I have been a fan of SFH for a couple of years but this is not...

I have been a fan of SFH for a couple of years but this is not good news. Sales down only 0.5% but EBITDA down 37%. They have cut their margins to the thread, which means they are hunkered down in survival mode. This is a hard “mentality” to get out of and needs strong leadership.

The simple maths looks like this:
Last year
EBITDA 34.1 – DA 8.7 – I 0.9 – T 7.4 – Abnorm 0.3 = NPAT 16.8
This year looks like
EBITDA 21.5 – DA 9.4 – I 1.0 – T 3.3 = NPAT 7.8 - that is, earnings 54% down.

Last year the second half showed a loss of $2.6M - lets be optimistic and assume breakeven for second half this year. FY earnings of 7.8M is a drop of 45% from last year FY earnings. I wouldn’t expect any dividends and ROE drops from 27% to 11%.

If SFH can get some recovery in 2013 and get their earnings half way back to last year, then the current SP is about right - but that is a big IF. My present valuation is around 0.25. I sold my remaining holding this morning.

My opinions only, please DYOR.