Ann: FY18 Earnings Update, page-5

On first look this really just marginally improves the revenue/EBITDA performance of the first half, on capital expanded by the $10.7 m raising at the start of calendar 2018. Second half revenue is $53.3 m compared with $49.7 m in the first half. EBITDA in the second half is $4.1 m compared with $3.4 m in first half. The capital raise should have reduced interest payments by near $0.4 m in the half year. Net profit after tax was $1.6 m in 1H so should be over $2 m in 2H. In a full year that suggests earnings around 4 cps and a PE of 10 at present. That justifies the current share price, rather than demanding a rerating. What cash flow was we do not know, nor whether we may start getting dividends.

On the plus side I assume this excludes the $11.6 m contract under dispute. On the negative side the order book was $83 m at the start of calendar 2018 and had shrunk to $61 m at the start of FY19. However, there are $120m in tenders where we are "well positioned" so we should be able to improve on last year's revenue numbers if we keep winning contracts.

This strikes me as consolidation rather than exciting. Before the share price is rerated we need to settle the legal dispute, win more contracts and see what the cash flow position is and hopefully start paying dividends. Still we are in a growth sector and are well placed to take advantage. The longer term prospects remain good for the patient. We need to get larger and get more broker coverage as a mining service firm with good prospects so we get on the institutional radar. I bought more before this announcement and see this as a sound investment.