Monday, 11 February 2008

PBP's little legal problem gets much smaller

Some good news today for Probiotec (PBP) shareholders with that news that the company's appeal against the Phoscal claim has been successful.

The company previously advised that their liability in this case could be anywhere from $2 - $5m. As the company states in today's ASX release;

The effect of the appeal judgment is that it has reduced Probiotech's liability from 100% of the claimant's legal costs to 10% of those legal costs. The claimant has also been ordered to pay Probiotec's legal costs of the appeal....

....Probiotec's preliminary assessment is that its liability (which is yet to be quantified) under the appeal judgement will be for an amount estimated in the range of $50,000 - $350,000.

A couple of hundred thousand sounds much better than a couple of million. The company is also proceeding against it's former legal advisers and thus may be able to recover the majority of the amount it pays under the revised judgment.

This is very welcome news for patient shareholders, who have stuck with the company through this period. It removes a lot of uncertainty around the future prospects of the stock by not encumbering the company's cash flow to pay legal damages.

I expect the company to report strong growth in half year profits sometime in the next week or two and possibly the payment of the company's first dividend.