement:

15.6 million operating cashflow
6.7 million to service interest on debt
4.4 million tax (which should be reduced this half)
Leaving 4.6 million cashflow.

The 9 million capital expenditure was due to site relocation in Adelaide (this is not going to be a recurring cost)- for the full year 2010, this was 3 million.

The main reason that the reported NPAT was a loss, apart from re-structuring costs was D&A which was 5 million. It is questionable how much of this D&A will have to be re-spent on capital expenditure in the future, given that Coffey is a predominantly a consulting business.

For Coffey to start going "bust," the operating cashflow would not be covering the interest payments (which is obviously not the case). Assuming favourable tax, and acknowledging that dividends will not be paid this year, it is highly unlikely that this will happen- and the current shareprice more than accounts for this risk.

Coffey does not need to grow- it needs to focus on its core business. It has to get rid of all the excess from the years before, and return to profitability.

The key figures to look at on the next report are:
1. Operating cashflow and the "buffer" between that and interest re-payments.
2. Profit margin. Currently the margins are <2% and this reflects all the excess I have been talking about. In its heydey, Coffey had margins of 5%.

Even if revenue, reported net profit after tax decline/stagnate and the other two figures are preserved or improving, I would hold some confidence that Coffey is actually turning around.