RSM Tenon Share Discussion Threads

[envirovision] 14/5/2011 19:07

A lot of emotion attached to the stock at the moment, one can tell from the array of posts here.

[nigelpm] 14/5/2011 16:18

nigelpm

I'm sure you know they don't value their WIP anyway. This is done by third party auditors.

Which makes the argument of others all the more BS to be honest.

Not quite true.

RSM will value their WIP and the auditors will "audit it"!

But, as I said it's very unlikely it will wildly misstated due to the auditors checking it.

There's some awful posts on here today from people who clearly no nothing about business - but then that's nothing new.

[goldibucks] 14/5/2011 13:13

£20m of facility headroom doesn't go far in the context of £30.3m of cash outflow in 6 months to 31 December 2010. This was the comment in relation to net debt in the Q3 profit warning;

"Cash collections have materially improved in March and April, and operating cash inflows will be positive in the second half. After dividend and deferred consideration payments in this period we continue to expect net debt, which will be influenced by profits generated in the period and the continuation of working capital improvements, to reduce, after normal trading cycle increases, by the end of the period."

When they say collections materially improved in March and April, I assume they didn't improve in January and February and therefore net debt went up in those 2 months otherwise they would have said materially improved in H2 not just March and April. They say net debt will go down by the end of H2 after "normal trading cycle increases", again I take that to mean it has gone up so far in H2 but they expect it to fall my more than it has gone up by the end of H2 so it ends up below £73.3m. The going up bit has happened but the going down bit hasn't offset it, companies that issue one profit warning often go on to release two or three more.

If Tenon is such great value at the current share price why did Polar Capital offload 2m shares in the week? Surely, they know more than somebody on a BB who thinks Tenon are servicing their debt "out of £30m of PBT".

[bonio10000] 14/5/2011 12:26

Bob - believe me, i'm not overly fussed about other's opinions and investment decisions.

I suppose it is to be expected on ADVFN. 10 years on and the arguments still baffle me on most boards.

Good luck all.

[bobsidian] 14/5/2011 12:18

bonio10000

I think some of the posts on this board are less about agenda and more about interpretation.

If there were any question marks about going concern then the true value of assets will always be subjective. But going concern is unlikely to be the issue.

The nature of some posts seem to be consistent with the perception of a business in trouble and involve speculation about the source of the problem.

The way in which you are valiantly rebuffing such speculation is to be commended. Unfortunately the stockmarket is not currently supportive of your own willingness to believe the views of the management of RSM Tenon. And it does not help the management of RSM Tenon if there is past history of their credibility being impugned.

[bonio10000] 14/5/2011 12:00

nigelpm

I'm sure you know they don't value their WIP anyway. This is done by third party auditors.

Which makes the argument of others all the more BS to be honest.

[bonio10000] 14/5/2011 11:56

?????? - Do some people have an agenda on this board?


"Net debt of GBP73.3m at 31 December 2010, expected to reduce in H2; facilities increased to GBP93m."

So £20m of headroom and debtor days have actually been improving. As there should be no big one offs, other than the years Bentley consideration, why would people think banking covenants are being breached?

Anyone actually got a rational argument or are we just going to get "because they will" BS type arguments?

Assuming WIP is being overvalued with no evidence is a stupid argument imho.

You might as well say BP has no oil and is making it up ffs.

[still waiting] 14/5/2011 09:31

with sme sector still being hit it doesn't take too many to go under and take the debtor book and wip with them, that's the issue.

we haven't even mentioned the fee deflation that's going on in the sector at the moment..

[dnfa1975] 14/5/2011 08:11

THe problem i see is that an independent review of the WIP could quite possibly result in bank covenant breaches? Then the rot will set in.

[nigelpm] 14/5/2011 08:08

dnfa - yes there will be rogue's out there.

However, there have been numerous changes to accounting policies since then to protect shareholders/bankers etc..

What we have here is a good business being hit by their rather ambitious acquisition strategy. Once things have settled down and WIP has been billed a three/four fold rise isn't out of hte question. Equally there's a chance of them going bust like any company.

Risk:Reward however looks exceptional from what I can see.

[goldibucks] 14/5/2011 08:07

Of the £30.3m cash outflow in H1 only £2.6m relates to deferred consideration on Vantis and RSM. £23.7m is operating cash outflow. If you accept Tenon's adjusted version of the P&L with exceptionals, goodwill amortisation, and deferred consideration interest stripped out, you are excluding the costs of being a consolidator and since that is what Tenon do, you are ignoring the costs associated with buying growth.

If exceptionals did ever permanently drop out of the P&L or if Tenon had historically made far more money than they had to pay in excess of net assets for practices, they would have a big retained earnings number in the bottom of their balance sheet after paying dividends. They haven't and that's because after paying dividends, exceptionals, and amortisation, they haven't cleared much of a profit cumulatively after years and years of consolidating. This is reflected in their Balance Sheet as a whole. If you strip out goodwill and fixed assets at 31 December 2010, they have negative net assets of £40m. Can you not see that negative net assets combined with cash outflow way beyond what they are paying in deferred consideration for Vantis and RSM, £73.3m of net debt, and now a profit warning might spell disaster?

[dnfa1975] 14/5/2011 08:02

nigelpm


Vantis was a tax specialist. It didn them stop them being naughty....

.....and dont start me off on Arthur Anderson...RIP







WIP is where the worms and merde will be hid

[nigelpm] 14/5/2011 08:00

Yep, bonio is spot on here. Once you take out all the exceptionals - which are one-off's on acquisition you are on a PER of 3/4.

dnfa - TNO are accountants - whilst not impossible they aren't valuing WIP correctly I'd be quite surprised.

My real concern here though is that they need to make sure they can convert the WIP into cash by efficient billing - which has clearly taken a back seat of late.

[dnfa1975] 14/5/2011 07:44

Auditors need to review the WIP make sure no works or nematodes in the accounts

[bonio10000] 14/5/2011 07:32

Goldi - as you are not too bright.....

Interim results for the six months ended 31 December 2010.

Underlying operating profit* up 53% to £13.5m (2009: £8.8m)

Funding and cash flow

Working capital utilised in the period was above anticipated levels as the result of the timing of revenues, the integration of new debtor collection procedures for acquired clients, and slower asset realisations in recovery cases.

Trade receivables, including amounts recoverable on contract, represented an average of approximately three months activity at 30 June 2010 and this period had extended by over two weeks overall by 31 December 2010. Whilst this represents a competitive performance within our industry, it is a priority to return all parts of the business to the standards previously set.

In addition, we made significant capital and related payments in the period in respect of our acquisitions amounting to £14m as follows:

£'m

Exceptional items - cash costs (6.8)

VAT payable on acquisitions (4.0)

Deferred consideration 3.4)

Total (14.2)

[bonio10000] 14/5/2011 07:27

Goldibucks

£1.6 PBT? Looking at after the restrucuring exceptionals are you?

These don't exist anymore.

£30m cash outflow? So this includes the purchase costs of VTS and Bentley and the exceptionals as well.

The lack of research on this baord is unbelievable.

Try looking forward and not back.

[qs9] 14/5/2011 06:43

I'm holding fire until detailed figures come out and new statement, when can then make a more educated view. Risk in meantime I agree, but if working capital and cash is visibly brought under control then will be happy to continue to hold.

[dnfa1975] 14/5/2011 06:22

When will the next bank covenant test be?

[goldibucks] 13/5/2011 23:43

bonio10000 you keep referring to £30m of PBT. Tenon made £1.6m PBT for the 6 months to 31 December 2010 and had a cash outflow from operating and investing activities of £30.3m in that period. The EPS in the last 3 H1 periods has gone from 1.59p to 0.63p to 0.40p. Tenon is a good example of ambition biting the nails of success as the meagre £19.2m of retained earnings in their Balance Sheet at 31 December 2010 demonstrates. Polar Capital won't be the last institutional investor to give them the cold shoulder.

[bonio10000] 12/5/2011 15:03

Or he might just think that he is a long term holder, so short term fluctuations are irrelevant?

We can't all know how the market will react.

Plus the obvious issue that he can't keep buying every share in existence whenever there is a price fall.

[edmondj] 12/5/2011 14:56

Could be a restriction say if looking at a fund raising.

[the shuffle man] 12/5/2011 14:45

Is it a bad sign that Uncle Bob hasnt bought any more. If he thought they were cheap at 40p what does he think now?

[bonio10000] 12/5/2011 13:59

TNO will also be funded out of banking to a degree, because of the insolvency side. This was one of the reasons debt rose, as they were waiting for cash from the settlement of cases.

But this should be a timing issue, not at all like Stanford where VTS did the work and then were simply told they were not going to be paid for any of it.

[still waiting] 12/5/2011 12:47

debtor book is a worry when sme's are going bust and the next wave is due to start..

[envirovision] 12/5/2011 12:44

and Vantis was funded directly out of their banking facilities, as is all its working capital. People forget that.