Ann: Appendix 4C - quarterly, page-68

Good to see SP down. The more info we can gather at low prices the better IMO.

Here's my view on this Year:

Annual revenue up 11% ($8.75m) from $79.7m to $88.5m

Net operating cash flows up over 88% from $9.75m to $18.36m. Much better net operating margins.

Reduced loans from $9.15m to $2.88m

Having invested over $13m back into the business, reduced loan balance by over $6m and paid a small dividend, they still ended the year with an added $1.4m in cash. This has partially been aided by favourable currency conditions.

Specifically to the success in this December Quarter:

Net operating cash flows up vs 2013 Dec quarter by $5.7m (from -$2.25m to $3.48m)

We were expecting lower receipts due to the renovations. Which from looking at the net investments, it looks like they did a lot of. But impressively they still managed to convert last years December quarter operating loss into a significant profit.

The one thing I'm thinking could be a negative is - how does this large investment back into the business effect the 2014 profits from which dividends will be derived?

I am hoping that the NPAT is still big enough to derive a good dividend from. In the past two years it has been in the $10-15m, they would have smashed previous numbers if it weren't for all the re-investment. So how will all that cash being plowed back into the business effect NPAT???? I think significantly.

I was also confused regarding the allocation to intellectual assets vs physical assets. But if you break it down: You can't really allocate cash spent on refurbishments as a physical asset, and buying out franchisees can only be accounted for as intangible, as you are buying the right to future profits but again no physical assets. Regarding the $1.7m for the new office building: the building is not finished yet. Therefore in terms of cash, I doubt they have paid more than half of the cost. My experience is a big chunk of the payment in these building projects is paid on completion. If you think $2.5-3.5m still seems cheap...thats China for you. Don't have to jump through all the hoops and meet all the standards we have to in the western world, cheap labour and they certainly won't be using the high quality (more expensive) materials we're used to.

I think it has been a very impressive year for SBB - based on cash flows and assuming they get a good return on the franchisee purchases and refurbishments. Same question remains for us as shareholders (the one that will decide the fate of the SP)...Will we receive AU$ in hand via a dividend? And if so how significant will that be? Personally my bet is yes we will, but it won't be as big as some of the numbers touted (i.e. I doubt it is anywhere near 1c, I would be happy if it was around 0.5c).