Hi Roy great comments. Re UGL – Norfolk does have a very good...

Hi Roy great comments.

Re UGL – Norfolk does have a very good existing working relationship with UGL and I think Norfolk is a very good fit for WOR as well.

Also consider overseas companies which are very actively strengthening their positions into the Australian market, such as GE (who recently purchased Industria), Veolia, and Schneider Electric, all are very large companies which are trying to increase there footprint in the Australian Industrial and mining services sectors and all have commented on seeing Australia as part of their growth strategies. I have probably overlooked other potential suitors but you can see the scope to your UGL comment. Private Equity should not be overlooked when considering suitors.

See link re GE's CEO interviewed on Switzer; http://www.switzer.com.au/video/sargent20120626/

“Annuity/cost plus,” type revenues are a cornerstone of Norfolk’s strategy and have continued to strengthen each year, which gives confidence to both the investor and any potential suitors.

With a high quality client list, a $1billion plus order book and a pipeline even larger again this will be seen as a compelling market advantage on top of Norfolk’s high quality balance sheet.

Regarding low P/E, that would be great for UGL but you have to factor in Maui Capital’s 20% holding, Maui will not settle under $1.80 and more likely $2.00 will be the magic figure. I am reasonably sure that Norfolk’s 1H13 will surprise to the upside adding further support to Maui’s expectations.

Regarding Free Cash Flow; I agree with you Roy, they will direct it into “Working Capital for Larger Projects” as I put this question to Norfolk and the reply I received confirms your thoughts. As for a Buy Back, I don’t see this being part of their thinking at this point in time but I can see them moving to increase their dividend policy to beyond 25%