Public Recruitment Share Discussion Threads

[rivaldo] 08/2/2006 12:08

Spooky, for a start the management are in a closed period prior to results! And they've probably been insiders prior to that due to the EGM and then earn-out negotiations. You won't get any director buying till after the finals are out soon.

If I were looking at PUG I'd also be staying on the sidelines until things had settled down. Now that that's happened and the trading update is good, we have a chance (hopefully) to invest right at the bottom.

[spooky] 08/2/2006 12:01

Debt is a problem,particularly with the earn outs.

Any thoughts on why management haven't bought any,negotiations on borrowings with banks may be a reason.

The fact that Unicorn has a stake is usually positive but once again it is noticeable that they have not picked up any shares at these lower levels.

The shares traded ahead of the warning in a way that suggested some knew it was coming,which tells me that those on the inside know the real story and they are not buying yet.

[rivaldo] 08/2/2006 11:50

Hi tiltonboy, always a good sign if you're here. The debt makes PUG a little risky and makes the calculation slightly less stunning on an EV basis. But the risk/reward seems to be greatly weighted in favour of a large return in a very short time, especially since we now know that trading for last year was in line and is currently good across the company.

On a P/E of 3.5 or so, even a 50% share price rise to 58p would still give a P/E of just 5.3.

[kimboy2] 08/2/2006 10:29

Kellis alone is doing £2m PBT per year.

[tiltonboy] 08/2/2006 09:35

riv,

Just bought 35K at 38.6p.

tiltonboy

[cloudfall] 08/2/2006 09:17

Well rivaldo, I haven't done analysis in the same way you have, all I know is that the valuation seems extremely low against earnings and there isn't a tremendously big reason why this is the case. The whole healthcare sector is down at the moment and PRG has been affected by this, making it very good value at the moment. I wouldn't entirely be surprised if this was back over a quid later in the year with 80-90p in the midterm.

[rivaldo] 08/2/2006 07:43

A further thought occurred to me. The broker forecast of 10.6p EPS for 2006 was presumably calculated on the basis that the acqusiitions were to be paid for by fresh shares as originally announced.

But now we know that a considerable proportion of the purchase prices are to be paid for in cash. This will add a little interest expense, but the net effect will be to reduce dilution and increase EPS.

It's therefore likely that 2006 forecasts can be lifted to maybe 11.5p-12p EPS. That puts PUG on a current year P/E of around 3.2. Enough said....

[rivaldo] 07/2/2006 21:26

Darkinbad, the point to note is that goodwill amortisation is ignored as irrelevant by analysts and most in the City, rightly imo, which is why the adjusted EPS figure pre-amortisation and goodwill is the one to note.

The market expectations which we now know will be met are for £3.9m PBT (i.e pre-amortisation and exceptionals), or 11.2p EPS, giving a historic P/E of just 3.4.

PUG made £2.25m adjusted PBT in H1, and should therefore have made £1.7m in the weaker H2. The company has stated that "trading in 2006 has started well with continued growth in organic revenues across all sectors", and with 10.6p EPS expected for 2006 (£5.4m PBT) for a P/E of 3.63, PUG appears to me to be an opportunity for once for private investors to get in at the bottom of a cycle.

[darkinbad] 07/2/2006 20:48

Just been looking at the numbers and I would welcome any thoughts on the assumptions. When I first looked at the update I thought this looked very cheap but now I'm not soo sure.

04 Nov trading update said profit before tax, exceptional items and amortisation would be 3.9m for the full year and this appears to have been confirmed today.

In H1 2005 profit before tax, exceptional items and amortisation was 2.8m, which implies only 1.1m in H2.

Assuming that there are no exceptional items and amortisation of goodwill is twice H1 (2x839k), 1.7m, then 2005 should see an operating profit of 2.2m. Interest payable in H1 2005 was 594k so assuming twice this for the full year (1.2m) gives PBT of 1m. Assuming tax is around 700k this leaves only 300k and an EPS of 1.2.

If the numbers above are correct then this doesn't look cheap on a 2005 PE of 32.

[rivaldo] 07/2/2006 20:18

I think you're right empirestate. The online amount available to buy had reduced from 30k to 17.5k by the close - that's only £6k's worth. Any decent interest could see quite a zip back up, and there's a long way to go to 120p!

[empirestate] 07/2/2006 16:38

just need a few buyers and we should easily see 50p. i will look to get in tomorrow on this as i have just noticed today's update

[rivaldo] 07/2/2006 15:58

And off we go - the penny is starting to drop.

[rivaldo] 07/2/2006 15:17

Yep. Even including debt the EV is cheap compared to £5.4m PBT for 2006. From today's update we now know:

- trading is in line
- Kellis is performing extremely well
- JCJ also has to be doing well
- dilution has been minimised by paying more cash
- PUG should be able to choose its facility provider from a number of lenders

Above all, 2006 has started well across all sectors. On a P/E of 3 or 4 this reminds me of HPS a few years ago - that turned into a four or five bagger for me.

[cloudfall] 07/2/2006 14:57

To me, it seems ridiculously good value. In fact that isn't even the word, this is bargain of the century. I don't get it. IMHO this should be trading at 80-90p and I reckon this is where it will be within a few months. I think giving cash for these redemptions was a very smart thing to do and will keep influential owners of the business like Capital Baird much happier who paid £1.30+ for theirs recently. Will be interesting to see what happens.

[rivaldo] 07/2/2006 14:29

Only 30k shares available online when I looked, or around £10k's worth. Won't take much to move the price sharply if the market deems a historic P/E of 3.4 is too low.

[rivaldo] 07/2/2006 13:45

Trading update just out:


I know PUG disappointed the market, but given that we know PUG will be in line, i.e they'll make £3.9m PBT or 11.2p EPS for 2005, isn't PUG incredibly good value at 37.5p on a P/E of 3.4?

The latest EPS forecast for 2006 is 10.6p with dilution etc, or £5.4m PBT. Against a £10.61m m/cap this looks a bit ridiculous imo. I've bought some.

[seangwhite] 25/1/2006 23:35

Got no friends bit like Spring Group and Nestor,all at or near recent lows.

[cloudfall] 12/1/2006 10:22

Kimboy yes, that's an interesting article. PRG would be an interesting acquisition for someone like James Reed at the moment! Not much activity on this, is everyone waiting for the rest of this redemption to happen and for the dust to settle I wonder. Still looks very good value to me, but what do I know :-/

[kimboy2] 30/12/2005 23:26

No I am not linked to the company.Interesting bit on the buyout of Reed in the Times



James Reed is the son of the founder and wanted control of the whole company. There was obviously a premium paid but it was sold on a P/E of 20 rather than 4 despite its poorer financial performance than PUG.

[amberspyglass] 30/12/2005 18:20

kimboy... you linked to the company in any way? You seem to know this market very well. But reed health had a reed desperate to buy, without that it would; prbobably be less than PUG now

[kimboy2] 30/12/2005 18:17

Reed health, which is a competitor to PUG, produced a PBT of £1.691m for 2005 compared to PUG's forecast £3.9m and has just been taken over for £21.5m. This compares to PUG's £11.9m.

I think there is value here once the dust settles.

[tiltonboy] 30/12/2005 18:07

The market is factoring in further disappointment, which given the current debt position, is probably justified. However, if trading can be stabilised, the shares may start to be re-rated, though I believe this is some way off.

I tend to agree with cloudfall re the GB position, and it certainly helps the balance sheet a bit.

Watching with interest at the moment, but may take a few later.

tiltonboy

[cloudfall] 30/12/2005 17:29

From what I know of them Granville Baird are a pretty serious outfit. They have a huge stake in this company and my thinking is they will do whatever it takes to ensure the company delivers the management, the profits and the potential the market wants. I feel better knowing that Granville Baird have a bigger stake irrespective of any dilution and feel better knowing cash has been conserved

[kimboy2] 30/12/2005 15:17

The forecasts from Oriel Secuirites are;
PBT EPS
2005 £3.9 11.2p
2006 £5.1 10.6p

The 2006 figure is down from £7.05 PBT and 15.69p EPS. The EPS figure has fallen disproportionately because of the increased share issues.

It is still on a P/E of 4 though.

[cloudfall] 30/12/2005 12:50

Yes giving 3x as many shares to JCJ and Action First shareholders was something I am sure they were not expecting to have to do. Even so, earnings per share will be probably be no more than 15% lower than expected as a result. In any case it certainly makes the Granville Baird deal look excellent! :-)