OriolThanks for your considered opinion.It essentailly boils...

Oriol

Thanks for your considered opinion.

It essentailly boils down to whether they can normalise costs on a percentage of revenue basis, and halt the decline in the revenue line.

The main driver of profitability is Employee Benefit Expense/Revenue, over the last 4 DH this has tracked as follows.

DH07 43.7%
DH08 43.1%
DH09 42.9%
DH10 48.3% (inclusive of redundancy costs)

I feel reasonably confident that the decline in this has been arrested with the restructure and layoff off around 100 employees ie they have recalibrated their largest expense back to a level sustainable under the lower revenue. This gives me some confidence.

This should of no doubt occured before we have reached this critical stage and perhaps testifies to your comment that Roger Olds was not the correct man for the urgently needed remedial action.

The one grudging concern i have around the recent restructuring of the labour resourse it that if not done correctly it can have a large negative effect when the work load/projects increase. I have seen this before with service companies where the restructure self perpetuates the further decline in the revenue line through poor contract performance.

Unallocated Expenses/other as a % of Revenue(head office,corporate etc)have fallen in line with Roger Olds commentary as follows. Which again shows they are exerting cost discipline to turn the story around.

DH07 8.44%
DH08 8.73%
DH09 8.81%
DH10 8.23%



I take your point regarding the deteriorating solvency metrics.

EBITDA/NI

DH07 7.2
DH08 6.2
DH09 5.3
DH10 1.4

I prefer to consider (Net Receipts minus Tax)/Interests which has fallen to 1.6x's.

However as an investor and not a banker a perspective needs to also be taken to normalise this for one off restructuring costs and the future benefits of that restructuring.

Again I believe improvement is occuring on both cost management and restoration of revenue.

I see this last half year as a bottom view with improvement to come. (rightly or wrongly this is where the risk comes into play)