Premier Technical Services Share Discussion Threads

[skatersav] 12/4/2019 16:38

Hold on a minute... Prem Tech received £1.6m from Trinity. £1.6m! And this was supposed to be a share of the profit increase? I don't buy that one bit. Here's a statement from Prem Tech about the transaction:

“Trinity brings with it 2,000 customers, 8,500 one to seven-year maintenance contracts, £24m of reoccurring revenue and an annual run rate of circa £40m with a forecasted EBITDA of £2.2m."

So they are forecast to do £2.2m of EBITDA, presumably in the coming 12 months to December '19, and they just paid PTSG £1.6m on a profit share on an increase in their profits to June 2018? That doesn't stack up. The profit share would have to be over 100% of the increase in profits! Trinity did £1m of EBITDA in the 12 months to June 2017.

[rivaldo] 12/4/2019 10:35

PTSG's accrued income pre-invoicing is absolutely fine in terms of standard practice in their sector.

The fee income was invoiced in H2, but it could have been agreed much earlier (in H1). Obviously it's not ideal, and should have been better explained. But I can see the reasoning behind it (and also why it can be sen as smoke and mirrors).

And this year's forecast of 13.6p EPS doesn't include any such one-offs, so presumably the company must be pretty confident of achieving this from continuing good performance from core activities.

I'm happy to hold. It's interesting that we haven't had a single RNS re institutional sales since last October (and that was Bob Morton!), and it was stated to me that all those institutions who've been presented to post-results are happy and are continuing to hold.

I note that Danske Bank were increasing their stake at around that time up to 4.6%. Given their troubles since then, I wonder if they've been forced sellers since then, which might account for what's been happening.

[hatfullofsky] 12/4/2019 10:27

1 On the 15th Oct RNS I can't see where it says that the proposed acquisition (presumably Trinity ) is "for £4m"

This was the deferred element for the Guardian Acquisition £12m cash

[cockerhoop] 12/4/2019 10:02

Rivaldo,

Good work contacting the company.

The timing doesn't convince me though, all the consultancy work was completed in H2 (and we know PTSG generally book revenue before they even invoice :-)). Trinity was muted as an acquisition at the placing presentation in October so very little time for them to benefit from sales uplift. Feels like smoke & mirrors to me.

[eezymunny] 12/4/2019 09:49

What's impressive in that presentation is the absolutely yawning gap (about 342 adjusted Grand Canyon's worth?) between adjusted profits and free cash flow.

ps "CASH FLOW" appears in 4 places in those slides and "adjusted" appears 19 times. That's an adjusted "adjusted" to "cash flow" ratio of 17 in true PTSG spirit :)

Cash is king. Never forget it.

[rivaldo] 12/4/2019 09:19

I spoke to the company to ask primarily about the Trinity consultancy income. It derived from advice PTSG gave to drive Trinity's profitability last year, after PTSG initially looked at the company but at that stage believed that its profitability was lacking and withdrew. Trinity agreed that PTSG would be entitled to a percentage of improved revenues resulting from PTSG's advice and help. I assume that this plus charges for the time and expense involved in helping Trinity amounted to the full receipt from Trinity.

Also, the interest-free loans to key staff, which date back a few years now, result from an incentivisation and retention scheme under EMI share options - when it pays out then the loans will be deducted from those amounts.

Finally, take a look at the impressive presentation re last year's results, particularly as regards the reductions in debtor days, debt etc:

[baddeal] 10/4/2019 12:34

Something doesn't smell right with this. Glad I got out a few months back but I still watch it carefully

[100laila] 09/4/2019 16:08

Hi IdrcvnSince when does the consideration (upfront or deferred) for buying a company normally go through operating profit!!! Sorry this is exceptional as this should go through investment not P&l. As I explained previously it only goes through P&L where the deal has been constructed in such a way that the consideration is contingent on the previous owner remaining in employment with PTSG You are purposely ignoring/ distorting the points of my previous post. I guess you have an agenda and you are purposely posting misinformation.

[ldrcvm] 09/4/2019 14:42

Thanks for that 100Laila,

I can't see why the Deferred/consideration balances should not be seen as a normal operating cost. There is nothing exceptional about them.

If you take 2018: You correctly state that £5.8m has been expensed but it still remains on the balance sheet as a liability under deferred consideration see note 18.

This implies that these costs are also included in the revenue number. (Otherwise you would be double counting on the bottom half of the balance sheet)This has the effect of increasing revenue and exceptional items.

As to the share based charge, it is true they are now non recurring short of another plan being put into place. If you believe, as I do that the "adjusted" ebitda numbers are a wholly inappropriate measure upon which to measure compensation, then it begs the question as to why they were there in the first place.

The market seems to be coming round to the fact that PTSG should be valued on its statutory rather than make believe earnings. I think it may have some way to go on this.

[buffetteer] 09/4/2019 14:35

Idrcvm
Rather than sneer from the sidelines why not ask the Ceo or Cfo for answers to your questions as we have . That way you would be speaking with a modicum of knowledge

[cockerhoop] 09/4/2019 14:34

Director remuneration (in any form) should not be considered exceptional, nor should re-organisation costs in a group having a business model of acquisitive growth. imo.

[100laila] 09/4/2019 13:28

Hi IDRCVM

Your analysis is simplistic.

The largest exceptional items each year are the deferred consideration balances relating to acquisitions. PTSG typically acquire companies with at least two years worth of deferred consideration which is contingent on achieving performance targets AND the owner remaining in employment with business. This last condition results in IFRS requiring the total value of deferred consideration to be expensed in the P&L as it is earned. If there was no condition requiring the owner to stay in employment, the deferred consideration would be added to investments - ie not go through the P&L. This is an accounting anomaly.

The values of deferred consideration expensed as an exceptional items in the the P&L for the last 4 years are :-

2015 £0.9m
2016 £1.9m
2017 £3.5m
2018 £5.8m


The next largest exceptional charge that has occurred over the last few years is the share based charge relating to the option plan given to the Operations director that he negotiated when he joined the company - the plan was linked to profit growth. He was not a founding director. The plan is now complete so there will be no further share based charges required for this going forward. The values of the share option charges in exceptional costs are :-

2015 £2.3m
2016 £1.9m
2017 £3.0m
2018 £2.4m

The remaining items are much smaller and relate to intangible amortisation and restructuring costs (will include advisers costs on the acquisitions transactions) and of course the IPO cost.

[ldrcvm] 09/4/2019 12:35

This is a quote from the book I mentioned earlier "Financial Shenanigans..." Its from the section on acquisition accounting and the misuse of metrics.

"Be sceptical when Gaap (in this case read IFRS) earnings materially lag adjusted earnings. A good rule of thumb to assess the legitimacy of a non Gaap metric is to compare it with the corresponding Gaap based metric, so if the non Gaap adjusted earnings tracked closely to Gaap based net income we consider the non Gaap equivalent as legitimate. Of course if the non Gaap metric continually produced A plus results and the Gaap based equivalent produced D minus results investors should reject the non Gaap metric".

Accounting Year £ PTSG IFRS PBT. £Adjusted PBT £ Difference

2013 2,514,345 3,029,118 514,773

2014 1,172,654 3,702,370 2,529,716

2015 830,984 5,002,626 4,171,642

2016 2,614,399 7,451,789 4,837,390

2017 1,793,376 10,151,137 8,357,761

2018 3,723,420* 14,254714 10,531,294

*flattered by other operating income of some £2.2m

I thought I had seen it all with Victoria Carpets but this makes them look like angels.

Love to hear a reasoned argument from bulls as to why these adjusted numbers provide any useful purpose for investors.

[eezymunny] 09/4/2019 12:21

Oh dear dear dear dear dear. Still lapping up the paid for research which homes in on the massively adjusted numbers and ignores the numbers that matter.

Absolutely laughable.

[rivaldo] 09/4/2019 12:07

New Edison report....forecast 13.6p EPS this year with a 1.9p dividend:



Summary:

"FY18 results met market expectations but PTSG’s share price performance
over the last six months has been weak, in contrast with rising earnings
estimates over this period.

Acquisitions have been a good fit in our view and with a prospective net debt:EBITDA below 1x we still consider the company’s financial position to be set conservatively.

A PEG of c 0.7x and FY19 P/E of 7.2x provide a gauge of the weakness of sentiment for PTSG, which we expect to deliver a double-digit three-year earnings CAGR."

[100laila] 08/4/2019 10:43

Just for clarity re point in post 1177 above, the acquisition discussed in the £20m placing RNS for £4m was not Trinity. In the presentation that accompanied the placing, the company listed the £4m deal and five additional near term acquisition opportunities with sector and turnover details. One of these five was clearly the much larger Trinity deal and I have since had this confirmed by management. My understanding is the smaller £4m deal fell through.

[onjohn] 07/4/2019 16:09

Nasty posty!

[cockerhoop] 07/4/2019 15:08

Skatersav,Don't worry about that, I find these Red Flag plays fascinating as to how they unfold and much more educational trying to understand the management motives involved. I'll not gain financially either way but enjoy the cerebral challenge of looking at slightly 'whiffy' accounts.Loads to keep bears interested here, receivables, accrued income, the large disparity between adjusted and statutory earnings, poor FCF and the large cash balance along side large debt (why? Unless window dressing or worse)

[cockerhoop] 06/4/2019 15:26

Hi ldrcvm,With regard to your points1. It's lower down the statement under Pipeline of Future Acquisitions.2. My mistake - I'd taken the £14m hurdle to be based on Adjusted Operating Profit rather than Adjusted EBITDA.Currently on holiday so only have access via my phone so apols for not being more comprehensive.

[eezymunny] 06/4/2019 07:38

Err the CAKE accounts were agreed with the auditor! etc etc

[buffetteer] 06/4/2019 06:56

Consultancy fee was paid for work done in 2018 . It was explained to me and is completely legitimate . It has been agreed woth the auditor . I cannot explain more dienti commercial sensitivity . If you knew the reasoning you would not think it smells.