Premier Technical Services Share Discussion Threads

[larva] 30/9/2016 10:43

Quite a lot of bad debt showing up on this analysis

[buffythebuffoon] 30/9/2016 10:32

More 'relaxed' payment terms may be the norm, but on general business principles it's not a great position to be in unless you can also agree the same payment terms with creditors.

Buffy

[larva] 30/9/2016 07:44

Anyone know how much of debt is impaired?

[larva] 30/9/2016 06:40

Capita shares plunge on profit warning
Outsourcing group highlights problems with flagship contract and disappointing sales at key units
Read latest:
Capita: another outsourcerer loses its magic

[swiss paul] 29/9/2016 21:17

Larva, FM and Propcos tend to stretch out the payments. Paulypilot has his rag trade head on and should realise that maintenance are always the last to be paid - its not all FMCG

[penpont] 29/9/2016 15:28

The Paul Scott article today:




'Call with management - the CEO & CFO wanted to speak to me, to explain/discuss the queries I raised in this Monday's report here. I'm always happy to run through discussion points, so was happy to talk through the figures & issues with them.

So taking my points in the same order as from Monday's report;

1) Adjusting items.

Management point out that the largest adjustment to profit is the £649k charge for "contingent payments in relation to acquisitions". They made the following points about this charge;

One-off in nature
Based on stretch performance targets, i.e. the vendor of the business acquired gets paid more, if it generates a higher than anticipated profit - hence, self-funding.
Accounting standards (IFRS3) require this capital payment to be put through the P&L, as an adjusting item.
Can be paid in cash or shares, at the discretion of PTSG.
These sound perfectly valid points to me, so I'm happy that the adjustments to profit look generally OK. Share options charges are quite high though, and this is really just additional remuneration, so I tend to reverse adjustments for share-based payments to Directors & senior staff.



2) High debtor days.

We ran through the figures, and the way the company works it out, the figure for the recent H1 2016 results drops out at 110 days. This is based on using a £15.1m starting figure for trade debtors (the total is £17.1m, but that includes £2.0m of prepayments). Strip out the VAT and we get to £12.6m trade debtors (exc VAT), which compares with turnover of £18.5m. So I make that 124 days.

To arrive at 110 debtor days, the company makes further adjustments for a £0.9m large cradle installation, which was paid 6 weeks late, but funds received in July 2016. So this is treated as a one-off.

The company also works backwards from the period end date (add back approach), so this shortens debtor days a bit, because more was invoiced near the end of the period.

So the company reckons that its measure of 110 debtor days is an improving trend over 125 days at the last year end, and 138 days a year prior to that.

I take on board all the above, however I retorted that 110 days is still very slow payment, and that my original assertion that debtor days is very high is still correct!

The company replied that bottom line is that customers force 90-120 day payment terms on suppliers, and this is a general thing in the sector. The key point is that there are no bad debts. So PTSG always gets paid, but slow payment by its customers is a "necessary evil".

The bank covenants are constructed around 120 days payment terms being the norm.



My opinion - I was absolutely right to flag up that PTSG has unusually slow customer payments, because it does. However, management are adamant that this is not a sign of trouble, but is normal for their sector, and that the underlying trend is improving. The key thing is that they're not experiencing bad debts.

I'm not really comfortable with 120 day payment terms, when 60 days is the more usual standard level for UK companies - maybe not in this sector though? Although I'm grateful to management for giving me a thorough explanation of how they see things.'

[buffythebuffoon] 29/9/2016 14:26

That's Paul Scott update on Stocko rather than..P.S. update from CEO.

Buffy

[fizzypop] 29/9/2016 13:39

PS update from CEO

[opodio] 28/9/2016 19:40

GBP3.5m in the Group's working capital position.


Reminds me of Utilitywise disaster

[rivaldo] 28/9/2016 15:45

Good post robinskardon.

Davidosh, I'm busy in town tomorrow so can't make it, but thx for arranging - maybe you or someone else can post feedback here.

[robinskardon] 28/9/2016 15:32

Hi APAD,
Yes you are right that is the concern but my point is that this has been the case all along and indeed was the situation when PS bought into PTSG.
Figures as follows;
HY15 Revenue £11.7m receivables £10.4m =88.9%
FY15 Revenue £14.0m receivables £13.1m =93.6% (extrapolated figures for 2nd half)
HY16 Revenue £18.5m receivables £17.2m =93.0%
In other words the relationship between revenue and receivables in terms of time outstanding does not appear to have changed in the last 18 months.
I agree that all PS' points are valid but the situation does not seem to have deteriorated in HY16.
If they could sort out the receivables situation they could be in a net cash situation!
I don't know how much of PTSG work is as a subcontractor to construction companies but I know from my own experience that they are in general very slow payers despite contract conditions etc. and they may be subject to retentions of typically 5% which can take 6-12 months or longer to be released and this may partially explain the receivables figure.

[tattooed93] 28/9/2016 15:23

Surely if they buy rubbish acqusitions on PE of 4, then the whole big collection is only worth a PE of 4
No synergies
and debtor problems
so target of sub 30p?

[nfs] 28/9/2016 15:04

I can't DavidThanks though

[davidosh] 28/9/2016 14:54

I may be able to arrange a meeting with management for tomorrow afternoon at about 5pm if any of you are interested in joining ?

[apad] 28/9/2016 13:44

Hi robin...
I think PS main point was the length of time that the receivables stayed as receivables, rather than the absolute level.
I do hope management replies. I might email them myself.
His point about the management planning to reduce on the market rather playing into the institutions hands was also valid.
apad
ps
I'd be tempted to buy a first tranche at these prices.

[mysteronz] 28/9/2016 11:52

If you look at the customers PtSg have you will see they arent small companies likely to avoid paying for a service. That said clarification would be good to clear the point up

[buffythebuffoon] 28/9/2016 11:05

It's easy to get a lot of work from people who are not going to pay for it!

Buffy

[longshanks] 28/9/2016 11:03

Who is this Paul Scott -- and what review?

[robinskardon] 28/9/2016 10:47

High level of receivables as flagged up by Paul Scott is of some concern but I see from HY15 and FY15 that receivables were at a similar level in relation to revenue then without causing a sell off. Just shows what a following Paul has! It will be interesting to see what explanation comes back from management for the high level of receivables. This is still a fast growing company and net debt is no worry at less than 2x profit for the year (unadjusted). Still looks good value to me.

[apad] 28/9/2016 10:13

Nope. Reaction to PS review.
apad

[fizzypop] 28/9/2016 09:48

Tree shake?

[fizzypop] 28/9/2016 09:38

Down 9% - this is getting seriously knocked back for those red flags I think.

[fizzypop] 28/9/2016 09:17

APAD hold for me too. PS has identified some red flags that are of concern and I am sure we all await management's response via Paul.

[apad] 28/9/2016 09:03

riv
FWD PER of 10 or less does make this seem good value. Paul Scott says he is going to question the company about the debtor levels, which do seem excessive.
Hold for me.
apad