|I discovered this thread on a quick look through my profile for a recent post.
Although this thread was simply created to provide chart views and I was long gone as an investor in the company on it's creation, I thought that I should bring the saga to a conclusion and on a quick trawl through the web it looks like Shareholders were shafted and management did very well in picking up the business (no doubt for a song).
The lights were indeed turned off on 15th March 2010
Basically administrators came in on 12th March and 3-days later had sold the assets of the businesses to the existing management team....known as the Cornhill Partnership
Quick trawl through and it looks like they are doing very well.
Commiserations to all shareholders who lost out here and a good example of where the buy-build model falls down when a company over commits and economic downturn arrives.
|looks like lights are about to be turned off here! Very sad!|
|Didn't realise that the Chief Exec had resigned on 17th Aug with Chairman taking the helm. News had passed me by.
Johnathan Wright held close to 10% as well.
Reckon best scenario is that Barclays will now conduct a large debt / equity swap which will significantly dilute holders...the other option, well.......
As always, IMHO. I have had no contact with the company or advisors so pure speculation on my part.
Through the years we have shared many similar investments but in the last month or so I'm at the opposite sides with regards to IGP and HHC.
Today's announcement has alarm bells and whistles for me.
I've been looking closely at this one for over 2 months now.
Prior to recent results I contacted Carl Thompson, FD, and asked a series of questions as I was worried about the debt position of the company.
Understandably Carl was unable to clarify matters and thus assuage my fears.
Following a mixed bag of results....business fell off a cliff in the 2nd half.....I initially thought that the debt position manageable but on receiving Brewin's note was astounded to see the forecast debt at the end of the this financial year (2010) was forecast to have climbed to £10.9m (earlier forecast was for £9.7m debt in 2009, falling to £6.8m in 2010) and thus the precarious nature the company was in.
So, even after the issue of the convertible loan notes we were looking at a £4m increase in net debt hence I think that they must be struggling to remain within covenants. Please note this is conjecture on my part.
The issue of the loan notes bought them time and alleviated short term cashflow concerns as there were loan repayments due in June and December.
When this popped out at me I felt (all IMHO) that the company would struggle to survive intact without a material increase in Executive Search business and interim management side continuing to hold up in the current climate.
Best scenario IMO was a bid for the company or divestiture of part of the business as it has to be remembered that they have a portfolio of attractive businesses.
* Banking covenants (potentially) stretched and funding issues currently unresolved
* NFI forecasts reduced to £16.3m for current year (was £24.3m forecast previously). I expected a downgrade but this was fairly savage compared to my own thoughts of reduction to £20m (approx 20% I'd penciled in).
* Unable to anticipate a recovery timescale in the Executive search market.
* Interim management not as resilient as hoped
* EPS forecast at 5.6p (reduction of 66% on previous forecasts)
* Founders of Robert Corr left unexpectedly during the year
* Founders of BIE exited (although company appear to have weathered this)
The pro side:-
* When markets turn they now have a model that should reap the benefits of operational gearing and the debt / funding issues will be left way behind.
* Excellent portfolio of companies, especially BIE which is market leader.
* From previous point - Potential bid interest
* Euromedica performing well.
* Oxygen performing well
* Outlook statement in prelims mentioned that last 2 months have seen an improvement.
I will not be joining you with an investment in HHC but watching from the sidelines in the hope that bank funding issue is resolved swiftly and for the first signs of a recovery in the companies respective markets. Only then will i take the plunge.
Please remember this is simply my take on things and I may well be factually incorrect over many of the issues.
Kind regards and best wishes,
Brewin note dated 29th June had following price target,
"We retain a BUY recommendation based on a 12 month view, with the caveat that this
depends upon the successful conclusion of discussions with the banks and an improvement in the market in 2010."|
|Barclays are going to stick by them, I have bought back this afternoon|
|Executive search and leadership consultant Hexagon Human Capital has confirmed that talks are underway over a possible offer for the firm.
Hexagon said it had received an indicative conditional proposal from a third party interested in making an offer for the company.
Discussions are at a very preliminary stage and there can be no guarantee that any offer will be forthcoming.
The says it will also be posting a circular to shareholders about a proposed agreement with Barclays Bank to reduce the level of its senior debt by £1,500,000 in return for the issue of the convertible loan notes.|
|There is an article about Hexagon in the February Aimzine - register free at http://www.aimzine.co.uk
Merely providing quick update for my research later on.
Shareprice has fallen
35% since my last update above and what seemed to be a decent set of figures.
Price now 42.5p (40-45)
It appears that forecasts have been reduced by Brewin for both current year and 2010.
So EPS reduced by 12% this year (2009) with similar reduction forecast for 2010.
With much of their growth emanating from the financial sector and looking back previous updates in June 2007 I noted:-
".... I'm surprised to see that the majority of the revenues generated are down to 5 key employees and the success of HHC (for the time being) is aligned to their retention by the company.
It suggests to me that this is a riskier proposition than I had first anticipated.
"The group depends entirely on 5 fee earners within the interim business (which represents 61% of 07E EBIT)." (per Daniel Stewart initiation of coverage).
I will require to give this a long hard look when time permits as the price now indicates this an extremely good long term buying opportunity (PER 2) or perhaps business/ key employees is simply not there anymore.
|Merely updating the thread.............reckon these will be a v good buy at some point in the cycle (if not now) and may well have achieved a share price low given decent interims (at a first glance).
Adj EPS 11.92p for 6mths ended Sep '08
Current Trading and Outlook
Performance across the Group since the end of the period has been in line with management expectations; however, the continued economic uncertainty makes accurate trading predictions conditions very difficult for the coming months. Whilst continuing to focus on delivering growth in NFI and EBITA, the Group as indicated in this report, has taken a conscious decision to focus on margin improvement whilst limiting the hiring of new consultants.
This decision will protect our average production levels - probably the best in class - as well as to limit increases in fixed costs and protect our high NFI to EBITA conversion and consequently our strong cash flows.
The Board is confident of delivering a strong full year performance and points to the following key characteristics of the Group...."
Share price up 4% initially.....66p mid (63 vs 69).
|Morning G - thx for the update and info you sent accross. Appreciated as always. Been having a look at some in the recruitment sector - reckon a few bottomed out for the time being - RWA, SRG, HVN starting to put on a bounce off their lows.|
|Morning Tole and apologies to aldi1 (forgot to add threads to "my favourites" and didn't see your post until now.
Tole - Not in at present and until the credit crunch abates not likely to dip a toe in as I believe the recruitment sectors will continue to experience further declines in this protracted downturn.
Don't think Dan Stewart are following....haven't seen forecasts from them.
aldi1 - As above, still think the sector as a whole will show further weakness but with the price dipping below 110p it has come off considerably but could remain depressed until sentiment changes.
Only brokers forecasts are from Brewin who indicate fairly static EPS growth between 2009 and 2010.
|Hi G - you in here? Are brokers Dan-stewart still following these -wondered if you've seen anything from them of late?|
|i seem to share quite a few shares with both you and rivaldo, ghf.
i split my portfolio between long term value stocks and a trend following system.
i've looked at this one b4 but with recent results and possibly the bottom of the down trend may look to start buying if this can break 130.
this sector has been bashed recently and i pulled out of bdi at about 160 when the down trend was established.
just curious - what is your entry point(as you say its on your watchlist)?
|New thread with charts.
|Not a holder, but on my watchlist following a firm set of results today.
Wished to see charts which weren't included on the last thread.
Arrived on AIM in 2007, synopsis below:-
Hexagon Human Capital, a holding company which buys and builds businesses in the interim management and recruitment sectors, has listed on AIM, raising £8.9 million.
The company was established in 2004 and owns a profitable portfolio of recruitment firms. Hexagon listed 18.2 million shares at 165p each, giving it a market capitalisation of £30 million. The funds raised will be used to repay acquisition debt (£3.9 million), to settle deferred considerations (£2.8 million), and the remaining will be used for working capital (£2.2 million).
Hexagon recently completed the acquisition of BIE Interim Executive and, upon completion of the merger, will be the UK 's leading provider of senior executive management.
In the past two years, Hexagon has completed four acquisitions and has made an investment in a 70% majority-owned joint venture. It was founded by its current chief executive, Jonathan Wright, and Dr Swee Lip Quek, and employs a similar business model to the one that Mr Wright used as group managing director at Alexander Mann Group (AMG), although it is more of a recruitment-process outsourcer than a conventional recruitment agency.
During his time at AMG, Mr Wright oversaw an increase in revenues from £0.9 million to £128 million. Since its inception, Hexagon it has made a number of deals similar to its current agreement with Acusearch, a joint venture with the
management team to provide partner and director-level staff to the management consultancy market. Hexagon has also acquired Oxygen, which offers recruitment services to senior personnel in the retail, financial services and industrials
market; Euromedica, an executive search company for the life-sciences and healthcare industries; and Roberts & Corr, which is focused on the international market for human capital in the media, communications and technology sectors. The takeover of BIE Interim Executive has enabled Hexagon to offer interim management executives to UK and overseas public and private-sector companies.
Hexagon now has in excess of 200 clients, and among its blue-chip customer base there are 25 FTSE-100 companies and three out of four of the world's largest accountancy and professional services groups.
In the year to 31st March 2006, Hexagon reported operating profits of £3.6
million on turnover of £14.67 million. For the six months to 30th September last year, it recorded operating profits of £2.28 million on turnover of £7.9 million.
And, for the six months since September 2006, Hexagon has encountered surging demand, especially from the financial services and consulting sectors. So, following the acquisition of BIE Interim Executive, it claims that it will announce a strong set of results for the final year to 31st March 2007.
Hexagon looks to acquire profitable businesses that have a market share in geographical areas likely to exhibit strong growth. By doing so, the company expects to enter new sectors and take advantage of post-acquisition growth
to help the value of its investments appreciate further.
What's more, the targets must demonstrate strong profit margins and cash flows. And this strategy of diversification should help Hexagon create more sustainable revenues streams and avoid the impact of an economic downturn in
a particular region. Hexagon also plans to consolidate its market-leading position in the provision of interim management not only by developing its business, but by creating quality consulting teams. As a result, its acquisitions are considered for the cross-synergies they can offer its different subsidiaries - the companies in its portfolio have specific clients that they can promote to the other subsidiaries.
In addition, Hexagon intends to generate additional revenue and establish longer-term relationships with clients by offering additional services such as organisational design, board effectiveness and assessment, and human
capital research. An additional advantage comes from the fact the specialist staff and senior executive sector has always been short of supply, while the company's executive assignments bring in revenues for nine-month periods,
creating earnings visibility.
Hexagon is a growth story. Both through acquisitions and organic development, it has established a premier position in the UK market, reflecting the talent of its management team in selecting suitable targets for acquisition and the
ability to expand successfully. However, in the past two years it has merged with four companies while adding BIE Interim Executive last December, so there are complications in trying to value the business and assess whether a
market price of £30 million discounts future growth or not.
Hexagon's consolidated profit-and-loss statement is not detailed and offers no additional information other than the company's operating profitability. However it looks pretty obvious that this is a company which could easily achieve operating profits of £5-6 million this year and more next time. With no debt left on the balance sheet a £30 million valuation looks far from demanding.|
|Gets a nice write up in Shares Mag today..."Strong underlying figures and high margins makes this a firm buy."|
|The following note appears to be an initiation of coverage from Daniel Stewart. Clear and consise guidance on the company.
Of course the excellent margins enjoyed by the company are highlighted but I'm surprised to see that the majority of the revenues generated are down to 5 key employees and the success of HHC (for the time being) is aligned to their retention by the company.
It suggests to me that this is a riskier proposition than I had first anticipated.
"The group depends entirely on 5 fee earners within the interim business (which represents 61% of 07E EBIT)."
HHC is apparently on a PER of 12.6 for 2008 @196p.
Unique growth exposure, concentrated risk
We met Hexagon management last night. We were impressed by management and liked the story, but believe that the current valuation discounts much of this while risk is relatively concentrated given a dependence on a few key fee earners.
The company specialise in leadership recruitment - exec search and interim management (where they are UK #1 with a fairly unique exposure to this exciting arena)
Very good margins - 30% conversion ratio across the group (top quartile - only Morson, Matchtech, Healthcare Locums & Hays do better) with a 55% conversion ratio in interim management (only HCL can top this that we are aware of)
Interim management a high growth arena that has little price competition; candidate supply fuelled by increasing numbers of 45-55 year olds who have "made it", who want interesting projects but also want a significant amount of leisure time between projects. On the demand side, fuelled by a need for experience project managers to drive change.
There is likely to be some upside to consensus numbers from earn outs and from cross selling between the 2 sides of the business (recently put together), plus we sense that consensus numbers have been set at a beatable level.
We like the twin invoicing model in interim management - Hexagon's fee is billed to Hexagon, while what would normally be their cost of sales (the interim's salary) is billed direct to the interim - Hexagon therefore does not have to carry the payroll cost within working capital on its Balance Sheet
We see the acquisitive strategy as a risk; management understand the risks involved in making acquisitions and address some of these by retaining separate brands and by requiring management to retain significant minority stakes. However the length of earn outs appears to be relatively short at 2-3 years, which deferd rather than eliminates the risk of key staff departures.
The group depends entirely on 5 fee earners within the interim business (which represents 61% of 07E EBIT). These individuals are locked in with equity, but these lock ins seem relatively short, and further significant equity may be required to continue to retain them. Any departures could prompt significant loss of business. This is a significant asymmetric risk in our opinion.
The valuation multiple is fair but offers only modest upside on 12.6x 08 in our opinion given the risk - as the group broadens out and diversifies, our view on this could moderate.
|Recommended as a BUY in today's Investors Chronicle.
As for acquisitions,
"Expect more acquisitions, too. Hexagon is currently talking to two "relatively chunky" targets, the smaller of which may come on board first. It currently has more than 260 customers, of which 20 are in the FTSE 100 and another 13 in the FTSE 250."
|These Look good. May have a dabble in these...|
|Well everything seems to be on track following the bullish outlook statement accompanying this mornings results.
All of the markets in which the Group operates continue to be buoyant and the
new financial year has started strongly. We are particularly encouraged by the
strength of the Interim Management market which according to most observers is
growing more quickly than the general human capital market. The Group's
portfolio of search consultancies which operate in a variety of sectors are
benefiting from a number of new assignments and trading is in line with
Other pleasing noises scattered throughout the statement.
With the nature of the acquisitions occuring at various stages during the year the results are indicating that we should expect a bumper 2007/08 IMHO.
As per the Shares Mag note, they do appear to be off of the radar of most, again this may change when we get some forecast/updates from their brokers.
|Nice find...suppose we could have results out first thing Monday since they've stated they'll release in the week commencing 4/6.|
|A possible reason behind yesterday's rise to new highs may well have been a short article relating to Hexagons forthcoming results, which was published in Shares Magazine yesterday.
The article notes that the company has been "under most investors radar" but suggests strong management and expertise in chosen markets.
Forthcoming results are forecast "to show decent profit growth which
should attract the wider attention it deserves".
It appears significantly undervalued when compared to the sector average PER and of course we know results will have exceeded market expectations.
|Creeping up again today then - noticed a nice 11400 BUY @ 188p (1p premium)
L2 2v1 183-187|