Northgate Information Solutions Share Discussion Threads

[slaterlp] 06/5/2007 10:47

This from the Independant

The Investment Column: Northgate Information Solutions has a lot to prove
M&C Saatchi; St James's Place
Edited by Andrew Dewson
Published: 03 May 2007
Our view: Hold

Share price: 82.5p (-5p)

Chris Stone, the chief executive of Northgate Information Solutions, has taken a big step toward fulfilling his ambition to turn the outsourcing firm into the world's largest payroll processing company. Northgate has offered £257m to buy the Belgian human resources services provider Arinso after striking a deal to purchase a 60 per cent stake from the company's founder.

Arinso is Northgate's largest ever acquisition, taking the Hemel Hempstead-based business into 40 new territories. However, the deal represents a sea-change in the company's strategy in that Arinso resells software from the industry heavyweight SAP whilst Northgate offers its customers its own ResourceLink software.

Mr Stone explains that, while Northgate has built a solid position in the UK, offering its own software, large global customers are completely reliant on SAP. Thus, combining the two sub-scale companies will allow Northgate to take a two-tier approach, targeting large customers with SAP-based services while offering smaller customers ResourceLink.

With the company now the third-largest provider of payroll services in the world, management focus will likely rest on its fast-growing human resources business. This has raised questions about Northgate's underperforming public sector division, with analysts speculating it could be sold off to raise funds to pay down debt. However, Mr Stone dismissed such talk, arguing the company has leveraged its lower-growth, cash generative, assets to invest in higher-growth areas.

Northgate has a great track record in improving the margins of acquired businesses. Its valuation of 16.5 times projected 2007 earnings leaves plenty of room for upside if the Arinso deal pays off. However, such a radical change in strategy leaves the company with a lot to prove. Until the first signs emerge that Northgate has successfully integrated the two businesses and started to capitalise on the increased scale of the company, the shares could remain under pressure. Hold.

[slaterlp] 06/5/2007 10:43

Thanks soulman.

I wondered if that was his stance. He usually does take a while to digest news and then make a well researched comment.

Prior to the trading update and takeover he was still a buyer up to 90p, and 120 target I think.

Surely, if the takeover gives NIS better future revenues, then a small setback on the trading statement will have, or at least should have little effect on the overall view.

As pointed out above, expanding into Europe, just as the EU is getting growth, as well as a foothold in Asian Markets, must be a good move, as NIS stated aim now is to be the largest payroll services provider.

[hotfinance14] 05/5/2007 11:50

We are now in the European market and i think this will be good for the company.Stone will merge this well with NIS.

[soulman] 05/5/2007 11:22

TW has commented on the trading update but has said that he needs more time to comment on the takeover.

[hotfinance14] 05/5/2007 10:15

I think we can trust the management.The gradual increase in the dividend payment will prove this.

[slaterlp] 05/5/2007 09:56

IC says NIS high enough for now. But when you look at the IC record, they often say that, or even time to sell, only for the stock in question to go on to a far higher share price

The Times thinks that NIS management are shrewd enough to know exactly what they have bought into, and will produce the goods. They say Buy.

So far nothing from TW. That makes me wonder, as he follows NIS closely.

I get emails from T1ps.com saying when TW has an update.(even though I cant read the update as i am not a member anymore). But TW has so far said nothing it seems. If anyone knows different, could they post the general flavour of the TW, update without breaking copyright. I think T1ps1 are a bit hot under the collar about that sort of thing :)

Anyway, the share price seems to have stabilised, and any news from NIS (even good) has always sent the share price lower. Typical reaction to anything NIS does. My feeling is that NIS are a completly different company to the one I bought into over 7 years ago, and I think this will be a great deal when looked back on in say 6 months time.

[slaterlp] 04/5/2007 10:01

I too would like to know what TW makes of it.

[bhoy1966] 03/5/2007 15:58

filmboy,

Good luck with holding, NIS will always be a stock to keep my eye on, if things progress quicker, or more positive news comes out, then i don't think i would take too long to think about buying back in.

But for now, i am happy out, with other potentially better investments out there.

[filmboy] 03/5/2007 14:58

i will continue to hold. chris stone and the board have hardly put a foot wrong over the past few years, this is a very big leap for the company and the city did not like it one bit. we had a win double yesterday, a warning of lower profits and a new aquisition. the new buy looks expensive but i still have faith in their judgement and as for the warning on profits once the home office sorts itself out nis will be back on track. i see downside in dilution of shares and also do not expect increase in dividend. we are looking at another three years to see benifits of this merger, that will make me a ten year holder of this stock.....ouch.

[aldasoa] 03/5/2007 11:38

I too sold out NIS yesterday, but I only held 3k anyway. It seems like a long term stategy from the company so I don't see any short term gains in share price. 1 pound by the end of the year seems rather unlikely, but what do I know? I'd be curious to know if TW has any comment.

[bhoy1966] 03/5/2007 09:45

I too sold out yesterday. Just can't see the upside for some time, and if markets fall slightly, this is the kind of share that could be over marked down.

Once this aquisition is digested, if they have paid top dollar, then investors might not be so happy and sell.

[stateside] 03/5/2007 09:09

It's a fine call T. Certainly not a short term holding is it? I just can't see anything around that looks more appealing (apart from Tate and I've got enough of them at the moment) and I'm happy to be fully invested in this market for the time being. Good luck to you.

[aspex] 03/5/2007 09:08

They do have to offer to take over the balance of the Belgian company.
They do not have to improve on the offer made to the major holder so it is possible they may not get all of it.
The statement seemed positive on earnings so presumably they are happy with the cash flow.
The lower current price is only back to a point before the recent t/o activity.

[tradx666] 03/5/2007 08:52

Stateside,

Well good luck to you, I decided otherwise yesterday, I do think that this has killed off any hope of a t/o - and that it will take two or more years for NIS to prove that the new expanded strategy can really deliver.

In the short term, I can see this pulling back at least 10%, and perhaps even more, I haven't finished my own /guesses/estimates at the cash impact here, but already I'm not overly convinced that they won't need more cash soon..


regards

T..

[hotfinance14] 03/5/2007 08:47

Longterm this looks very good.

[stateside] 03/5/2007 08:21

My overnight thoughts were to sell this morning, but have decided to hold for the medium term. More indecision on my part!!!!
I don't think the price will move an awful lot in the next few months. I suppose this has scuppered any take over/private equity interest for the forseeable future but it could make it an interesting target later in the year. On the other hand, if they can achieve what they are aiming for then we could get some real global growth here.

[aspex] 03/5/2007 08:13

Times Tempus:
By acquiring a 60 per cent stake in Arinso, of Belgium, Northgate Information Systems clears itself a path for a £260 million debt-financed takeover of the rival provider of HR software and outsourcing services.

Combination of the two companies will give a big boost to Northgate's international ambitions. Arinso counts GM, Unilever and Philip Morris among its customers. It operates in 27 countries across five continents and provides an essential next step in Northgate's development.

There are risks in bringing the two companies' products together, but there are opportunities, too. Asia is one. In many cases, the products will prove complementary and cross-selling is possible.

All acquisitions carry risks and that goes some way to explain the dip in Northgate's shares yesterday. However, Northgate's management are well regarded and deserve the benefit of any doubt. Buy.

On the other hand from The Independent:
Chris Stone, the chief executive of Northgate Information Solutions, has taken a big step toward fulfilling his ambition to turn the outsourcing firm into the world's largest payroll processing company. Northgate has offered £257m to buy the Belgian human resources services provider Arinso after striking a deal to purchase a 60 per cent stake from the company's founder.

Arinso is Northgate's largest ever acquisition, taking the Hemel Hempstead-based business into 40 new territories. However, the deal represents a sea-change in the company's strategy in that Arinso resells software from the industry heavyweight SAP whilst Northgate offers its customers its own ResourceLink software.

Mr Stone explains that, while Northgate has built a solid position in the UK, offering its own software, large global customers are completely reliant on SAP. Thus, combining the two sub-scale companies will allow Northgate to take a two-tier approach, targeting large customers with SAP-based services while offering smaller customers ResourceLink.

With the company now the third-largest provider of payroll services in the world, management focus will likely rest on its fast-growing human resources business. This has raised questions about Northgate's underperforming public sector division, with analysts speculating it could be sold off to raise funds to pay down debt. However, Mr Stone dismissed such talk, arguing the company has leveraged its lower-growth, cash generative, assets to invest in higher-growth areas.

Northgate has a great track record in improving the margins of acquired businesses. Its valuation of 16.5 times projected 2007 earnings leaves plenty of room for upside if the Arinso deal pays off. However, such a radical change in strategy leaves the company with a lot to prove. Until the first signs emerge that Northgate has successfully integrated the two businesses and started to capitalise on the increased scale of the company, the shares could remain under pressure. Hold.

Which to believe?

[hotfinance14] 03/5/2007 07:42

It will be interesting to see what dividend is paid on the next results.

[aspex] 03/5/2007 07:31

I would have thought that the 'earnings up' statement would have helped.
Lack of profit does not destroy companies but lack of cash and earnings certainly does.

[stateside] 03/5/2007 07:30

Indy:
The Investment Column: Northgate Information Solutions has a lot to prove
M&C Saatchi; St James's Place
Edited by Andrew Dewson
Published: 03 May 2007
Our view: Hold

Share price: 82.5p (-5p)

Chris Stone, the chief executive of Northgate Information Solutions, has taken a big step toward fulfilling his ambition to turn the outsourcing firm into the world's largest payroll processing company. Northgate has offered £257m to buy the Belgian human resources services provider Arinso after striking a deal to purchase a 60 per cent stake from the company's founder.

Arinso is Northgate's largest ever acquisition, taking the Hemel Hempstead-based business into 40 new territories. However, the deal represents a sea-change in the company's strategy in that Arinso resells software from the industry heavyweight SAP whilst Northgate offers its customers its own ResourceLink software.

Mr Stone explains that, while Northgate has built a solid position in the UK, offering its own software, large global customers are completely reliant on SAP. Thus, combining the two sub-scale companies will allow Northgate to take a two-tier approach, targeting large customers with SAP-based services while offering smaller customers ResourceLink.

With the company now the third-largest provider of payroll services in the world, management focus will likely rest on its fast-growing human resources business. This has raised questions about Northgate's underperforming public sector division, with analysts speculating it could be sold off to raise funds to pay down debt. However, Mr Stone dismissed such talk, arguing the company has leveraged its lower-growth, cash generative, assets to invest in higher-growth areas.

Northgate has a great track record in improving the margins of acquired businesses. Its valuation of 16.5 times projected 2007 earnings leaves plenty of room for upside if the Arinso deal pays off. However, such a radical change in strategy leaves the company with a lot to prove. Until the first signs emerge that Northgate has successfully integrated the two businesses and started to capitalise on the increased scale of the company, the shares could remain under pressure. Hold.

[stateside] 03/5/2007 07:27

UK Analyst
"News of its largest acquisition to date failed to inspire positive sentiment in the shares of software company Northgate Information Solutions (NIS), which closed 5p lower at 82.5p. The group said it had bought a majority stake in Belgian human resources company Arinso for 228.4 million euros, in a move to strengthen its human resources software division. However, it was the accompanying news that the full year EBITDA for the period ended 30th April would be towards the lower end of the range of expectations (although earnings per share will be at the top of the range) that knocked shares lower."

[grlz] 02/5/2007 16:32

feels expensive but with a 60% stake to acquire the seller was always going to hold out for top dollar - and the guy ends up holding around 45m shares of NIS which may form an overhang?

I believe Stone can leverage NIS into this new global platform he has created, but I can see the share price being held back for months though I would like to think holders will see a £1 before the end of the year, were probably see 75p also!

Looks like no one was interested in the managed services division @£150m hence the cold water from Stone - with this latest push into HR, managed services looks like a redundant unit - But if we can dump it in future the shares will flip as it paydown some of this mooted 500m debt facilty imho

grlz

DYOR/AIMHO

[hotfinance14] 02/5/2007 14:51

Could see some big T trade sells.

[hotfinance14] 02/5/2007 14:51

Could see some big T trade sells.

[willfy] 02/5/2007 14:50

Almost 4 million buys, out of a total of 6 million trades, and the price drops 6%.
Strange trading day !!!!!!!