Ann: Half Yearly Report and Accounts , page-4

Also think a good result. HVAC is surging to prominence. Revenue up 102% and margins up from 3.6% to 5% per the segment figures. Plus the solid HVAC order book with much revenue ultimately funded from government, and zero pesky FX risk. Provides company stability and balances other portfolio risks for me.

On the contracting contracting side, this recent Foxtel article highlights the trend:

Foxtel Performance 11 February 2011 - The proportion of Australian households who pay for television is lower than in other countries - about a third of households or 35% of the population. MOST Australians have at least 15 television channels available on the box for free, yet Foxtel (the dominant pay TV company) gets more than a billion dollars every 6 months, for even more of it.

Total revenue for the first half of the financial year increased by 9% to $1.078b. The rise was mainly due to getting more money from existing subscribers - almost 70% now have its iQ digital video recorder. And its half-owner Telstra yesterday said the average revenue per user, for those who subscribe to Foxtel through it, had increased by 6%, largely by encouraging more people to pay for the most expensive package, Platinum.

Foxtel said the annualised rate at which people stopped subscribing dropped from 13.3% to 12.5%. Its direct subscribers grew by just 2.4% to 1.55m. So Foxtel has difficulty lifting the rate at which new households subscribe. It is moving to consolidate its online product. This week it said Telstra would stream 30 of its channels on its T-Box system.

So for BSA, there is ongoing connection/disconnection activity, but the connection boom from new customers is definitely over. BSA foresaw this and it was the impetus for the quick diversification into two revenue streams. Without that proactive move, we would have been in deep Shiite.

Foxtel is still important to us, but connection revenue dropped by 9% and sector profit dropped more. So margins have reduced from 7% to 4%. We may be losing some economies of scale, incurring costs to downsize and picking up some extra NBN positioning costs. It looks as though no significant NBN revenue will eventuate in 2011, or even possibly 2012. As this is a multi decade project I'm giving management the benefit of the doubt. I magine this will be a very different structure from the current multitude of independent installation contractors we have.

Back to the big picture - overall there was a nice predictable surge in the first half comparisons. Revenue up 39%, NPAT up 71% (to $4.3m, including a one-off tax benefit). Operating Cashflow ok at $2.5m. The valuation isn't demanding imo and am receiving a nice yield on 50% of the EPS, while the other 50% goes back to work for me.