I agree that BYL should be able to trim expenses. In the...

I agree that BYL should be able to trim expenses. In the internal Bnews of Autumn 2015 (http://www.brierty.com.au/investors-and-media/bnews.html), Mr McBain wrote as follows:

“Over recent years construction activity and mining services have been driven by massive expansion in the iron ore industry. Royalties from iron ore production also assisted in providing State Government funding for infrastructure and regional projects.

During this time there was more focus on production than costs and as a result some inefficiencies and additional costs have crept into day to day operations.

With the changing environment, Brierty, like every other responsible company needs to work hard in stripping out unnecessary costs and inefficient business practices. Only in doing so can we continue to provide employment opportunities and returns to our shareholders.

It is possible that some difficult changes may be required in the coming months, if so, they will be necessary and not made without significant consideration. We seek everyone’s focus and input as to how we may increase efficiencies / productivities and reduce costs. Please discuss any ideas you may have with your supervisor or manager.”

The high administrative expenses have over the years attracted adverse comment on HC and other investment forums, and I am astounded that nothing seems to have been done to reduce that expense, or even explain it. I disagree with the words, “they will be necessary” in the final paragraph pasted above. The words suggests that if it were not necessary to reduce wastage, it could continue! Wastage should have been avoided in the first place (or at least reduced years ago) as a matter of managerial principle and habit, not only now when it is thought to be necessary in straitened economic times.

On a positive note, the administrative expense is such a high percentage of gross profit that it is more likely to reduce than grow, and therein lies a hope that NPAT can improve, which should, in the absence of dysfunctional share dilution initiatives, lead to higher EPS, DPS and SP.

To reduce share dilution initiatives, Managerial incentives should be based on EPS improvements, not NPAT as is now the case.