Public Recruitment Share Discussion Threads

[stemis] 22/9/2006 08:39

Shares in education, health care and social work focus staffing group Public Recruitment fall sharply last week ahead of its interim numbers. It appears that fears were unjustified, as the group posted a good set of fits-half figures - sending the stock 8p ahead to 41p. In the six-month period to 30 June, pre-tax profits jumped to 1.234 million pounds from 816,000 pounds and fully-diluted earnings per share came in at 1.7p compared with 0.9p in the equivalent period last year. No dividend was paid. The group was also upbeat on the future, saying that it was growing revenues and improving both gross and net margins.

UK Analyst - The Stock Market Reporter

[pictureframe] 22/9/2006 07:45

will be interesting to see if we can break 50p seems to be a real sticking point

[davidosh] 21/9/2006 23:05

The two broker forecasts appear to be terribly out of date and certainly the Stemis estimates for the interims earlier in this thread seem to have been far more accurate......Any thoughts for how the same figures will now pan out for the full year?

[cloudfall] 21/9/2006 14:26

Plenty of selling, price still holding. Must be a big buyer in the midst.

[tiltonboy] 21/9/2006 11:19

MJ,

No. I had an e-mail yesterday evening telling me of the change. I wasn't going anyway, so it didn't matter to me.

tiltonboy

[mjcrockett] 21/9/2006 11:06

WJCCGHCC, Thanks for replying to my earlier query re cashflow and thank you SteMis for your post, which is roughly in line with my estimate of £4m per year to reduce debt at the current level of business. So whilst agreeing that this is not the safest of investments, I am content to hold.

Tiltonboy, did they give any reason for cancelling the analyst presentation?

MJ

[stemis] 21/9/2006 09:53

Fair points about the cashflow/debt however

1. It is in the price and more. On a debt free basis the company is trading on P/E [Taxed EBIT/Enterprise Value] of 6.7.

2. You are ignoring the impact of working capital movements. The cashflow was H1 2006 was reduced by increases in working capital due to recovery from the dip in trading in H2 2005. On an annual basis (H1 2006 + H2 2005) cashflow from operations has been £6.206m. This includes exceptional costs of £338k. Knock off an underlying annual interest charge of £1.5m and tax of £1.5m and you have underlying cashflow over the last year of £3.5m. At this sort of rate in 2-3 years debt would be down to mid teens of million, which doesn't seem so bad for a £100m turnover business with probably a £6m PBT.

3. The company is diversified across 3 sectors; so should have some insulation against a downturn in one of them. All 3 are in long term growth areas; education, health and social care.

Overall the company is doing all that can be asked of them. I'm disappointed the share price isn't a lot higher but prepared to wait.

[vida] 21/9/2006 09:12

It's a fair point and the one weakness I see. The point about the Cash Statement being more important is true. What comforts me and keeps me holding is that the management are keen to make this the priority. My point is that with the concentration of public sector recruitment into fewer hands, net fee income as a % of TO should increase, as should cash flow.

[wjccghcc] 21/9/2006 09:08

From the cashflow statement mj, which for a heavily indebted company is more important than the income statement IMHO.

Net operating cashflow 2,436
Servicing of financing (1,130)
Taxation (245)
Capex (51)

Gives net cash available for debt repayment of 1,010. Double that for the year and that's 2mm repayment a year on 24.5mm debt - with a possible rise in finance costs in H2 since debt is now 7mm higher than at the beginning of H1.

At that rate it will take them 8-10 years to pay down debt to what I'd consider a comfortable level given the volatility in the business but that's just my risk/reward comfort level. Provided the business levels hold up they'll be fine. All I'm saying is there isn't much leeway for a downturn in the recruitment cycle/change in public sector hiring practices etc. PE is certainly cheap but there's a reason for it. You pays your money and you takes your chances ...

[tiltonboy] 21/9/2006 09:06

The analysts presentation due at 9.30 was cancelled at short notice, and was replaced by a conference call at 8.30 this morning. I've got a copy of the presentation, and will be going through it shortly.

tiltonboy

[vida] 21/9/2006 08:36

Difficult to know what is included in note 4 and general interest payable. Imagine that organisation fees would be quite expensive and go in general interst payable. Happy with these results. I believe that they have headroom to weather a downturn, and the concentration of health and education into a few suppliers plays to their strength. Challenging conditions yes, but they seem to be coping.

[njp] 21/9/2006 08:34

They could pay down half the debt with a share issue at 30p £12m raised) and still the eps would be not far short of 6p.

[mjcrockett] 21/9/2006 08:22

WJCCGHCC, Where do you get your figure of £1m to pay debt? I come to an annual figure of around £4m.

MJ

[kimboy2] 21/9/2006 08:11

The interest charge I believe will include the arrangement fee for the new loan which is probably about 300k. They have also been paying interest on the earn outs since February when they were re-negotiated.

There was also a "breakage fee" of 340k which I presume was paid to Fortis.

[spooky] 21/9/2006 08:08

WJCCGHCC - You have hit the nail on the head,any meaningful downturn in their business and the company will vanish.The performance of a company like Homebuy should tell you that you ignore the balance sheet at your peril.The angle to explore here might be a takeover bid.

[njp] 21/9/2006 08:01

Yes, but look at the p/e ratio. The gearing is more than covered by the price IMO.

[wjccghcc] 21/9/2006 07:57

True, but with 1.1mm cash outflow on interest (which will rise in H2 as debt has risen) and 250k in tax, there's only 1mm left in the cashflow to pay down that 24mm debt/absorb any volatility in the business if the economy slows. They are sailing pretty close to the wind IMHO.

[stemis] 21/9/2006 07:57

Stonking results!

Actually they were better on all counts than my expectations as set out in post 444:- Expect Actual
Sales 47,164 49,306
Operating profit % 6.9% 7.7%
Operating profit 3,254 3,796
Interest -600 -1,006
Profit before tax 2,654 2,790
Taxation -796 -729
Profit after tax 1,858 2,061
Shares 28,310 28,747
EPS 6.6p 7.2p My EPS forecast was undiluted (so didn't take account of shares to be issued under contingent consideration). The actual diluted EPS was 6.8p. Expectation and actual are pre goodwill and exceptional bank arrangement fees.

Overall highly satifactory with a decent outlook for the year.

We are growing revenues and improving both gross and net margins. The outlook remains positive and the Board looks forward with confidence .......... The Group has seen a steady start to the second half of the year with trading in line with our expectations. The organic growth in operating profit, combined with a reduction in gearing, remain the key objectives.

So all our fears came to nought. If this doesn't move the share price I don't know what will.

P/E - 2.4
Taxed EBIT/Enterprise value - 6.4
EBITDA/Enterprise value - 4.5

I would have thought 100p would be a reasonable price = P/E of 7.4, a taxed EBIT/Enterprise value of 10 and an EBITA/EV of 7.

We'll see.

[njp] 21/9/2006 07:49

Well, the results look pretty reasonable to me. Turnover up 20%, with some organic growth, gross margin a tad better than last year and admin cost percentage reduced. Cash flow looks fine and debt is well within the new headroom. All in all, with adjusted earnings of 6.8p for the half year, the current share price is clearly far too low. On a p/e of 8, these would be 110p.

[kimboy2] 19/9/2006 20:00

Bridgewell own 44% and are doing a report after the interims. I would like to think it may raise it on to the radar screens.

Does anybody have access to Bridgewell reports ?

[cloudfall] 19/9/2006 17:19

What would it take to oust the existing management bearing in mind a couple of big companies own more than 1/2 the company

[amberspyglass] 19/9/2006 15:33

astonishing,, just over a year ago worth almost 4 x as much - yet really the company has not failed to reach targets that much! HLO a lesser company valued at considerably more. pity about their "news management" but I guess if you have a pair of accountants running the company you are hardly going to get positively presented news!

[its the oxman] 19/9/2006 14:58

cheap as chips down here or is disaster round the corner? still holding a small speculative position for what its worth.

[empirestate] 19/9/2006 13:04

results were meant to be announced early september, i wonder where they are

[empirestate] 19/9/2006 13:01

this is looking good value again, i did sell my holding at 41 recently but like the look at this level