Brief thoughts on a few FY12 results

Supply Network Limited (ASX:SNL)

A strong result was posted with revenue and profit up 20.3% and 57.8% respective. NPAT coming in at $3.95m or 11.58cps and the annual dividend is up 40% to 7cps. As mentioned previously, the major strength for this truck and bus parts company is its management. The ability to plan and execute medium to long term strategies and deliver for shareholders. Management has once again delivered in spades.

A new three year business plan has been put forward targeting compound revenue growth of 10% per year (i.e. $60m to $80m) and a minimum 10% EBIT margin by year 3 (i.e. EBIT from $6m today to $8m+ in year 3). However this strategy will require significant investment and as a result EBIT is expected to remain flat in FY13.

While this company has been an excellent performer in recent years, I do need to remind myself that its business is cyclical with ties to the mining-boom. With a P/E of around 10 and flat earnings forecast for the current year, perhaps it's not a bad time to put the cue back in the rack on this one.

SNL is currently trading at $1.24

Structural Systems Limited (ASX:STS)

The company had revenue up 18% to $280m and net profit up 79% to $8m or 12.5cps. While the numbers appear good, it was an ordinary result. If one normalised the NPAT figures by excluding the losses incurred from discontinued operations, earnings only grew by 3% year-on-year. This while the concreting division turned around a $6.4m loss in FY11 to past break-even this year.

It's mining services division (ROCK), what used to be the jewel in the crown for this company, is putting a dampener on profits. ROCK is at the very pointy end of the mining boom by being in the business of drilling. With the current cycle having already seemingly peaked, greenfield projects are being pulled and ROCK is seeing under utilisation of its drilling rigs.

Although with a P/E of 6, it's cheap and pays a good 6.75% fully franked dividend - there's a glut of cheap construction and mining services companies on the ASX at present. Whether one would want to dip into these is another matter, but you'd say Structural Systems would have a hard time in making it onto the shortlist.

STS is current trading at $0.745


All things considering, underground coal mining services company Delta SBD did pretty well for the year posting 43% increase in revenue and 20% increase in NPAT (normalised with 30% tax: $5.61m or 11.8cps). It appears to be a year of keeping on - incrementally winning more work and delivering on those contracts.

The outlook is positive and management is expecting further growth in the current year. With FY13's portion of the order book already exceeding FY12's revenues and margins expecting to revert back to FY11 levels, they should have a good year. Of course the macro environment is all important here. Should coal prices start following iron ore prices off a cliff, and coal mines start shutting down - not even a sizable order book will halt a landslide.

DSB is currently trading at $0.80

Disclosure: At the time of publishing, I own shares in DSB and STS although I have reduced holdings in the latter. I no longer own shares in SNL.