Friday, 8 August 2008

CEC's impaired development

Cairns construction and development business CEC, has today released it's profit guidance.

The 'impaired development' is no doubt False Cape, I presume.

Interesting to see the corporate governance moves but won’t hold my breath waiting or Hedley to follow suit. Encouraging to see at least forward guidance instead of the last effort of a surprise poor half year result late on the last day for release under ASX listing rules.

CEC down 5c (18%) to 22c on the guidance.

  • ASX ANNOUNCEMENT 8 August 2008
    Earnings Guidance and Changes to Management and Audit and Risk Management Committee Earnings Guidance FY 2008

    Cairns based property development and civil construction company, CEC Group Limited (ASX:CEG) advises that the FY 2008 result has been adversely affected by the downturn in the property market and through losses on asset sales which were required to reduce debt levels.

    In June 2008 CEC announced that it expected a loss after tax in FY 2008 of between $6M and $15M before any impairment of goodwill and property, plant and equipment.
    At that time, CEC advised that total goodwill on the balance sheet amounted to $23M.
    A number of asset sales currently planned for FY 2009 have been analysed and, where these are projected to make losses in the FY 2009 year, provision has been made against inventory as at 30 June 2008.
    In addition:

    • Following a review of goodwill and property, plant and equipment, an impairment of $4M has been made,

    • the company undertook an interest rate hedge in February 2008 which has a mark to market fair value loss of $1.6M as at 30 June 2008 due to a softening of the forward interest rate curve. Under accounting standards requirements for assessing “hedge effectiveness”, this mark to market loss will be recorded in the income statement in FY 2008,
    • Impairment of $2.5M has been recorded against a receivable relating to a development in Cairns, as at 30 June 2008, and under accounting standards requirements, there is insufficient certainty of a project restart to allow an impairment to be avoided.

    CEC is hopeful of a restart to the project in question and payment in full of outstanding amounts, and the impairment will be reversed if a positive conclusion is reached prior to signing of the accounts, and..
    • Other recent asset sales to reduce debt have resulted in additional losses.
    Information relating to the reduction of debt levels by CEC Group has previously been disclosed to the market. Whilst the FY 2008 result is yet to be audited, the pre-audit consolidated loss before tax (after impairment entries) is expected to be approximately $33M.

    Debt Reduction
    CEC is focused on debt reduction, with total facilities (bank loans, overdrafts and guarantees) with our major banker now at $90M. The Company intends to reduce this debt below $80M by 31 October 2008 and also will look to secure a longer term facility
    to position the company for sustainable future growth.

    New Senior Management Structure
    The Board is pleased to announce a new management structure designed to provide for
    greater focus on driving improvements within its operational business units, to improve
    performance in key safety and environment areas and to provide more internal capability for strategic and corporate finance initiatives including balance sheet structure, whilst also strengthening succession planning. The senior management structure will encompass:
    • Chief Executive Officer (Roy Lavis),
    • Chief Financial Officer,
    • Chief Operating Officer, with full operational responsibility for operating sites
    within Civil Construction and Building Materials businesses, and
    • General Manager – HR, with responsibilities including human resources and
    organizational development.

    A search has commenced for a person to take up the new role of Chief Operating
    Officer.

    Chief Financial Officer (CFO) and interim General Manager, Business
    Improvement
    Mr Darren Smith has resigned as Chief Financial Officer effective from 15 August 2008.
    Mr Kevin Lubbe, CEC’s Company Secretary will become Group Financial Controller/Company Secretary until the appointment of a new CFO. An interim General Manager, Business Improvement is expected to commence with CEC Group in the week ended 15 August 2008 to lead the groups restructuring activities. It is expected that this role will continue until at least 30 November 2008.
    The outgoing CFO, Mr Smith, will provide part time consulting assistance to CEC Group through to 19 September 2008 to assist with the company's transition to these new management arrangements.

    Change to Board and Audit and Risk Management Committee
    The Board has resolved to commence a search for a Director with significant banking and finance experience to strengthen capability in the current difficult market environment. In order to achieve closer alignment with the ASX Corporate Governance Principles and Recommendations, the Board has resolved to appoint an independent Chairman (who is not a member of the Board) to the Audit and Risk Management Committee. Mr Tony Hartnell has agreed to Chair this Committee until a permanent Chair is appointed.

5 comments:

Anonymous said...

Very intereesting to read that $2.5m is still owing to CEC from Reef Cove Resorts.

I would be very surprised if Reef Cove Resorts will find any financial institution to back this project. The project is a complete disaster. I'd estimate another $50-$60 million would need to be spent just to make the site ready for subdivision and to make it safe.

The issue of sewage disposal hasn't even been decided yet. To pump sewage back to Gordonvale will add another $15 million to the project.

Who are these idiots who prop up these insane development ideas.?

Professional Market Analyst said...

The sharemarket has clearly ruled on CEC management, with only negative moves in the stock despite "rosy pictures" that continue to emanate. Attempts to blame this mismanagement on "changes in the market" are absurd in the extreme - and with the same greed-meisters at the helm, the company is basically doomed with ASX action looming.

It's also likely that this fiasco, which will result in the loss of hundreds of jobs, will seriously erode the mooted political future of director Warren Entsch.

bungyone said...

Who are they indeed. The faceless fools. I don't believe any amount of money or earthworks will stop the mountain making its way to the sea in short order.
To try and amend the damage is simply inviting another death or serious injury.
When viewed from the sea one can observe the dangerous and huge overhanging rocks.
Every person responsible for this must be hauled into the environmental court and made to pay.

Thersites said...

Well after passing this on to MM Thersites was somewhat amused by the appalled response from Roy Lavis reported even by the ignoramuses at Compost that the board at CEC was not a happy camp!

This is now far from a secret around town. Given the criteria CEC have announced in their search for a new director the question is what useful function can Greg Kern possibly play any longer?

Everyone knows who CEC is, and who Hedley is, but Kern is the most interesting business character in Cairns with close connections to both.

Kern may even be worthy of some type of award as director failure of the year as he has managed to be on 3 boards of ASX listed companies which have all blown up @80% or so of shareholder value within the last year!

Well done Kerny!!

Kern Consulting Group is the registered address for Hedleys ASX listed plaything and is on the ground floor of the Lake St office tower. Drop by and say hi but be very wary of any financial offerings emanating from this premises ......

Anonymous said...

CEC offered share portfolios for sophisicated investors ha ha Roy lavis the shining light of Cairns but does anyone really know Roy Lavis.The people of cairns inclusive of the sophisiticated investors are about to find out the hard way As the great man always says you just have to keep moving foward into a cashless debt ridden disaster As for greg Kern consulting disaters he got Roy out of one mess can he do it again Go Murray