RSM Tenon Share Discussion Threads

[aleman] 02/6/2011 15:20

And it's just regained the 20-day average for the first time in 5 months as well.

[aleman] 02/6/2011 15:16

Nice little uptrend developing here. Looks like its about to finish playing with 25p as well. Next stop 30p, where the consensus P/E is still less than 5.

Edit- looks like the 5 month downtrend has just broken as well.

[aleman] 01/6/2011 14:59

I've doubled up. (Still not a big holding.)

More recent updates (don't know if they've changed). Not as optimistic as others but still make current price look a bit low.



Keefe Bruyette & Woods Ltd MPER 25 May 2011
2010 24.10 6.58 1.60 190.40
2011 25.60 5.62 1.60 248.00
2012 25.10 5.52 1.60 250.80

Brewin Dolphin HOLD 24 May 2011
2010 24.09 6.58 1.60 190.42
2011 25.90 6.00 1.60 249.40
2012 26.20 5.70 1.60 249.00
2013 27.60 6.00 1.60 255.00


Latest Proquote Consensus (6 brokers - all since May 6 update)
2011 252.8 28.5 6.36 1.71
2012 259.7 29.9 6.59 1.79
2013 265.1 30.2 6.71 1.92

[the shuffle man] 01/6/2011 14:48

2 large trades gone through and price gone higher. Has uncle bob been buying again

[aleman] 28/5/2011 22:39

The rise in debt is down to the change in balance of payables and receivables which the IMS is suggesting has got better since the interims. I don't see why we shouldn't believe the IMS. Have you any comment on them?

[wjccghcc] 28/5/2011 21:55

Aleman,since the trading update, there have been no director buys apart from the savings plan.

The improving trend needs to be in net debt (subject to normal working capital seasonality). That's what's been increasing alarmingly since the acquisition.

[aleman] 28/5/2011 21:04

Financial advice and insolvency work can have revenues that appear some time after they are earned. Do you book them when you get the cash or when it is earned? Normally when it is earned if you are fairly sure it is coming. (See p.47.)



Expansion of receivables is to be expected as the company grows. It rose a bit too much in H1 but they admit to some new system teething problems. The biggest question is why payables fell £15m when it would have made more sense for it to rise £15m and leave debt £30m lower. It is hardly a sign of a struggling company to pay off suppliers early. As a newbie, I see directors have increased shareholdings and paid performance related payments for acquisitions. I see they've paid down the money they owe others. Would they do this if revenues were not as high as indicated and the cash wasn't there? Also, haven't bankers checked numbers before expanding the lending facilities and wouldn't sellers want to check numbers for the performance payments? I would never say fiddling timing was impossible but I just feel the recent results and IMS should be taken at face value. Timing of payments aside, results indicate an improving trend on underlying operating cashflow

[nigelpm] 28/5/2011 08:53

Don't you think its possible they could have been invoicing and booking work in progress that's not finished? or even that Bentley could have been before they paid eye watering multiples for it?

This is an accounting practice that has sunk many a company.


Well anything is possible but this is highly unlikely I suspect particuarly with a firm of accountants and given past howlers auditing and accounting standards are pretty robust now.

[envirovision] 28/5/2011 08:29

Don't you think its possible they could have been invoicing and booking work in progress that's not finished? or even that Bentley could have been before they paid eye watering multiples for it?

This is an accounting practice that has sunk many a company.

Which case the bilge pumps are currently running full blast to stop the ship sinking.

I'm sorry to come across so negative, but one must take into account the capability and history of the management and therefore assume the worst at all times.

[aleman] 27/5/2011 22:33

The irony here is that underlying cashflow has been improving but directors have been letting suppliers and customers hold onto it for them. The difference was £10m in 2008 and it is now £62m so outsiders have kept an extra £52m of our cash. (What the hell is the finance director doing and why isn't the board dragging him over the coals? )If we have another £15m+ generated in H2 and directors pulled their finger out and got us back to the same state of payables/receivables as 2008, nearly £70m of cash would appear for shareholders. All the debt could be paid off or a special dividend equal to the market cap could be paid out. If another company bought this company, they could squeeze its purchase cost out of working capital and get about £35 million per year of operating profit for free. That would normally be valued on the UK market at around £250m. Either something is seriously amiss here or this company should be a serious bid target for a private equity, VC or hedge fund. As I said, I'm assuming directors are telling the truth and they are now sorting out some bad cash management. If so, the shares are well undervalued.

[aleman] 27/5/2011 22:07

It's impoosible for them to keep reducing payables at the current rate as they would run out in a year so operating cashflow after working capital changes must improve soon from that side. The comments saying collection of receivables has improved and debt should fall suggest it will improve from both sides after worsening from both in the last year.

[envirovision] 27/5/2011 13:51

I agree, I am simply suggesting that there may be an inherent quirk in the way the business operates and happens to recognise income, which means they may not be able to improve cash flow quite much more, it maybe they have pretty much done as much as possible.

Maybe its just me but reading the trading update I felt I was left with the guidance that that there could be further improvement in this respect and of course if it were to be shown not so in the next update then the market could once again smash the equity valuation to pieces.

After all, don't forget it Bob Morton sitting here in the chair.

Take a look at what happened today at Armour group.

[aleman] 27/5/2011 13:16

If the cashflow wasn't really there, how did they reduce the money they owed to others by £15m in H1 at the same time that money owed to them increased by £13m? If it wasn't the implementation of new collection systems as described and they had problems, the payables number would have blown out rather than reduced. The interruption of collections due to poor implementation of a new system sounds perfectly plausible and the IMS suggests things have improved. As I said, I am prepared to take the statements at face value - although I am a new investor here.

[envirovision] 26/5/2011 16:01

Sure you may have an agreement and engagement contract, but the work has not been done has it !

No point in having an engagement letter that allows you to pretend you've done the work. That neither helps you or your client in the long run. Not till the you have published the final copy.

[bonio10000] 26/5/2011 15:36

Another valid point. Plus trying to tell a client you know personally for 15 years you have to pay within 10 days.

I disagree on the booking income they don't have though. If you have done the work you have done it and you have a letter of engagement to determine the fee/rates.

If you are saying they are falsifying billing - that is rather strong.

If the fee income was not genuine and was not paid post year end or was subject to a credit note, the auditors would not allow it to be recognised.

[envirovision] 26/5/2011 15:29

In my experience accountants seem to be in the habit of invoicing their clients far to early. Typically they will invoice the moment a draft copy of the accounts has been compiled.

In reality as a client, you then need to schedule a meeting and go through the accounts and the final copy drawn up. Often then a second meeting may be required.

As a client, you hardly want to consider paying your invoice until you are happy with the final accounts. Really it should be at this point that the invoice is booked, but I guess they think they are being clever by booking it early.

I rather suspect the problem may be simply that they are invoicing and booking their work far to early, so in fairness they may be trying to pretend they have £30-60 Million which they don't really have. I rather suspect the market knows this.

I was tempted to sell the remainder of my holding at a loss but something told me not to rush, I may regret it lets see.

I was

[bonio10000] 26/5/2011 15:04

Aleman,

As an accountant, all practices have large debtor days.

Plus, in the case of Tenon, they have a lot of insolvency/recovery work. Unlike audit or tax work, where you bill on completion or in stages, here you build up the WIP and can bill on account but you will only collect once the assets have been realised. Hence you can get a large gap between billing and getting the money in.

If you are the adminstrator, you get first take on the assets, so the debt should be secure, but the time lag can be irritating.

[aleman] 26/5/2011 14:24

I bought in today. Can't say I rate the management or like the acquisitive style but the shares have got too cheap to underlying operating cashflow of around £30m per year (and possibly rising if forecasts are to be believed). The IMS suggests they are getting to grips with the apalling management of payables/receivables in H1 which blighted that period's reported operating cashflow. Any stabilisation should allow for the forecast modest debt reduction and bring a rerating. I'm taking the IMS at face value but think it is worth the risk considering how cheap the shares have got. How does a company get so bad at getting in the money it is owed?

[the shuffle man] 24/5/2011 19:52

The latest IMS which started this slide said full year t/o was likely to be £250m with profit ahead of last year which was;

Acquisitive and organic growth delivered: |
| | · 26% increase in turnover to GBP190.4m |
| | · 38% increase in underlying operating |
| | profit to GBP26.3m* |
| | · Operating margin increase of 1.2%* to |
| | 13.8% |
| | · Adjusted basic earnings per share* up |
| | 3% to 6.69p

What am i missing, the shares trade on a pe of under 4 which looks way to cheap

[johncraven] 24/5/2011 15:47

this has got 30p written on it short term