research note

Research Summary
The downgraded FY12 profit guidance provided by Coffey International Limited (COF) on 27 April 2012, implies that the business will go backwards in FY12. The business reality is: 1) declining geosciences margins (geosciences accounts for 70% of earnings); 2) zero contribution from the project management business; 3) an OK performance from the international development business and 4) more goodwill impairments. The previous guidance goal post for FY12 of A$45M of EBITDA (now A$39M to A$41M) should have been achieved from cost cutting programs in place at the beginning of the year. In our view, to not meet this target when the market for geosciences services continues to boom, is a black mark against management. Management has not delivered. Our confidence in the new CEO has been shattered. We have a low level of confidence in our forecasts for FY13 and beyond. We cannot recommend this stock and accordingly change our target price from A$0.50/sh to A$0.40/sh and maintain our UNDERPERFORM recommendation.