Testing trading conditions has prompted Perth-based risk management company Greencap to forecast a lower interim net profit of up to $2.2 million.
Testing trading conditions has prompted Perth-based risk management company Greencap to forecast a lower interim net profit of up to $2.2 million.
The forecast compares with a net profit after tax of $2.9 million reported for the six months ending December 2008.
As previously indicated by Greencap, the trading conditions experienced during the latter part of FY09 were testing for all group businesses. The conditions have extended into the current financial year and in particular the first quarter of the 2010 financial year.
However, Greencap said it was seeing a general improvement in trading conditions with earnings before interest and tax performance of the group businesses in Q2 FY10 showing a combined 17 per cent increase over Q1 FY10, which should see a stronger second half result.
A number of the key factors causing the reduced first half earnings include;
Clients re-assessing project commitments, and timing of projects / commitments - the trend has seen a deferral in timing of activity, rather than outright cancellation.
The impact of such deferrals was felt primarily during the 1st quarter of FY10 - all group businesses remain profitable.
The land development sector in Western Australia experienced a marked slow-down in activity particularly Q1 FY10. A solid recovery in this sector is now being seen with developers re-activating projects as well as searching for new opportunities.
With the slowdown in general levels of client activity, all businesses experienced increased pricing competition leading to a softening of margins during the period.
Corporate expenditure during the period included $0.2 m in respect of M&A work.
The group's cash flow remains strong as evidenced by the App 4C lodged with ASX 14 January 2010 showing net operating cash flow for the first half FY10 of $3.5 million (split Q1 $1.5m and Q2 $2.0m).
Trevor R Howse & Associates Pty Ltd (TRH)
As previously indicated, TRH is a defendant to a claim for damages in respect of a building redevelopment in Sydney which was made against a number of parties. The claim related to work undertaken in the mid 1990s and is being defended by TRH and others. The parties to the litigation have agreed to resolve the dispute on confidential terms which will not have any material financial impact on Greencap or TRH.
Board Composition
As previously advised the board is actively looking to re-orient the board composition to reflect the company's national presence by adding two eastern states based independent non executive directors, including a non executive Chairman. These appointments are expected to be finalised within a month, and by 31 March 2010 at the latest.
