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  1. #511
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    Quote Originally Posted by macduffy View Post
    Yes, it's hard to shine when your top two markets are struggling as SKL's are. I'd prefer that they acknowledge that fact and accept that they have limited scope to grow profits until conditions improve.
    I agree to a certain extent although downturns and trends present excellent opportunities for businesses to become efficient operators. I currently hold the stock and will continue to (I haven't looked through the report in detail as of yet) but will look closely at management statements in months to come.

  2. #512
    always learning ... BlackPeter's Avatar
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    Great to see the new director Alan Isaac buying some SKL shares (20k) as well: https://www.nzx.com/files/attachments/242697.pdf;

    I guess - he can't leave all the shares to the other directors - can he?

    Sir Selwyn holds already 15.3m shares, David Mair more than 2.2m shares, Liz Coutts nearly 880k shares, Ian Parton 205k shares and John Strowger (another rather new director) 42k shares!

    And hey - they all (but John Strowger) topped as well up during the last 6 months or so. I like boards full of directors who not just give lip service to their company but have lots of skin in the game!

    Discl: holding as well ... though can't keep up with most of the board members ;
    Last edited by BlackPeter; 31-08-2016 at 09:24 AM.
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  3. #513
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    Quote Originally Posted by Biscuit View Post
    Well, not that great. $20.5M. "In line with expectations...." but then "expectations" have been steadily reduced over the last year ($24-26M in October 2015; $23M in February; $20 - 21M in April) So they got the bulls-eye in the end.
    Not to forget that at the time of the FY15 results announcement the directors were confident of profit growth in the year ahead just like they are this year. How much credibility can one attribute to this year's confidence ?, that's the $64,000 question. Directors buying is no guarantee that they know something shareholder's don't.

  4. #514
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    Even if FY17 is similar to FY16, i.e no growth, the NPAT and free cash flow will still allow them to maintain the same dividend and still have a bit left over for retained earnings. On that basis I calculate a SP Value of 1.68 With a buy up to 1.45, and hold up to 1.80.

  5. #515
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    Directors buying is no guarantee that they know something shareholder's don't.
    No, not a guarantee - just as directors selling isn't necessarily a sign of impending doom - but it, the buying, increases the odds that things are improving.

    I hold.

  6. #516
    always learning ... BlackPeter's Avatar
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    Quote Originally Posted by Roger View Post
    Not to forget that at the time of the FY15 results announcement the directors were confident of profit growth in the year ahead just like they are this year. How much credibility can one attribute to this year's confidence ?, that's the $64,000 question. Directors buying is no guarantee that they know something shareholder's don't.
    Hi Roger ... "tit for tat" for my AIR remarks ? Of course are directors buying no guarantee for SP rising, but they hopefully will always know more about the company than even a good informed share holder - i.e. lower risk to buy if they are confident.

    I guess if you want to compare SKL and AIR: SKL does not operate planes (i.e. less likely to crash), but more importantly ... they are just lifting off from rock bottom with 2 major customer groups (dairy and mining) both smelling spring air after a long and hard economical winter.

    AIR on the other hand just started on the downward cycle.

    Again - there are obviously plenty of other differences but industry and position in the cycle (both are cyclical, though);

    A good time to swap my SKL against AIR shares might be when mining and dairy are both booming ... and after AIR reached its cyclical low (obviously - I can't guarantee that these two events will happen concurrently, but you can always live in hope).
    Last edited by BlackPeter; 31-08-2016 at 01:08 PM.
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  7. #517
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    Quote Originally Posted by Roger View Post
    Anything with meaningful exposure to dairy will face similar strong headwinds so this shouldn't be a surprise to anyone. Perhaps a warning for other companies exposed to the severe dairy downturn ?, banks and PGW spring readily to mind.
    Quote Originally Posted by Roger View Post
    I think you've summed this company up extremely well mate. I think shareholders have every right to expect better forecasting than they've received and the trend is definitely down so maybe as you suggest the actual result will be below even the most recent disappointing guidance, assuming there isn't yet another downgrade before then, which is by no means a safe assumption. The currency hasn't been helpful either in the last month or two tracking back up towards 70 cents U.S. Headwinds remain for the foreseeable future and with the currency above the 20 year average it doesn't have any appeal to me anymore even at $1.20.
    Quote Originally Posted by Roger View Post
    Funny thing is Snoopy me ol mate, whenever I would take my old beagle Kelly to the beach she always seemed to make better progress swimming with the tide than against it. This silly old dog took notes and has recently decided to follow suit
    Quote Originally Posted by Roger View Post
    Well Snoopy me ol mate, how's the hound feeling about this result ? I see they are confident about earnings growth this year....Hmmm How many times did they revise the forecast last year ?

    Maybe let's back test that and have a look at what they said about earnings growth with last year's result.

    Yet earnings declined this year. I'd suggest their credibility is very much on the line now...if they can't deliver earnings growth in FY17 then they're a no growth stock and deserve a lower PE. (I for one will not be giving them the benefit of the doubt as this hound has little patience for directors that make excuses not results). I suppose its some consolation the size of the dividend feed isn't changing.
    Quote Originally Posted by Roger View Post
    Not to forget that at the time of the FY15 results announcement the directors were confident of profit growth in the year ahead just like they are this year. How much credibility can one attribute to this year's confidence ?, that's the $64,000 question. Directors buying is no guarantee that they know something shareholder's don't.
    Not at all BP. I started making some objective observations back in April 2016. The whole market is very fully priced and my 3 cents is this is a classic case in point.

    Mining and dairy still scraping along the bottom of the cycle and could be for quite some time. OTOH possibly we've already hit the peak of new competition for AIR ? and with them trading on less than half the forecast PE of this company who's directors guided up at FY15 profit release and then again much later that year and then down 3 times..here's a company that got their guidance so badly wrong compared to AIR's that got it bang on the money first time last year and the year before, that one must truly wonder what credibility to apply to this year's confidence, especially so early in the new financial year, (change their mind many times again this year) ?...tell me that's not at least a possibility mate
    Last edited by Beagle; 31-08-2016 at 02:34 PM.

  8. #518
    always learning ... BlackPeter's Avatar
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    Quote Originally Posted by Roger View Post
    ...
    Mining and dairy still scraping along the bottom of the cycle and could be for quite some time.
    Sure - everything is possible. However - all major mining stock I am following passed over the last 6 months or so the golden cross ... i.e. market seems to think mining's profitability is increasing. But hey - the market is not always right ... The other thing of course is a significant under-investment into mining (particularly research and preparing new mines) over the last handful of years. Always results in subsequent under-supply and with that increasing prices, but yes, I don't know whether this will be this year, next year or whenever. Obviously - new mines need a lot of new pumps!

    Dairy ... well, the latest auctions looked positive, but one or two sun rays don't make a summer. Still - nothing is more effective in resolving an oversupply than low prices, i.e. I am optimistic, but again - an improvement might come through this year (at the moment it looks like that way), but only time will tell. Obviously - the under investment of the last handful of years in dairy farms will mean that farmers will need to replace more milking liners than normal!

    Quote Originally Posted by Roger View Post
    ...
    OTOH possibly we've already hit the peak of new competition for AIR ?
    We probably should move this bit onto the AIR thread ... so just short. As indicated, possible is anything, but this does not mean it is likely. Cheap fuel and less maintenance for new planes is nothing specific for AIR.

    But just to stick with the SKL comparison ... they do have now a brand new factory in Wigram ... maybe this helps them as well to work more effectively and efficiently than in the past?

    Quote Originally Posted by Roger View Post
    ... , that one must truly wonder what credibility to apply to this year's confidence, especially so early in the new financial year, (change their mind many times again this year) ?...tell me that's not at least a possibility mate
    I would be the last to claim that any forecast is 100% certain (but the famous exemption of death and taxes) and this obviously includes all SKL forecasts. However - just wondering, are you saying that AIR never ever got their forecasts wrong in the past ? Roger ...?
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  9. #519
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    The current management team have a good record but aviation is a notoriously volatile industry as I am sure you know.

    Lets just unpack what was said regarding the forecast and when last year.

    20/08/15 Company announces an increased profit of $21.9m and says "I am confident that our progress and plans mean we are well placed to deliver a further improvement in earnings in FY16"

    28/10/15 Market Update at Annual Meeting - Skellerup expects strong increase in profit and forecasts $24 - $26M for FY16 based on strong first quarter.

    18/02/16 Half year result of a modest $9.6m down from 9.7m in the previous comparable period, (what on earth happened to Q2 financial performance if Q1 was so incredibly robust ?) but still forecasting $23m for the FY16 year, i.e. expecting 2H profit of $13.4m.

    29/04/16 Lower commodity prices reduce Skellerup forecast earnings to $20-21m. Really, no kidding ! Commodity prices were low all year, directors would have known that. What changed so dramatically between 18/02/16 and 29/04/16 so as to reduce expectations from a second half profit of $13.4m down to $10.9m ? Commodity prices certainly didn't.

    Could it simply be a classic case of company directors needing to learn some basic conservatism with their forecasting ? Whatever happened to the old adage of under promising and over delivering...certainly Sir Selwyn has been around long enough to know about this basic principle of good corporate communication ?

    Interesting contrast. When the current directors and senior management of AIR occasionally have issued profit forecasts they have no need to revise them over and over again and have delivered on what they promised. Could this be the reason why some directors win prestigious awards at the Deloitte top 200 business awards and others don't ?

    The $64,000 question is what credibility to attach to this years confidence of profit growth in the light of what happened last year ? I will leave investors to decide that for themselves but for this hound, I expect better forecasting skills from highly paid directors especially for a relatively stable industrial type company for whom it was well known all year that dairy and mining are scraping along the bottom of the cycle. Fact is at the interim result announcement in late February 2016 the directors were forecasting a 2H profit of $13.4M and delivered only $10.9m, nearly 20% less. Interestingly that $10.9m in 2H compares to $12.2m for 2H last year so Fy16 trading was down over 10% compared to FY15 ? Implications going forward ?

    Seeing as their earlier forecasting for profit growth in FY16 was articulated as being based on a strong 2H15 result what does this relatively weak 2H Fy16 performance suggest going forward ? Profit growth confidence misplaced again this year ?

    What went so wrong in the second half FY16 compared to the business plan ? Surely this cannot be explained simply by ongoing low commodity prices ?
    Last edited by Beagle; 01-09-2016 at 10:00 AM.

  10. #520
    always learning ... BlackPeter's Avatar
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    Quote Originally Posted by Roger View Post

    ...

    Lets just unpack what was said regarding the forecast and when last year.

    20/08/15 Company announces an increased profit of $21.9m and says "I am confident that our progress and plans mean we are well placed to deliver a further improvement in earnings in FY16"

    28/10/15 Market Update at Annual Meeting - Skellerup expects strong increase in profit and forecasts $24 - $26M for FY16 based on strong first quarter.

    18/02/16 Half year result of a modest $9.6m down from 9.7m in the previous comparable period, (what on earth happened to Q2 financial performance if Q1 was so incredibly robust ?) but still forecasting $23m for the FY16 year, i.e. expecting 2H profit of $13.4m.

    29/04/16 Lower commodity prices reduce Skellerup forecast earnings to $20-21m. Really, no kidding ! Commodity prices were low all year, directors would have known that. What changed so dramatically between 18/02/16 and 29/04/16 so as to reduce expectations from a second half profit of $13.4m down to $10.9m ? Commodity prices certainly didn't.

    Could it simply be a classic case of company directors needing to learn some basic conservatism with their forecasting ? Whatever happened to the old adage of under promising and over delivering...certainly Sir Selwyn has been around long enough to know about this basic principle of good corporate communication ?

    Interesting contrast. When the current directors and senior management of AIR occasionally have issued profit forecasts they have no need to revise them over and over again and have delivered on what they promised. Could this be the reason why some directors win prestigious awards at the Deloitte top 200 business awards and others don't ?

    The $64,000 question is what credibility to attach to this years confidence of profit growth in the light of what happened last year ? I will leave investors to decide that for themselves but for this hound, I expect better forecasting skills from highly paid directors especially for a relatively stable industrial type company for whom it was well known all year that dairy and mining are scraping along the bottom of the cycle. Fact is at the interim result announcement in late February 2016 the directors were forecasting a 2H profit of $13.4M and delivered only $10.9m, nearly 20% less. Interestingly that $10.9m in 2H compares to $12.2m for 2H last year so Fy16 trading was down over 10% compared to FY15 ? Implications going forward ?
    So, yes, they got it wrong this year - nobody contests this. Was it the worst forecast error ever happening? Not sure, maybe you should discuss this with WYN or RAK share holders .

    Lets see - so you say on a sample basis of one year the AIR board is forecasting much better than the SKL board and therefore you prefer to hold AIR? Fair enough, if this is your strategy, though obviously one data point is not a trend.

    Actually - not even sure AIR's prediction was much better (I remember the result fell well short of analyst forecasts, but not sure, whether analyst expectations have been supported by company forecasts), but yes, they obviously had a spectacular result.

    However - one of the reasons AIR delivered well is as well one of the reasons SKL fell short ... both of them didn't expect resource prices to stay that long that cheap. For AIR this is good (lower fuel prices), for SKL this is bad (less income for one of their major customer groups).

    So maybe the performance of AIR and the underperformance of SKL is at the end not related to the performance of the respective boards at all? AIR was lucky with fuels staying cheap (and yes, I realise that there are other factors as well) and SKL was unlucky for mining to stay unprofitable for the most recent financial year.

    This begs the question ... do you believe resources (and fuel) will stay that low? If you think yes, than staying in AIR might not be the worst strategy (though their competitors obviously benefit as well from low fuel, and the largest margin was obviously during the time when fuel prices went down but flights still have been dear). If you believe however that resources will come back in the foreseeable future, than the better choice might well be different.

    Your guess on the future development of resource prices might be as good as mine ...

    Quote Originally Posted by Roger View Post
    ...

    Seeing as their earlier forecasting for profit growth in FY16 was articulated as being based on a strong 2H15 result what does this relatively weak 2H Fy16 performance suggest going forward ? Profit growth confidence misplaced again this year ?

    What went so wrong in the second half FY16 compared to the business plan ? Surely this cannot be explained simply by ongoing low commodity prices ?
    Good question. I assume that they expected an earlier recovery of commodity prices, but who am I to know. The old Latin saying "errare humanum est" might be applicable as well. Anyway - I might ask this question in the upcoming AGM ...
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