smh article

Saferoads looks to the fast lane
Christopher Webb
October 20, 2010


TO GET an idea of Saferoads Holdings' line of work, just have a look around at the roads.

Those metal guard rails on freeways or the wire rope systems on highways could be from Saferoads.

Portable traffic message boards, flexible road posts, not to mention plastic, metal and concrete barriers, are also on the product list.

When the group went public in 2005 the Drouin-based company was a terrific performer: earnings improved 31 per cent compound a year until 2008.

Indeed, in that year - when sales registered about $58 million and earnings were about $5 million - chairman Gary Bertuch was tipping $100 million of sales by the end of 2011.

As it turned out, directors got just a bit ahead of themselves.

Difficult trading conditions caused earnings to fall 72 per cent to $1.4 million in 2009; they recovered somewhat to $2 million in the year to June 30, 2010, on sales of $49 million.

About 20 shareholders turned up for the annual meeting yesterday, and several were concerned about the two-year dividend drought.

''I rely on dividends,'' lamented one shareholder.

Managing director Darren Hotchkin - a motor mechanic by trade who owned a tyre business where years ago he invented a flexible road guide post made out of used tyres - didn't have any good news.

''The business outlook is tough (with) a flatter marketplace,'' he said.

''Competition is quite intense and there's less business out there.''

Saferoads sells its plastic barriers to hire companies including Coates, some of which have drastically reined in capital spending over the last few years.

Saferoads, though, is fighting back, and has now started hiring out its Ironman product - a portable steel safety barrier.

The company has been affected by a reduction in new road infrastructure spending, and wet weather in the September quarter led to delays in many civil contracts.

That, and slow-moving stock write-downs, resulted in a warning that earnings would be ''significantly more than 10 per cent lower'' in the current half year.

Touching $3.50 in its glory days in 2007, the scrip was fetching 43? last week.

The earnings warning delivered last Friday saw the shares lose 18 per cent to 35?.

Meanwhile, it's not all bad news. Directors reported a strong order book and the hope that ''trading will improve for the remainder of the year''.

At 38?, the group is valued at $10 million. Not one for the faint-hearted.

The reporter owns Saferoads shares.