Ann: Major New Contracts and Retail Sector Expansion, page-8

Thanks for your numbers.

I excluded from the new contracts the $500000 mentioned as the management estimate of likely earnings over the next 12 months from the new retail security division. It is not clear they actually have contracts for all of that amount as yet, it COULD just be the management hope of what the new division will earn based on the unspecified value of contracts won so far. The release is unclear so I though it better to be conservative.

The after tax margin shown in the presentation (page 13) suggests around 10% in both 2014 and 2015 and the latest release said current contracts "are generally being awarded at comparable margins" to last year. It also mentions additional unspecified contracts they are pursuing and expect to be awarded in 2016. It could be there were delays in some of the smaller contracts mentioned in the early presentation, or they missed out as you say.

I suspect in your forecasts you are being conservative on revenue and optimistic on the margin at 13.5%. I could not identify how you got that margin. Given their estimate of $1.92 million NPAT for this year I assume they are expecting revenue of around $19 million in 2016 up from $16.5 million last year. I would assume a higher revenue number as the base for 2017, but a lower margin than you do.

As long as get renewals and keep winning some new contracts they seem very cheap.