Touchstone Grp Share Discussion Threads

[welsheagle] 21/8/2007 21:08

From August's 'Company Refs', when price was 164p:-
a/ Prospective PE ratio of 8.04 (based on two broker forecasts, both recommending 'overweight').
b/ Forecast growth in eps of 149%.
c/ Price to sales ratio of 0.79.
d/ Dividend yield of 2.80%.
e/ Net asset value of 58.8p.
f/ Net cash per share of 26.9p.
g/ Positive cash flow per share of 22.8p per share.
h/ Turnover up from £14.2m to £30.2m in five years.

[mrdynevor] 16/7/2007 09:56

Weird that it is tipped as a recovery as fundamentally not a lot wrong.

It is not as if they have posted losses, it was just that growth was below expectations.

[welsheagle] 14/7/2007 20:16

Tipped as a recovery buy in Shares magazine this week.

[welsheagle] 03/7/2007 18:27

LONDON (Thomson Financial) - Touchstone Group PLC, a provider of integrated business software solutions and consultancy, said it has won a deal to supply integrated back office financials to The Montcalm Hotel.

Financial details were not disclosed.

The Montcalm Hotel, part of the Nikko Hotel Group, is located just off Marble Arch. Following a recent decision to upgrade its whole back office IT portfolio, and a review of the market, The Montcalm has chosen Touchstone Group to deliver Infor FMS SunSystems Financial Management together with migration and installation consultancy.

[madmix] 03/7/2007 16:28

Just released on AFX : Touchstone wins contract to supply software system for Montcalm Hotel in London.

[diogenesj] 03/7/2007 13:47

Let's hope so. Trouble is, the market is jittery and small software companies don't have much credibility.

[diogenesj] 03/7/2007 13:17

Is that a tip or an expletive?

[glasshalfull] 28/6/2007 21:32

Welsheagle - 28 Jun '07 - 20:14 - 271 -272

Results were in line with expectations - delayed contracts should not cause this reaction.


My take FWIW is that the earnings did meet/exceed the REVISED forecasts of 17.7p, however in March Brewin had reiterated their Buy stance and provided estimates of 18.6p at this juncture, so on this basis the EPS came in 4% lower than the earlier figure.

Pretty immaterial in isolation but with the profit figures also coming in slightly lower, announcement of delay in contracts, possibility of margin pressure and EPS for this year being downgraded by 13% I would suggest that the market are nervous of any future setbacks.
My perception is that growth has slowed which will understandbly lower the rating afforded to the company.

That said, I think the fall has been overdone but don't think these will race ahead until some of the uncertainty over the outlook have been clarified.

Here are Brewins earlier figures (from my own records):-

Brewin Dolphin Securities

13/03/2007 - BUY

2007 est.

PTP £3.09m
EPS 18.6p
D/V 4.20p


Regards,
GHF

[weatherman] 28/6/2007 20:28

The market misread the positive statement earlier in the year, and was spooked by contract delay and extra staff reducing cash flow and margins. All may come good later in the year, but the shares were marked down to the level they were at 3 months ago. Painful but not a disaster.

[welsheagle] 28/6/2007 20:14

Results were in line with expectations - delayed contracts should not cause this reaction.

[dcomd99] 28/6/2007 19:38

It was picked on TMC for the value shares list on Monday. I bet a few people bought it on Monday because of that (when it rose 3%). Bad timing!

[glasshalfull] 28/6/2007 16:31

Thanks for responding Welsheagle.
A flurry of posts today but not much in the way of analysis.

I thought the share price may fall further when posting yesterday but had 180p as the floor.
With EPS for the current year being downgraded by 13% then I don't think it unreasonable to knock off the equivalent in terms of shareprice and yesterday's fall of 14.7% reflects this IMO.

I no longer hold but feel that the shares offer good value at 173.5p (as I type). When/if the company confirms that the contract delay is temporary, that will be my cue to re-enter.


Regards,
GHF

[weatherman] 28/6/2007 16:25

It has only gone back to the level it was at in mid March following the profit downgrade.

[hywel] 28/6/2007 16:11

Well FWIW i made a small top up today, i believe a 25% fall is overdone.

[gepetto] 28/6/2007 12:38

Managed to top up at 175 this morning. Lovely !

[weatherman] 28/6/2007 09:50

It seems to have support around 180p - will have to wait to see what happens longer term.

[cwa1] 28/6/2007 09:37

Morning All

Couldn't resist a dabble this morning. The fall looks overdone to me. Hope I'm not just risking a few fingers by trying to catch a falling knifr but it doesn't seem like that. Bon chance to holders.

[welsheagle] 28/6/2007 07:42

It also still has cash of 26.9p per share.

[weatherman] 27/6/2007 21:39

My view of results; is that they were not flat, but that eps rose by 15%. Non cash write offs should be ignored - it seems some small companies are judged more harshly than bigger beasts such as vodaphone.

Clearly margins have been squeezed by additional staff, but business not yet on stream. Hopefully margins will improve as slack is taken up by new business wins and as new contracts begin. It seems though that margins are being eroded slightly by competition. TSE needs to balance turnover growth with maintenance of margins if it really wants to be a big player.

Growth of 10% going forward with a current PE of 11, (forward PE around 10) is still good value imo.

[glasshalfull] 27/6/2007 18:45

Investors Chronicle have provided an update following today's announcement.
They rate the shares Good Value at the current price.

Part of the article confirms the volume of competition out there....55 companies going for a contract. This level of competition can only impact on margins IMO.

Snippets,

"The impact of analysts lowering their earnings forecasts by 13 per cent was not diminished by mixed results: revenues well up but profits flat, cash generation down and margins lower. Chief executive Keith Birch pleads growing pains. He is targeting larger contracts, with more than half of Touchstone's deals now worth over £100,000. "We can't just march on into larger and larger projects expecting the cost structure to remain the same," he says. But after increasing headcount by 47 per cent, delays to some larger contracts have held back full staff utilisation. So in a tight labour market, Touchstone needs to hire more project managers."


"..good example of how well Touchstone's recipe can work is its contract with the Bank of England. As an existing customer of older business software from Infor, the Bank chose Touchstone over 55 competitors - among them the best-known names in IT services - for a new Microsoft Dynamics system."

TIP UPDATE - GoodValue
Further staff utilisation weakness is a concern, and has knocked the shares below the level at which we recently advised buying (209p, 13 April 2007). But trading on a lowly 11 times earnings forecasts, the shares have upside potential. Good value.


Regards,
GHF

[glasshalfull] 27/6/2007 18:38

MrDynevor - The recruitment of staff has been well flagged for over 12 months now and the fact that this would impact on margins.

For instance in last years AGM statement (Aug '06) they state:-

"Operating profits also show a healthy increase albeit the salary costs
associated with recent acquisitions and the active recruitment of additional
staff will continue to restrain overall margin levels. With all Group
subsidiaries continuing to experience good demand, headcount is expected to
increase in future periods,the costs of which will naturally precede potential revenues."






Having had a good look through the results I have to say that initially I was under whelmed and now find myself disappointed.
For the first time since investing in the company over 18 months ago I'm no longer looking at it as an investment on the same risk/reward basis.

Until the April trading update I had penciled in 20p EPS for the year so was disappointed that they just exceeded Brewin's revised forecast of 17.7p.
Brewin have now lowered current year forecasts from 22.4p EPS to 19.4p, a reduction of 13%.
Growth is now beginning to look more pedestrian......the figures that I anticipated this year (rightly or wrongly) are now 12 months away.
EPS for 2009 is now forecast at 22.8p by Brewin. When you consider the 2008 est. was for 22.4p earnings in year to April 2008, it confirms the slowdown in growth.
EPS growth of 8.6% this year, but on the bright side improving to 17% in 2009, which is more like it.

As above, I was always aware that margins would be lower and indeed they reduced from 10.9% to 9.4% over the year.
Again, I am more concerned over whether they will be able to increase margins or I suspect maintain them if the market place is showing a greater degree of competition now. The company may well experience further margin pressure during the course of the current financial year.

I accept that they acknowledge delays with larger contracts but this fact and other signals impacts my basis for investing, the market perhaps apprehensive that they may warn in the near future should further delays be experienced.
Conversely, those subtle signals in the results may come to nothing.
The July AGM statement will be key IMHO.

Without picking through the accounts, these reasons alone made me a seller in today's market. It was neigh impossible to get any kind of volume away as I'm sure many of you experienced.

I cannot fault Touchstones strategy but anticipate protecting my gains and watching from the sidelines over the coming months. With the exception of a predator looking to acquire the company I'm unable to see much share price uplift over the summer and I for one would be nervous that these results signal further contract delays as we witnessed in competitors such as Chelford during 2006.

My take FWIW.

I wish all holders best of luck and interested to here any other views.


Kind regards,
GHF

[mrdynevor] 27/6/2007 11:44

Not entirely explained. If you recruit 10 Project Managers you would expect to get revenue for these people.

It is a real shame, if the profit was £250,000 higher than the reported then would not have this dip.