norfolk builds defence against downturn, page-8

Have been away for past 10 days, and am now digesting recent news and events.

Pugsley100, My thoughts regarding Norfolk buying Hastie assets, is that is not on the Norfolk agenda, however Hastie were Number 1 in the HVAC market with Haden / Norfolk number 2, this must be seen as a positive for Haden going forward and probably seeing Haden as the new number 1 player in the HVAC market. This will potentially mean better margins, as Hastie had been buying volume in recent times with margin compression being the net result for all players in this space.

I have had the opportunity to speak with some of Norfolk's key management and found that they are very focused on continuing to develop a strong Balance sheet. It must be reinforced here that Norfolk is essentially controlled by Maui Capital who are a 20% shareholder in Norfolk. In my opinion Maui capital are very focused on grooming Norfolk for a sale. This should be seen as a strong positive as this aligns with the average shareholders best interest. Maui have more than likely turned away MND's recent advances at approximately the $1.80 mark.

There has been comments on a number of PE and industry companies circling Hastie for cheap pickings, with Westfarmers and UGL's names among them - their motive as with MND is to develop revenue away from the mining sector.
Norfolk's forward work load is very well spread across a number of quality sectors and clients and is attractive when considering Westfarmers and UGL's future strategies. Norfolk also is attractive to P E firms who look to leverage off consistant earnings and strong balance sheets.

Comments on FY12 & forward looking;
1. debt/equity in a strong net positive position of % (-16.1),
2. Order Book currently exceptionally strong at 1.05 bln
3.Tenders submitted & in Negotiation is at an equally exceptional 1.1 bln
4. 277 mln in tenders currently being prepared.
5. EBIT growth forecast at 20%
6. NPAT forecast of "at least 10%"
7. Dividend policy reiterated.
8. New 3 year 150 ml facility in place by existing Bankers.

Also it was commented back in November 2011 by Goldman Sachs as follows;

"One other issue that is likely to keep a lid on NPAT growth in FY12 is the timing of profit recognition on contracts in the ODG business."

"As previously mentioned, Norfolk's conservative contract profit recognition policy means that profitability (and margins) can be lumpy and we therefore expect that ODG's EBIT margin will be lower in 2H12. Note, however, that this should reverse in FY13 as key ODG contracts move beyond the 50% complete point and profits are booked."

Haden's return to profit was also seen to be under pressure due to the inactivity in the HVAC /Commercial market. However since this comment was made, Haden has won important contract wins in association with ODG supporting Norfolks Key Strategy, to cross leverage off Norfolk's 3 key Businesses and existing client base. Haden is now emerging in my view as a real strategic & complimenting asset to the powerful ODG operations.

Resolve FM is continuing to perform strongly and accelerate it's earnings growth.

Recent price action; Declines have been on low volume with targeted low "offers" dropped in to keep the price action in decline, ie someone is LEANING on NFK's share price.