Ann: Guidance for FY18, page-2

For me this announcement raises lots and lots of questions:

1.) Is the slip-up in the Victorian Engineering & Construction division a consequence of the distraction arising from the CivilBuild acquisition? Did the integration see management take the eye off the ball with its bread and butter E&C operations?

2.) Would a similar result have been avoided under previous corporate management or was it indeed an unavoidable outcome due to poor local site management?

3.) If it is the latter, is there a danger that a similarly calamitous outcome can arise from another contract site? Can we be sure that corporate management now have a better handle on how all the various site management teams are performing - how come this was not previously the case with the Victorian E&C site?

4.) How much of the fault actually lies with SND management and how much might it be due to the customer? Given SND's high customer concentration, management might be reluctant to publicly blame the customer, but a dithering and indecisive customer can mess around a business like SND to no end.

5.) Will all costs arising from the problem contract be fully booked in FY'18 or will 1H'19 also be impacted?

6.) Net Assets of $26m?!? Usually a net cash or net debt position would be more useful to know than the rather blunt Net Asset figure. Looks like cash position has declined ~$2m c.f. Dec 2017?

7.) I wonder what the implications of this result will be for future acquisition plans? Hopefully, we will see a renewed focus on execution for 2-3 clean sets of results, before we take the next great leap forward. Perhaps Peter Lynch was right - "diworsification" ought to be avoided (I ask myself this question, even though actually agreed with the rationale to broaden SND's income streams to soften the blows of the business' criticality).

8.) What has the performance of CivilBuild been during the half? If it was performing well, and the poor result really only being due to one particular problem site in C&E, then FY'19 might show a meaningful improvement on FY'18.

Without a bit more information forthcoming from the company, I am not surprised to see some poor bugger sell down to $0.355 yesterday. But then again, in a year or two, depending on what the actual answers to some of the above are, selling at $0.355 might look like a wise move with the benefit of hindsight.

DYOT