LJC, write downs are needed when companies have stacked the balance sheet with costs that should have been expensed in order to "maximise" profits or "minimise" losses. Most commonly done by incoming CEO's as a one off opportunity to clean things up and blame the previous management.
The incoming management team will also take the opportunity to kitchen sink the write down by chucking anything they can at it, often including provisions against future potential liabilities which may have a limited chance of crystallising.
Result is the P&L going forward is then unencumbered by future impairment/amortisation, low level accrued risks don't materialise and are released to the P&L to boost profit and the new CEO/Team look like financial wizards.
The size of the write down did surprise me given the magnitude of the anomaly indicated in the previous RNS. Having said that, if AB does get us up and running, then our outlook is far more attractive than if we were carrying a load of junk on the Balance Sheet...............And with our financials now having been crawled all over and as clean as a whistle, we will be a far more attractive and less risky proposition for any financier looking our way.
I'm feeling much better now 32pps by March :-D Cheers
Is a scary word to me when a company is in this financial position. Experiences( I've has quite a few!)have shown me that with dilution even at 1for 10 after a short time of trading, unless there is a good recovery with increase in productivity the Sp drops rapidl and to get back even to break even there is usually a very high mountain to climb.Quite a number of mine after a several years have never recovered even though they soldier on. I was lucky to get out on a few spikes . Hope we are not going down that road here.
INVESTOPEDIA EXPLAINS 'WRITE-DOWN' Write-downs are typically reflected in a company's income statement as an above-the-line expense, thereby reducing net income. This, however, is not always a bad thing, since a write-down is simply a paper loss, which, since it lowers net income, will reduce a firm's tax burden. Companies will usually attempt to time large write-downs together, so they can "take a bath" in one reporting period with the hope of quickly recovering in the next period.
So could someone please explain in Simple terms what the outcome of the company is ? Have just read to RNS and seems to me that the company will now be valued 10-12 million below was was previously thought ... We have a new chairman and basically the share will be diluted near the end of feb accordingly ? If this is so ... It's the second time it's happened to me on AIM and as a fairly newish investor ****ed off !!!
Hi mate, it's a shocker at the moment, no 2 ways about it.
My guess about the current situation........from looking at the accounts to 30.06.2013 (last full set of audited accounts we have), Notes to the accounts 4 (extract only).
"4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY i)Recoverability of exploration and evaluation assets Determining whether an exploration and evaluation asset is impaired requires an assessment of whether there are any indicators of impairment, including by reference to specific impairment indicators prescribed in IFRS 6 Exploration for and Evaluation of Mineral Resources. If there is any indication of potential impairment, an impairment test is required based on value in use of the asset. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The carrying amount of the Group’s exploration and evaluation assets at the balance sheet date was £15,252,295 (2012: £9,877,922) and no impairment was identified or recognised."
You'll see at this stage we were holding some £15M on the Balance Sheet for Exploration & Evaluation (E&E). Their accounting policy is to capitalise the full amount spent in these areas.
I think one of two things has happened (or a combination of both), namely:
Loads of money has been spanked on useless studies which will not be used for delivering value from assets we have, and should have been written of in the impairment review, but MA didn't have the bottle to do this.
One or more of our copper "assets" N'dola, Chingola etc. doesn't have a future, so all costs relating to it should also have been written off, but MA failed to do this
MA should just have been concentrating on getting Kabwe up and running.
AB has now come in & realises there is little value in much of the capitalised costs, so has undertaken a proper impairment review, hence the size of the write off. While deeply concerning, the positives (struggling to find them, but still......)
The write off's are Balance sheet adjustments, and won't cost us any cash (this is critical)
I would expect AB to be ultra conservative at this point, so the fact not everything is being written off means there are assets that do have value.
I'm trying not to get too worked up by the sins of the past, but focus on 3 things from the RNS:
We're closer to the WPT being processed.
Work is starting on the LRT, which are a much bigger asset.
There is still life in copper (maybe)
We're on the canvass for sure, but I'm hoping someone has the smelling salts & we get fair value of the WPT & LRT on our balance sheet once proved up.
Hope that helps Shwmae, just me guessing to be honest, we'll find out some of the truth before long I expect.
Not even a stonking win on Friday will really cheers
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