Ann: Half Yearly Report and Accounts, page-4

Another impressive result! Overall, the business has real momentum. The past few years have been really impressive, fully vindicating the business model and discrediting the nay-sayers (there used to be rather a lot of them!).

I remember Alf once speculating that if everything went right, over time, in a perfect year, SRV had the potential to generate $100 million cash annually. It seems we are 4/5ths of the way towards what once seemed a highly aspirational target.

It’s great result. Perhaps the only thing one would like to see is better balanced regional growth. The growth we are achieving seems to be heavily skewed towards the Middle-East. The other regions are doing ok, fully holding their own, but aren’t really growing much.

I’m surprised that currency conversion impacted the North Asian result…it seems some currencies are doing even worse than ours . On a positive note, when looking outside the booming Middle-East, it’s pleasing to see the US seemingly in a position to finally start making us some money in the coming years.

The further strong performance of the Middle-East segment may have been what caused Alf to hold off its separate listing. Maybe he thinks it will be still more valuable in a couple of years time. It’s beginning to look like we may be sitting on a goldmine in terms of what that restructure might achieve financially down the track. Hopefully by the time it happens, the other segments will be growing a bit more than they are at present.

Finally, although the share price has risen a great deal, the consistent growth in profits, the extraordinary $120 million free cash balance, and a potential “bonanza” hiving-off of the Middle -East down the track, suggests SRV is STILL good value. I used to think around $5.50 was fair value for SRV, but right now I think it’s $7-8. I don’t really see the double-figure handle some here have speculated about, as I think there is always a bit of a “discount overhang” on SRV’s share price due to lingering concerns (perhaps unfounded) about the potentially volatile industry in which it operates, and the largely unfranked nature of the dividend. But it does still
seem to be very good value at the current price, if one focuses solely on the financial metrics.

Some of us have been here for a long time. We don’t always get it right (do we Stayer ) but we can certainly look back with satisfaction at our identifying the potential of this stock. Well done Alf, well done all, and onwards and upwards!