Ann: Appendix 4D and Half Year Report December 2016, page-12

"And, based on the $5.0m implied EBIT for the current half (and they will be exiting the half at a run-rate well in excess of $5.0m), they have also hit their $10m pa EBIT objective a lot sooner than I had expected."

Well, today's update shows how little I know.

The preliminary unaudited results have JH2017 EBIT at $5.5m, meaning that they - in the space of just 2 months since they provided the last update (viz. 21 June, which I suspect would have been based on the May, YTD management accounts) - have beaten their EBIT expectation for the half by 10%.

Which means that, arithmetically, June must have been an absolute cracker of a month for it to have resulted in a 10% beat for the entire half. Of course, management might been doing a bit of serious low-balling when it provided its 21 June update.

I suspect its a case of a bit of both.


For context, it is useful to track the guidance provided by the company, over the past 12 months, for FY2017 Revenue and EBIT:

On 24/8/2016 (the time of the FY2016 result announcement):
"Revenue above $92m and EBIT above $7.5m"

On 15/11/2016 (at the AGM):
Confirmed guidance for "Revenue above $92m and EBIT above $7.5m"

On 21/1/2017:
"Revenue in the region of $95m and EBIT in the region of $8.5m"

On 21/6/2017:
"Revenue in the region of $97m and EBIT around $9.0m"

Actual result:
"Revenue of $97.6m and EBIT of $9.9m"

That almost gives new meaning to the phrase "Under-promise and Over-deliver".

In fact, some cynical observers might say that management has been laughably conservative, or even that it doesn't have a good grasp of how its business is travelling at any point in time.

SNL management might be many things (including being overly cautious), but not having their finger on the pulse of the business they manage is not one of them, based on precedent performance.

On the point of being cautious, the final dividend of 5.5cps (effectively a 10% increase on pcp), seems to me to be somewhat paltry considering the 50% increase in EPS, as well as the fact that the company is now virtually debt-free.

But I suspect the board has just resumed the 60% dividend payout ratio that prevailed before it was allowed to drift up while the company's earnings were reduced in FY2016 due to the investment in the transformation of SNL's supply chain and the establishment of the new DC in Sydney.

But the dividend is not a big complaint from me, especially not in the context of the current operating and financial performance of the business.

The board is simply displaying its usual conservative disposition.

And I don't mind conservativeness.
Conservativeness is good.
Especially in business sectors that can be tough and competitive.