Murgitroyd Share Discussion Threads

[wjccghcc] 29/3/2007 11:37

The share price has done pretty well this year. Can't blame people taking profits before the end of the tax year. Personally I'm happy to hold since after doing 12.1p EPS in H1, I expect them to beat forecasts putting them on a fwd PE of 17.

[faraway] 29/3/2007 10:48

AS OPPOSED TO THE PRICE WHICH IS NOT

[lbo] 26/3/2007 09:46

Continues to do very well

[wjccghcc] 24/1/2007 08:42

Mr Murgitroyd placing 500k shares at 400p. You can't really blame him since he still owns 34% of the company. Nice he did it in an orderly placing rather than dripping them out.

[roughjustice] 24/1/2007 07:51

Even Mr Murgitroyd it seems.

[faraway] 23/1/2007 23:04

shuisky
- GOOD POSTS!

[faraway] 23/1/2007 20:16

First glance at trading post-close shows unheard of numbers for MUR - spectacular broker / broker trades - big fright - maybe even the possibility of strong accusations of insanity on this board for anyone selling.
Ah but we all sell eventually don't we, (even in a rough fashion)?

[wjccghcc] 23/1/2007 11:53

Been taking profits on AVV from 8 quid but still own half which is nice. Was hoping MUR would hit 430p for me to add. NCC seems a bit expensive after the recent spike IMHO.

[shuisky] 23/1/2007 11:00

Thanks Fellahs,

Alas I sold out of AVV far, far too soon. This was part of a hunch I had that when Crude prices fall they may take some Energy services plays with them. How wrong I was!

I'm very comfortable with MUR results, but trying to get my head around a few things with NCC this morning. My initial reading is that the deal makes sense and is EPS accretive but Escrow contract is slowing more than I hoped and a lot is being pinned on successful Site Confidence integration. Especially as the Soutern Area escrow hub is planned to be from SC offices. The Testing & Consultancy order book growth, Escrow renewal forecast upgrade, and the continual reduiction in escrow termination rates are all v good news though. Anyway, I'll gather some more considered thoughts and post on TMF later.

[wjccghcc] 23/1/2007 09:17

Nice post shuisky.

[shuisky] 23/1/2007 09:02

Hello DoY, I'll try and split my response up in sections..

1.The figure for pre-tax profit post amortisation is taken for Hardman's research dated 4 Sep which you (hopefully you can still access) from www.hardmanandco.com

For 2007, formally they had
Pre-Amortisation Operating Profit of 2.88m
Pre-Amortisation Pre-Tax Profit of 2.647m
Amortisation of 592k

So I have PTP post amortisation of 2.647-.592=2.055m

At these interims MUR just did 1.19 PTP post-amortisation with 320k amortisation.
Giving 1.19+.32=1.51m pre-amortisation.

As WJCCGHCC stated both numbers look to be easily ahead, I was merely (pedantically) noting that I had a different forecast for post-amortisation.

2Correct about WC adjustments. The 85% is a rough figure for conversion of operating profits into operating cash flow. So for exampe at these interims it was 1406/1642=85.6% (NOte the op profit is pre-Amortisation)

I've noted that the change in WC (WC=change in (current assets-cash-current liabilities) requirements are very low in relation to Sales growth. So it seems that increasing sales does not require a lot of additional WC. Similarly, CapEx is not gowing as a percentage of turnover. It's falling. Operating margins ae improving.

The point I'm trying to make is that with the increased revenue we will probably see a greater percentage of it drop into FCF. It's FCF 'geared' if such a phrase exists. These ratios are what DCF calcs are based on.

3. No reason other than EV/EBITDA is a commonly used comparable. FCF/Mkt Cap s also commonly used. FCF/EV isn't (it's not so 'correct' because essentialy you are not discounting the interet probably) but I like it as a rough approximation.

4 NOTE. According to my online broker. Hardman on 22 Jan now have for 2007 Full Year..

Pre-Tax 2.9m vs previously forecast 2.647m
EPS 24.1 vs previously forecast 21.9p
DPS 7.6p vs previously forcast 6.95p

Significantly upgraded forecasts. So punters have waited for the results, forecasts have been upgraded and now they are selling the stock?? Bizarre.

I note the MM's now have a near 7% spread on the stock 430-460p. They are having the eyes out of punters who haven't read the results properly.

Gotta run now and look at NCC. Looks like profit takers are out here as well. All the Best...


ps Decent article here which contains a rationale from MUR on the sales mix & turnover confusion...



'Murgitroyd chief executive Keith Young insisted the firm was still growing quickly. International work which had components that had to be passed to outside firms would increase sales substantially but would decrease margins. During the period under review, more work was able to be retained entirely by its own attorneys "meaning what we did was almost 100 per cent profit".

"The growth of Murgitroyd continues, but our gross profit, rather than our sales, are often the best indication of that," Young added.

Rae Ellingham at Hardman & Co described the results as "interesting" but agreed the figures showed a change in sales mix.

Despite downgrading Murgitroyd's full-year sales forecast by £2m to £23m, the company upgraded pre-tax profits by £300,000 to £2.9m.'

[wjccghcc] 23/1/2007 08:32

Wilmdav, brokers PBT forecasts are almost always pre-amortisation since this gives a more standardised measure of valuation - management have a lot of leeway to vary the goodwill amortisation charge.

And to confirm that, I see Hardman have upgraded their forecast by 10% to a PBT of 2.9mm and EPS of 24.1p for the current year. Puts MUR on a PE of 18 dropping to 16.5 for next year. Personally, I think next year's forecasts are conservative but they're probably waiting on further acquisition news.

[wilmdav] 22/1/2007 23:56

shuisky
As you may have guessed we are known to each other by different nom-de-plumes elsewhere. Would you be willing to clarify the relevance of your comments about working capital? Presumably you make some sort of adjustment for changes in WC to operating cash flow. My figures for previous 3 years show conversion of operating profit to free cash flow be only about 54% against your 85%.
Also, I note that you are using market value for the yield calculation, whereas you have used enterprise value on other occasions. Any reason for plumping for one or the other?
DoY

[wjccghcc] 22/1/2007 18:35

Yes Ian. 94% of RWS's business is a translation service for patents - they are not patent agents like MUR. I have held RWS in the past but sold out with the threat of the London Agreement which would significantly reduce the amount of languages patents need to be translated into.

[jeffian] 22/1/2007 17:42

WJCCGHCC,

"the only listed pureplay in the patent area". Have you checked out RWS?

Frankly, this looks like a classic bit of profit taking after a good run-up to anticipated good results. Wouldn't worry about it.

Regards, Ian

[shuisky] 22/1/2007 15:48

I agree with everything WJCCGHCC says and have said similar elsewhere (TMF) re:results (with the slightly pedantic exception that I think the hardman forecast is 2.0555m PTP post amortisation?)

I would also point out the CapEx is now less than 1% of turnover, Change in WC was (by my calcs) only 351k whilst turnover increased by 9.432m so change WC/Sales was only 3% They've tended to convert 85% of operating profits in to operating cashflow. Interest will be say 230k and tax at close to 31% for the year.

By my rough calcs, this could all result in about 1.71m free cash flow for 2007, putting it on a forward yield of 1.71/37.5m=4.6% IMHO, that's too cheap for a company growing earnings in double digits+. As long as European GDP growth holds up, so will patent/TM growth, and therefore MUR revenue.

However, we need to know if the operating margins are sustainable and some more 'colour' on Fitzpatricks please!

[roughjustice] 22/1/2007 12:59

It is defintely difficult to breakout the figures and I have the EPS figures around 22p and about 25p for 2008 which reads as a p/e of 21 (when I sold) this year, a p/e of about 19.

I expect they will do better than this, but the share price has already moved up considerably to reflect that. I don't think the shares are expensive but I would not buy more at these levels. As a long term holder since 100 odd pence, it was time to reduce the amount I had in this company.

Note I am still a holder tho.

[wjccghcc] 22/1/2007 12:14

It's never a bad thing to take a profit.

They talk about strong organic growth and organic growth in line with the market of 8%. They have high operational gearing because of their mainly fixed cost base so this can translate to a significant profit increase.

They don't break out the contribution from Fitzpatricks and given we only had 04 turnover figures for them and one of the four senior directors left, it's hard to tell from the figures what organic growth is running at until the full year numbers are released. I suspect the 05 Fitzpatrick turnover was a lot less than the 04 figure of 3.4mm else why did they only cost 1.3mm?

In any case, it looks likely that EPS will come in at around 25p putting them on a current year PE of 18 with perhaps EPS of 30p and PE of 15 for y/e May 08. Not much of a premium IMHO for the only listed pureplay in the patent area and a market leading consolidator - unless you think the growth in patent applications will level off or decline in the near future.

On that valuation I'm happy to trust there is organic growth as management say and will add if they overshoot on the downside.

[roughjustice] 22/1/2007 11:40

My main concern was about relatively little organic growth, and as such I have sold down my holding. Whilst it is great they have increase margins, such a low turnover growth makes it hard for me to justify holding a sizeable amount on the currently high premium the company has.

[wjccghcc] 22/1/2007 10:35

Yup, they could have presented it a bit clearer than having to go through the notes. This one moves quite significantly on small volume so definitely one to add on dips.

[wilmdav] 22/1/2007 10:19

You are absolutely right about PTP, WJ. I guess I'm not the only one to be confused, hence the current decline. Entirely agree about revenues and find the focus on margins encouraging. Only just noticed that directors hold 45% of shares. That's encouraging too.

[wjccghcc] 22/1/2007 09:42

I think PTP is ahead. I have forecasts of 1.8mm post-amortisation or 2.6mm pre-amortisation. The actual figures were 1.19 and 1.51mm so, given the lack of seasonality, I'd say they're well positioned to beat again for the full year.

Not that worried about revenues - with rationalisation of Fitzpatricks, they're probably focussing more on the higher margin value added work.