Ann: Appendix 4E, Annual Accounts & Performance Guidance, page-4

I agree the growth in profit an revenue over the past few years has been good. However, for me, that growth has highlighted an issue with the business model, in that each step-up in revenues and earnings has been accompanied by a corresponding increase in working capital.

Below is a summary of SNL's cash generating (in)ability over the past 4 years.

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6
1		FY11	FY12	FY13	FY14	Total
2	NPAT	2,509	3,958	4,548	6,000	14,506
3	NPAT Growth		57.75%	14.91%	31.93%
4
5	OCF	3,117	2,133	3,381	1,010	9,641
6	CAPEX	(811)	(615)	(1,622)	(718)	(3,766)
7	FCF	2,306	1,518	1,759	292	5,875
8	FCF CONVERSION	91.91%	38.35%	38.68%	4.87%
9
10	Dividends Paid	648	2,052	2,564	2,906	8,170
11	Cash Surplus/(Deficit) post-div.	1,658	(534)	(805)	(2,614)	(2,295)
12
13	Issued Capital	9,698	9,698	9,698	9,698
14	Net Debt	65	604	1,400	4,001
15	Gearing	0.67%	5.86%	12.61%	29.21%

Despite growing profits significantly from 2011 onwards, the last 3 years have generated only $3.569m of cash for shareholders. Which on a current market capitalisation of $80m, represents a free cashflow yield of 1.49% per annum. As evidenced by the FCF conversion line, SNL's ability to translate earnings into distributable cash is poor.

Given that SNL has barely generated any FCF over the past 3 years, how have they been paying dividends to shareholders??? You guessed it, DEBT. From 2012-2014 gearing levels have increased from 5.8% to 29.2%. Obviously this trend can't continue.

The P&L paints a rosy picture for SNL, but deeper analysis of the balance sheet and cashflow shows there's some issues which need addressing. I'm steering clear for now.

Regards
Gralynchett