Ann: Chairman's Address to Shareholders, page-2

From FY2009 to FY2014, SNL's revenue doubled from $40.3 million to $81.2 million. As a result, by FY2014, a lot of facilities were running at more than capacity:
- Australian DC in Guildford, NSW
- Sydney branch in Guildford, NSW
- Sunshine branch in VIC
- Auckland branch in NZ

FY2015 saw the building of the new DC and Sydney branch at Pemulwuy, NSW. This was completed in FY2016 and provides a much better working environment compared to the old facility in Guildford.


During the final year of Guildford DC operating, to provide relief to Guildford, in addition to its role as a normal branch, SNL also setup the Smeaton Grange branch as a secondary DC. With the Pemulwuy DC now up and running, Smeaton Grange branch will gradually be returned to its original role as a normal branch.

In July 2016, the third Melbourne branch was opened in Somerton, VIC. This also provides much needed relief to the Sunshine branch and sees greater Melbourne area pretty much well covered with a branch in the West, North and South East of Melbourne.

FY2017 will see the last problem in the above list being addressed. SNL will build a new DC and a branch in Hamilton NZ, in a similar setup as the one in Pemulwuy, but in a smaller scale. This new DC in Hamilton will also provide much needed relief to the Auckland branch. Hamilton is located south of Auckland, north of Wellington, and is a transportation hub for NZ.

As we can see, SNL is now well prepared to pursue its next 3-year goal. Management has indicated that they expect FY2017 sales to be above $92 million. Personally, I think they are being conservative by setting a lowish target for this year.

Looking forward to FY2018, I'm confident that they'll be able to achieve their aspiration target of $100 million revenue. With a much more efficient network of branches and DCs, they should be able to increase their EBIT margin again.

If we assume 9% EBIT margin, then EBIT for FY2018 should be around $9 million. This should translate to NPAT of around $6.1 million, about 26% higher than FY2016 level.

With current grossed up dividend yield of around 6.7%, shareholders get to enjoy nice dividends while waiting for operating performance to improve in the next 2-3 years.

For those are who are interested, these are the picture and map of the new DC in Pemulwuy. Note that the new Sydney branch is located next to the new DC. This separated setup allows more efficient operation for both the DC and the Sydney branch.

Picture (Left hand side is the DC, Right hand side is the Sydney branch):
https://www.google.com.au/maps/plac...c63d830dbfb6a!8m2!3d-33.8292289!4d150.9166939

From the top:
https://www.google.com.au/maps/plac...c63d830dbfb6a!8m2!3d-33.8292289!4d150.9166939