Following a string of corporate acquisitions SDS Corporation has initiated a major restructure of its operations designed to strengthen the group's revenue and earnings in 2005 and beyond, and improve the operating performance of its businesses.

An SDS drill bit

The decision was made following the completion of a three-month strategic review of the group's operations initiated by SDS's CEO, Christian Lange, with the changes expected to impact 2004 earnings by between 2 and 3 cents per share.

Some of the restructuring charges will include one-off redundancy, relocation and premises costs from the integration of some manufacturing sites and distribution centres as well as the costs associated with management's review of all supply and service contracts which has led to a more
conservative profit margin being recognised on certain projects.

"With the forward outlook for revenue encouraging for 2005 and beyond, 2004 revenue will be marginally lower than previously expected due to a project delay, poor contract execution, and the lower revenue contribution from Seismic Supply, which is now benefiting from the restructuring process and performing ahead of expectations," Lange said.

The cost reduction and supply chain optimisation program is expected to generate $3M – $5M in savings on an annualised basis.

SDS has already commenced the integration of the manufacturing facilities of Premier Rock Tools and Digger Tools in Western Australia. This will optimise the manufacturing process, which in turn will lead to the rationalisation of the two business' product range to further take advantage of SDS's position as a supplier of Reverse Circulation (RC) drilling equipment.

The newly acquired Manley Steels and Saxum Rock Tools, Canada, currently in the final stages of due diligence, will also be integrated into one location.

The Group has commenced the consolidation of its distribution businesses to remove duplication of premises costs and back offices functions. The Townsville operations of SDS Ausminco, Seismic Supply and Dural Group will be housed in one location. The two distribution businesses in Kalgoorlie have been consolidated at one location, and a similar approach will be taken with SDS's distribution businesses in Singleton, New South Wales.

To improve operating performance, SDS has adopted a new regional management structure. The Group has been divided into six regions and will be managed by a new Regional General Manager, who will report to head office in Adelaide.

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