|Public Recruitment Group
||EPS - Basic
||Market Cap (m)
Real-Time news about Public Rec. (London Stock Exchange): 0 recent articles
|purav: Annualised "non exceptioanl" pre tax profits £4.4m
Assume PE of 10 for enterprise value = £44.4m
= £31.6m value
Share price looks a bargain!|
|purav: The prior management had a tendency to say the glass was half empty, which I believe impacted the share price unduly.|
|stemis: I don't think the disposal makes much difference. PUG were already pretty cheap, but its the debt which is keeping it so. For what its worth my reasons for selling were:-
1. Trading if you read the 2006 accounts you'd think they were growing pretty well; turnover up, operating profit up and margins up.
However, turnover is only up because of the full year impact of acquisitions (which to be fair they do say). What they don't say is that operating profit is only up because of the accounting treatment of share options. The 2006 year benefits from £528,000 of 'profit' from share based payments and 2005 suffered from £521,000 of cost. The swing in effect is therefore £1,049,000. Adjust for that and operating profit is up only marginally and PBT is well down. Not good when 2006 benefited from the full year impact of acquisitions. Underlying performance is therefore deteriorating. The 2007 year will suffer from the loss of one off profit relating to share based payments.
Worse is that this fact is hidden away in the accounts (you can spot it in note 27 reconciliation of operating profit to cashflow, in which the profit is deducted from profit as not being cashflow). I don't like this sort of misrepresentation,
2. Debt disappointed with debt numbers. The problem is contingent consideration. Any improvement in trading is going to lead to more deferred consideration payable. See note 26 maximum amount of contingent consideration is £17.2M. This is not included in analysis of net debt (see note 29).
I just don't see them working the overall debt level down in any realistic timeframe. The market is just not going to re-rate them unless they do.
3. Directors remuneration the highest paid director, presumably the Chief Executive, got £411,000 in 2006 (up from £366,000 in 2005). Four directors (2 of which are non exec) received £759,000. I presume salaries for the 2 appointed on 11th December were included only for the 3 weeks they were directors.
I'm sorry I think that's outrageous for a company PUG's size. The FD owns no shares in the company and the CEO's shares are worth less than 6 months remuneration. If they are so cheap why aren't they buying? All they are doing is awarding themselves big deferred shares at nil cost to themselves.
The directors seem fat and happy presiding over a very poor share price and have little financial motivation to do much in the short term.|
|amberspyglass: HLO has been buying quite a few small businesses which typicall sell for between 1 and 3 x annualsied gross margin. bigger businesses are going for multiples of 7-10 on post tax net profits.
pug has a dangerous amoutn of debt (downturn in social work or teachers = doom) which is ipmacting on share price. if they can get rid of one of their division snd elimiate a substantial part of debt there share price may rise disproportionatelty.|
|amberspyglass: does it suggest a share price adjustment is due?|
|amberspyglass: the non execs should be making sure that forecasts are gotten out or there is communication about such a thing. they take money from the company for looking after our interests - not quite sure what they are doing for that money but as a minimum i would expect that they keep the broker on his toes
i would suggest that the lack of forcasts (which is what will drive the share price) is a reason to ask the non execs to resign, and for shareholders to put forward someone else
i would expect a non exec to be very concerned about the disparity in share price between this company, and Quantica and Healthcare Locums, and that there would be board meeting minutes that confirm such a discussion has taken place, and any steps taken to ensure that the market is aware of the disparity and the reasons for it
having just one executive director (excluding the fd) seems astonishing for a company of this size. if he were to become unwell, or to need to leave short term what would happen?
it would take 10% to call an EGM and for shareholders to put forward a new non exec to oversee their interests. does anyone posting on this board have a percent or two of the company? the most successful shag (shareholders action group), i've heard of was at QXL, where the management offered £7m for the company, and sufficient press interest was generated so that others got interested. market cap now £200m. - coffee republic shag, recently changed the management. this company has great assets real profits and the share price ought to be a lot higher (imho).
the sort required to build a company is different to the sort required to run it on going ... .maybe it is time for a management change now the company is solidy established.
but first thing... is 10% attainable? if so lets SHAG public recruitment
watch out for a new poster!|
|amberspyglass: yep. this non existant court case that someone on this board was told did not exist supposedly by a director, has been settled, so any mbo, will probably be able to go ahead now. if you think there is going to be one what is the "investment" strategy? if i was them i would wait a month or two to see the share price drift back down after the results, and then proclaim my generosity in buying out the poor underserved shareholders.
the other thing that could happen is a breakup with components being sold and a cash shell be created, medical is too touchy to be of interest to large groups, but the social work and teacher agencies are nice steady businesses. would make sense to dispose the "weakest link" anyhow. on balance i think we will see a 25% increase in share price in next month..|
|cloudfall: It takes nothing to seriously impact the share price on a small cap company like this. I suspect that many of the people on here have enough holding that if they were to make a serious attempt to ditch it the value of the company could drop by another 50% in a day. I have seen low-traded AIM companies with a market cap of £5m, go to £10m in a week, up to £20m, back down to £10m in a few days. Small buys and sells can greatly impact the share price on a company like this, it's just how it is. The fact is sometimes people need or want to sell some shares, they have use of the funds somewhere else. It's not necessarily anything to do with the underlying economics of the company in which they're selling. When it looks like the price is dropping the sell impetus increases a bit and people think "I' might as well flog those 10k shares now". It doesn't matter if they think the share price might double over the next few months if they have need of the cash elsewhere. Anyway, we all know this. I'll shut up.|
|stemis: The trading statement said turnover and conversion from net income to net profit were both up. That effectively means that sales are up, overheads are down as a % of sales but that the quantum of net profit is probably down (cos they'd have said if it was up) due to pressure on gross margin.
I've no idea if that's true, but it would be pretty misleading if that's the case. To draw attention to conversion from net income to net profit being up, whilst profitability has actually deteriorated, would be pretty close in my book to intentionally misleading. FWIW I made this point in an email to Nick Williams. Personally I suspect that this isn't the case but expect that PUG will announce a deterioration in trading conditions since the half year. It is hard to believe that the share price has fallen by 25% in 2 weeks just because of nerves [having said that small companies can have their share price wrecked just through one determined seller].|
|stemis: Well spotted Kimboy.
Interesting to compare the two (especially as both have identical year ends)£000 HCL PRG
Turnover 43,859 80,224
Gross Profit 10,123 16,990
EBIT 3,157 5,463
Enterprise value 46,676 34,791
Debt 10,856 24,371
Market cap 35,820 10,420Even if PRG was valued the same as HCL its share price would be 79p. On a valuation pro-rata to EBIT that would increase to 200p! Actually HCL has increased borrowings by £8.65M with 2 acquisitions post the above. I will be charitable and say that takes HLO's profit to the same level as PUG. On the same enterprise valuation that would give a PUG share price of 110p.
Just shows how massively undervalued PUG is.
Note 1 -
HCL makes slightly better margins - GM 23.1% compared to 21.2% and EBIT 7.20% compared to 6.81%. You could read this as PRG being slightly more price competitive or having more efficiencies to gain.
Note 2 -
PRGs' figures includes £1,066,000 EBIT which was for 4-5 months contributions from acquisitions.
HCL's figures includes £1,555,000 EBIT which was for 7 months contributions from acquisitions.
i.e roughly same benefit to 2006 from full year contribution from acquisitions.
Note 3 -
I have included debt relating to earn outs for PUG but nothing for HLO (although there could be up to £3M for RS Locums).|
Public Recruitment share price data is direct from the London Stock Exchange