Partway Share Discussion Threads

[wjccghcc] 26/4/2018 13:44

Good that they're better prepared but surely they're still likely to take a big hit?

[aishah] 26/4/2018 11:33

From the final results:
-- Legislation - e.g. IR35, GDPR
IR35 has increased the 'churn' rate of contractors in the Public Sector as they leave to work in roles which are not assessed to be within IR35, elsewhere in the Public Sector, or leave for roles in the Private Sector which are assessed differently. Our exposure was greater than most with a high concentration of Public Sector contractors. Parity tracks changes directly and as an active founding member of the Association of Professional Staffing Companies (APSCo) which lobbies and advises on changes. An internal working group changed our processes and ensured all stakeholders (client, candidate and staff) were informed through the transition. The processes are now business as usual, sales activities have increased, and our broader managed services in the consulting business have expanded to support clients who are also impacted by increased churn. If the same rules are applied to the Private Sector as rumoured, we will be very well prepared. We are following the same principles with a working group in place focused on GDPR.

[wjccghcc] 26/4/2018 11:15

Does anyone know about the impact of IR35 on PTY if expanded to private contractors?

[insideryou] 26/4/2018 10:20

Long term holder, but just could be the start of a re rating?

[qs99] 26/4/2018 10:13

Thanks will do, have bought a few this am...

[gr1982] 26/4/2018 09:53

chrisdgb - @mginvestor and @glasshalfull1 over on twitter have been buying.

I've joined them today. Worth going through the recent GHF posted above for newcomers

[teamaccounting] 26/4/2018 09:48

Also , this years stat accounts made mention for he first time that they have ver @9m of usable corporation tax losses - my understanding of this means they will not be paying any corp tax for the next 5 - 8 yrs minimum. Same note made mention of >3200m of capital tax losses they have - I have no idea whether these would be of any value to the existing company or a prospective purchaser

[chrisdgb] 26/4/2018 09:47

Has this been tipped...??

[nico115] 24/4/2018 22:14

Agreed pushMy worry would be on turnover of 85m a profit of 2m isn't great so with such low margins any economic downturn would hit parity hard

[push n run] 24/4/2018 20:59

Looks like a great turnaround story here, very undervalued after the disposal of Inition. My only questions would be:

1. Dividend policy going forwards - What proportion of free cash flow do they intend to pay out? Their strong cash generation could support a cracking dividend yield at the current share price. For example, even if they were conservative and set themselves a dividend cover of two, that would still be £1m+ which is over 8% at the current market cap. This would also leave them with plenty of cash for investment & looking after the pension fund.

2. There's a mention in the latest accounts of identifying new acquisition opportunities. Isn't trying to grow through acquisition what got them into difficulties in the first place? They've only just got rid of Inition, why not try growing organically for a few years first?

[nico115] 24/4/2018 20:08

When I said "ramping " I meant the market makers who bought a lump at 11p and have marked them up to try to sell them I think long term these are cheap but can't see any rush with a large overhang and general market very weak especially smaller companies which are mostly drifting due to a buyers strike

[glasshalfull] 24/4/2018 19:51

PTY

Delighted that Parity will be presenting at #Mello 2018 this coming Friday. Only a few tickets left for the event.



As I tweeted on Friday, I added 500k shares to my holding as ultimately I believe this an excellent risk/reward investment at the current share price. If Mr Swinstead (retired CEO) is indeed selling his entire holding (which nobody has yet confirmed) then this simply allows the opportunity for investors to add at a lower price. I’m in touch with a couple of PI’s that indicate they would add several million if the stock is indeed available. We saw some late trades today...perhaps they came from Mr Swinstead???

Before I provide some of the rationale for my investment here, worth also revisiting Philip Swinstead’s holding as even though there are infrequent posts here, clearly some posters are dismissive of an investment as this time due to the perception that Mr Swinstead is a seller.

Why let facts get in the way?

Now, he may be looking to sell a few shares or ... perhaps he is indeed looking to liquidate his entire holding. Let me review the holding RNS’s that apply dating back to the time when he stepped down from the board in Nov 2015.

—-

04.11.2015 - P Swinstead - Stands down from Board (following 5 years)
17.11.2015 - BUY 850,000 (9.9p) = 14,145,215 shares
09.12.2015 - BUY 150,000 (11.9p) = 14,295,215 shares
21.12.2015 - BUY 663,000 (10.75p) = 14,958,215 shares
03.04.2018 - Holding RNS = 12,043,751 shares (therefore SOLD 2,914,464 shares between 2016 and 2018
13.04.2018 - Holding RNS = Stating, “wife’s shares removed as I’m no longer a director - Parity advice”.

In other words, he no longer requires to declare his spouse’s holding as no longer bound by code of conduct for Directors. His holding is quoted at 10,075,351 shares with additional info that his wife’s holding was 1,968,400 & these shares are now excluded from the RNS & the voting rights threshold. So if we add P Swinstead’s shares 10,075,351 + 1,968,400 held by his wife = 12,043,751 shares.

Therefore, following the purchase of 1.6m shares in 2015 he has subsequently sold 2.9m between the beginning of 2016 & April 2018, retaining 10m shares as at 13th April 2018. As mentioned, I’ve absolutely no idea if he’s looking to sell further - and may have done so today - but we are only talking about £1.1m - £1.4m stock (if you include his wife’s holding) which may be attractive to an institutional holder...that’s if it is available & he’s intent on selling. What I’m attempting to say is this is not a material amount of stock however way you wish to dice his holding.

Now the main reason for my post...a quick summary of why I’ve invested as an overview prior to their Mello 2018 appearance.

*Strong Results (ignoring Inition - now disposed)

A fortnight ago we had confirmation that the continuing businesses comprising Professionals & Consultancy had beaten forecasts...they were in fact 73% ahead on FY16. Diluted EPS for continued operations were 2.08p (PER of 5.5 at 11.5p share price).

*Cash generative

Importantly that cash generation was even stronger than forecast resulting in net debt falling to -£1.6m versus forecasts that indicated that debt would only fall to -£2.0m. So, £400k better than forecast & continuing the amazing cash generation that has seen debt fall by almost £6m in 2 years!

Net Debt Reduction

2015 = £7.4m
2016 = £4.4m
2017 = £1.6m

2018 = estimates of net cash position

Now with Initiation off the books I believe we can expect the company to achieve a net cash position this year as the disposal improves cash flow by £712k (the cash cost of funding Inition’s operating losses).

*Pension Liability reduction

It should also be noted that the pension liability reduced from £1.9m to £1.1m in 2017.

*EV/EBITDA, PER & PEG low

The EV/EBITDA rating of 4.8x & PER of 5.5 look far too low for a company that is exhibiting strong growth & generating cash. Indeed, the PEG rating is only 0.55 where 1 is fair value (see Jim Slater’s - Zulu Principle).

*Earnings raised

Earnings were raised by +6% for 2017 following their “slightly ahead” trading statement in Dec 2017. WH Ireland also indicated that they had raised EPS by +13% for 2018 prior to the Inition disposal.

*Increasing Margins

The strong performance of the Consultancy Division continued during 2017 with revenue up +79% to £9.5m. This is excellent news for the company as the operating margin in Consultancy was 12% last year & helped improve the overall operating margin for the company to 2.5% from 1.9% the previous year. This growth in Consultancy should result in ever improving margins & thus profitability in the coming year.

It should also be noted that Consultancy was 33% of 2017 revenues & this also provides greater revenue visibility due to recent contract wins (£5m+).

*Positive Outlook

The company announced significant contract wins across both divisions recently and mentioned in their results that,

“We aim to grow Group revenues, with further focus on the development of the consultancy business driving margins, and to manage that growth with continued strong cost management.”

As mentioned, WH Ireland upgraded earnings on the back of results & believe there to be momentum in the business.

Conclusion

Parity achieved 2.08p diluted EPS las year on a continuing basis. With Inition now sold the company will now be in a position to focus on driving growth in the continuing businesses & therefore earnings of 2.2p - 2.4p may be achieved on a diluted basis...therefore they may be on a prospective PER as low as 5.

So on the basis of a move back to net cash, strong cash flow, improving margins, low PEG, low PER & earnings growth I firmly believe this an excellent risk/reward opportunity as per my opening remarks.

In response to one poster, WH Ireland do not appear to be ramping the stock IMHO. They issued a brief 1 and half page update on the day of results and only 2-paragraphs on the disposal of Inition yesterday.

Declaration

I’ve been adding to my position as confirmed at the beginning of my post.

Hope this post useful for any investor wishing to conduct further research. Look forward to meeting some of you at Mello over the next few days & where we will all get the opportunity to evaluate a number of investment opportunities including Parity, watch presentations & meet the management teams of the companies in attendance for what will be a fantastic event.

Kind regards,
GHF

[nico115] 24/4/2018 19:21

EyseLooks like Ireland took them on the book but has no buyers so he has whacked em up and offers on links Not fooling anyone ...these will be back down in a blink

[+eysenck] 24/4/2018 18:31

Swinstead offloading quite a few today by the looks of things and share price holding up. About 1.5 millions shares in a few batchs reported late. I'm gritting my teeth and taking the pain!

[nico115] 24/4/2018 10:40

Looks like Ireland are ramping PTY with little success Everyone knows from the last RNS that there is a decent seller around Buyers are rightly being patient

[nico115] 23/4/2018 17:45

No interest davidoshRommel hasn't had the decency to return my call..I won't be visiting him on his stand

[davidosh] 23/4/2018 16:58

Just to mention that Parity Group are presenting at the huge Mello2018 investor event at the end of this month so good timing with results just out.

They have never presented at a Mello event before and Alan Rommel is scheduled to present on Friday 27th April at 1.30pm. The company will be available on their stand for both days. Here is the link if any of you would like to come along and meet them....

[nico115] 23/4/2018 11:39

Maybe cheap but hard to offload a big chunk so looks dead money to me

[chrisdgb] 23/4/2018 09:33

18.5p price target from WHI today, cleaned up structure etc......Still looks too cheap.

[kemche] 20/4/2018 19:30

Where is this supposed £6m of goodwill write off supposed to be coming from? Has anyone actually read the accounts? Note 7 might be a good place to begin. Look also at "Assets classified as held for sale" of £791k and "Liabilities classified as held for sale" of £395k - so a net asset held on the books for £396k, against which they will receive £200k - resulting in a loss to be recognised in the year of £196k.

Have they introduced a new accounting standard that only nobilis knows about?

[napoleon 14th] 20/4/2018 17:07

Good news for PTY.
They could even charge a loss on that sale, as nobiliis says,
reducing future corporation tax liabilities (saving cash),
with a bit of wonga (£200K) & much improved cashflow by £712K p.a. approx.

That just leaves the question of the Swinstead overhang............

[weatherman] 20/4/2018 17:06

Parity reported eps of 0.01p if you include Inition, and 2.08p if you don't. The ongoing loss at the non-core part has held the stock back. As said above it will incur a non-cash cost of ~£6m, but if the eps of 2.08p is the ongoing earnings, then they are looking very cheap. A PE of 10 would give a price target of 21p, PE 15 would give you 32p. All imo.

Edit: Although from previous posts it seems Inition was recently valued at ~400k. So the purchase price may already have been written off in previous years. If so, it may only incur a non-cash cost of 200k [edit].

[kemche] 20/4/2018 16:06

You must teach me how to read a set of accounts nobilis.

[nobilis] 20/4/2018 16:02

They paid £6m so six million goodwill write off, Ouch!