Totally Share Discussion Threads

[sikhthetech] 07/11/2018 17:21

Allenby Notes:

[sikhthetech] 07/11/2018 17:20

Micro,
1gw's, Football's loaded and goading posts don't bother me...They obviously believe they know what I or anyone else is thinking and knows ...wow, such geniuses!!!

I noticed on lse that posters were discussing Twitter and "Financial illiterates".


ALWAYS DYOR AND FORM YOUR OWN OPINION...

[football] 07/11/2018 16:55

tick-tock

tick-tock

when will the penny drop here

with the gang of shorter's here

working this MB!

and don't say you wasn't warned about them

tick-tock

tick-tock

tick-tock

tick-tock

tick-tock

tick-tock

tick-tock

tick-tock

tick-tock

tick-tock

will the penny drop?

[turbocharge] 07/11/2018 16:22

Another 11,111 maybe...?

[football] 07/11/2018 15:44

and by that do you mean STT and the gang??????


microscope7 Nov '18 - 09:34 - 6369 of 6369
30.000 5 0
I'd guess there are shorters at work here.

[microscope] 07/11/2018 09:34

I'd guess there are shorters at work here. It's not too hard to figure out who I think they might be, but they would be too gutless to say it of course.I have filtered a few people this morning, it's a rum world when people invent a hypothetical magic money tree to bash the company. :)))

[ttreb] 07/11/2018 09:31

still not sure what they do,anything to do with petrol?

[grahamwales] 07/11/2018 09:19

Well done treble don’t expect to see you here for long once you’ve made your tenner lol

[ttreb] 07/11/2018 09:15

bought again @17.04 year low?
bargain of the day, what say you whale.

[grahamwales] 07/11/2018 08:49

The admin costs came across from Vocare. I’m sure there will be some duplication where savings can be made but have to be phased in

[1gw] 07/11/2018 08:16

Well except that they could have written down the goodwill at the same time as the deferred consideration, with zero net impact on assets, but chose not to do so. So they must believe that the value is still there. That's understandable if cashflow in the acquired companies is still at least as high as at acquisition and is still expected to grow in a similar fashion - ie growth delayed rather than cancelled. The 5-year cash flows in the impairment test should still look good.

But the rise in the discount rate will bite a bit and if cash flow turns flat or starts to decline then I imagine it will be much more difficult to convince the auditors of rapid growth in cash flow going forward.

[grahamwales] 06/11/2018 22:43

Savage

I don’t think the admin costs are for staff working on the front line,therefore won’t make a lot of difference to the bottom line. The key savings will be the use of high paid agency staff vs company. GP’s etc.

[sikhthetech] 06/11/2018 22:27

Here was my concise view of the strategy posted a few months ago...
It worked at Mears...



sikhthetech - 12 Jul 2018 - 12:25:07 - 3817 of 6357 Totally Health - 2014 onwards - TLY
Further from their presentation...

Look at the roadmap on pg 2..

As previously mentioned, they've raised, acquired companies by paying some upfront cash and some of the remaining by deferred performance related payments...
Bob did similar at Mears.. It means they can buy more with the limited cash. the obvious downside is that they may still owe some money, even if the acquired company hasn't done so well...

Some may not like the strategy but I think it's a good one...


eg Pg 2 March 2016 - raised £6.2m
then 'spent' around £15m within a few months - PPH, Optimum and About Health...






Given their strategy, I wouldn't be surprised to see further placing to acquire more companies as part of their add and build strategy.

I don't think that's a bad strategy

[grahamwales] 06/11/2018 22:27

If goodwill is classed as an intangible asset what would be the consequence of writing it down. At the end of the day they are paying less for the acquisitions and preserving cash and not diluting the share price as part was going to be paid in shares.

[savagedstock] 06/11/2018 22:27

Really post 6345...

Your analysis I think is broadly correct....remember these are unaudited accounts being the first half..going forward the key is the strength of the FD against the auditors. While the auditors are required to do an impairment test a decent FD will be able to significantly influence the outcome. After all the FD should be able to present a credible valuation and using comps in the market usually works. This is probably why they have been allowed to keep the deferred tax asset....

Longer term tly is really no different to an airline or any other very high fixed cost business. They have fixed revenue and the only variable is how many employees they need to meet those contracts. This is why the administration expenses are so crucial...this is where the profit will come from.

[grahamwales] 06/11/2018 22:20

At the end of the day if the revenue is more than costs they are in profit. And that’s all that matters. Simples

[nobbygnome] 06/11/2018 21:44

But will they be profitable going forward on the basis of the real business they are doing? That is all that matters!

[1gw] 06/11/2018 21:31

Clever old TLY - the magic money tree?

I've been puzzling over how writing back the deferred consideration creates profit in the accounts, when actually it reflects acquisitions underperforming against the profit expectations that lay behind the deferred consideration calculation. This is how I think they've done it.

Consider the acquisitions of Premier Physical Healthcare (PH) and About Health (AH). In the balance sheet they valued these at £5.1m and £7.7m respectively. But actual assets amounted to very little, so most of this was "goodwill". This was paid for by a relatively small amount of up-front cash plus an assessment of the contingent payments.

PPH
£5.1m value = £0.1m Net assets + £4.3m goodwill + £0.7m value of contracts
£5.1m consideration = £0.5m cash + £4.6m deferred consideration

AH
£7.7m value = £0.4m Net assets + £6.8m goodwill + £0.5m value of contracts
£7.7m consideration = £2.0m cash + £5.7m deferred consideration

In summary, for PPH and AH together:
£12.8m value, of which £11.1m goodwill
paid for by £12.8m of consideration of which £10.3m deferred

In the FY18 accounts they wrote down the deferred consideration by £5.3m (£2.4m PPH + £2.9m AH), reflecting failure of PPH and AH to hit the earn out targets in FY18 and presumably expectation of reduced payout in FY19. These targets were profit based (basically 7 x incremental pbt or ebitda).

But here's the clever bit. They didn't write down goodwill at the same time. So they effectively created the profit by keeping the goodwill value the same but reducing what they expected to pay.

The auditors have looked fairly closely at this in their review of the FY18 accounts(Risk 2 on Key Audit Matters: Valuation of non-current assets).

And then in the 1HFY19 accounts they've said another £1.0m of deferred consideration is going (seems likely to be PPH/AH since the only other is £0.5m due to Vocare which is just repaying employee loans). So that must mean more underperformance against the deferred consideration pbt/ebitda expectation in FY19.

I can only imagine that the auditors will look closely at this again for the FY19 accounts. £11.1m goodwill sitting on the balance sheet when the companies have failed by some way to hit the profit targets that were behind the original valuation. Maybe it's just as delboy and sikhthetech maintain - great prospects for AH mean they can produce impressive looking cashflow forecasts going forward to pass the impairment test. But they're also going to have to watch that discount rate in the goodwill impairment test. It went up from 3.5% in FY16 to 12% in FY18 and if they can't get the balance sheet in better shape by the end of FY19 you'd have to imagine it might go up again.

I would be interested in any other views on this. And as always, offered in good faith but I can't guarantee there aren't errors or misunderstandings in the post.

[turbocharge] 06/11/2018 21:29

THE BIG FELLA6: Nov '18, 18:06, #6351: "These could easily be single figures by the time they report next."

Perfect candidate for the use if the filter button. Not doubt he would have equally happy to state "these could easily be double by the time they report next" to suit his personal agenda...

[sikhthetech] 06/11/2018 21:27

TBF,

"admin expenses are rising"...

There was a REVERSE TAKEOVER...

What normally happens to admin expenses after a reverse takeover?? Did you expect them to fall significantly??

They also won some new contracts.

[grahamwales] 06/11/2018 20:33

Admin expenses for Vocare in 2017 prior to TLY taking over was £9.3 million for the 12 month based on £72 million turnover.