mcfadden's skilled transition from woe to go, page-8

I know you ask camden, but thought I would add my thoughst.

I think the main thing about SKE now is the business is transforming from one that was passive and being buffeted by the general climate (in particular the rising tide early this century and the subsequent outflow aster 2008). MM is turning his team into "high performance managers", basically what this means is they are creating a CAN DO culture. The business that SKE is in is highly scalable, if their is no business costs can be cut right back, if there is business then it can be scaled up quickly and relatively cheaply. The skill in the business is being able to manage that and have an organisation that is aggressively chasing business opportunities.

- SKE business is 75% non-mining (so well diversified)
- Most profitable business is off-shore which is growing and I would expect to continue to grow given the developments in WA. (question mark is with renewed interest by the major mining houses on costs, can SKE maintain margins? I think so.)
- SKE minning exposure is mostly related to volume, not price (of commodities). That is SKE people are in the business of keeping the mines and mining infrastructure and equipment working. Indications are that volumes of mined product is rising (whilst there is some price decline, stabilisation)
- Staff turnover in mining has decreased significantly in the past year. If this is also the case for SKE clients (which it probably is), then this reduces the cost of doing business for SKE. People can be placed on longer assignments and SKE clips the ticket, a much better business than banging moles, where you have to recruit and replace all the time. (maybe some downside on income derived from placement fees)

Although I like to do my own research (and read camdens) I note that most analysis on SKE has revenues unchanged, the only changes I have seen are a number of chnages from BUY to HOLD, which on top of the general nervousness of mining services companies may have contributed to the recent SKE sell off. Constent revenue, reducing costs can only lead to increased EPS and I am still looking to see 8-10 cents div for this half, that's 16-18 cents for the last year, that's about 7.5% yeild, not bad for a company with almost no debt (gearing). (And could be looking like 9.5% for FY 2012/13)

That raises the next question, what is SKE going to do regarding capital management down the track. They are committed to delivering shareholder value.