Ann: Half Year Financial Report 31 December 2017, page-18

Hi Madamswer, obviously the result was a little disappointing, but with the price looking reasonably attractive I have been doing some research on RHC. The Australian division seems to be experiencing the strong growth shareholders have come to expect from RHC over the years. However, RHC now sources around half of their revenue from France and the UK and these divisions have been less rosy. My understanding is that the French government is far less accommodating than our federal/state goverments and the restriction on tariff increases is starting to bite - certainly more than expected when this division was acquired in 15/16.

Combining the above I am wondering whether the material derating of RHC more than compensates for the poor performance overseas. My suspicion is that at a forward PE of 21ish and likely EBIT growth of at least 5-10% in future years RHC seems attractive on a risk reward basis. Curious to hear your thoughts on the most recent half year results.

PS. It is amazing how many Australian businesses attempt to replicate their homegrown success overseas and find it challenging. I can only assume that on average most industries are more competitive offshore and/or more tightly regulated - as appears to be the case here.

Thanks,
Andrew