Ann: SKE Swan Contract Personnel Withdrawal from , page-3

re: Ann: SKE Swan Contract Personnel Withdraw... JayMarket,

On the contrary, SWAN was one of the former CEO's rare decent acquisitions (refer to the letter I submitted to the former chairman in an earlier post where I argued that the business shouldn't be sold on the basis of EPS dilution).

To wit: "...SWAN has grown its revenues by an average compound annual growth rate of almost 6% per annum since 2006, and today this business reports 22% greater EBIT than it did in 2006. Compare this to the broader SKILLED Group, whose FY2010 EBIT (excluding SWANs contribution) was 14% lower in FY2010 than FY2006. Moreover, SWAN currently operates at 5% EBITDA margins, when the broader SKILLED Groups EBITDA margin is a mere 3.6%.

In essence, SWAN is clearly an enhancer of our company's financial pedigree, and yet it is being put up for sale. This is the sort of businesses companies should look to be acquiring, not discarding in a state of semi-distress. I cannot help but feel that we are selling one of the jewels in the SKILLED Group crown, and I am left to conclude that the mismanagement of our company has caused it come to this."

I had the privilige of meeting the then chairman some weeks back in a one-on-one meeting. During that meeting he informed me that a number of institutional shareholders had raised similar opposition to the proposed sale of SWAN.

After this latest announcement, I'm tentatively pleased the newly-constituted board and the new CEO are listening to the voice of the investor base that feels strongly about such matters.

I now believe a capital raising is pending, particularly given the strength of the share price in recent times.

This company has one of the highest ratios of Revenue-to-Market Cap that I know. And my assessment is that a significant slug of those substantial revenues are received at negative - or close to zero - EBIT margin.

The new CEO has carte blanche to chop off these toxic revenues and my call is that in two years' time, this company will be generating somewhat less revenue, but will be reporting materially higher profit.

And that's even without any major cyclical recovery in demand for its service.


Good luck.

Cameron