Analytical new focus
THE PAST FINANCIAL YEAR was good for industrial and mining support services company Set Point. Although the group recorded a 6% decline in revenue it increased headline earnings 88%, after having paid only 25% of what it paid the previous year in finance expenses. Those R4m finance expenses in the year to August compare favourably to the R16,9m Set Point paid the previous year. It says it’s made administrative savings after it bought back minority interests in all its operating subsidiaries. Its pre-tax profit of R75m was 81% up on the previous year, while 14,7c headline earnings per share were 88% higher.
Set Point has changed focus and ditched electronics to concentrate on specialised chemical analysis for the exploration of precious minerals, fluid handling for the petrochemicals and mining industry and other mining services.
The vibrant commodity markets of early 2008 provided Set Point with sustained business activity in mining exploration, which resulted in a 52% increase in operating profits at its analytical services division. That also received accreditation from the National Nuclear Regulator of SA to analyse uranium in naturally occurring radioactive isotope-bearing materials.
All the group’s divisions increased their operating profits in the year, with fluid handling recording a 29% increase, mainly on dewatering operations at mines, while mining services increased its revenue 20%. Because most of Set Point’s operations are in the mining industry it’s likely to suffer (particularly in the exploration field) in the year ahead as mining houses have been forced to scale down operations due to a combination of factors in SA and overseas.
However, management has chosen to ignore the depressed markets since second half 2008. It says it’s budgeted for an increase in revenue in the year to August 2009. Chairman Chris Seabrooke has bought into the story, showing his confidence by buying more than 7m shares at 85c last week. Set Point’s price has since dropped to around 68c/share. That’s a good price to pay to earn the 14,7c/share (already paid: 5c dividend).