Work Group Share Discussion Threads

[battlebus2] 20/3/2012 10:28

Yes a bit sloppy, Seen this happen with several brokers, wonder what shares in issue they are using. Either way ridiculously cheap imv.

[stemis] 20/3/2012 08:31

Surely £1.1m PBT less 25% tax = £825,000.
Divided by 27,949,138 shares gives an EPS of 2.95p and an EPS of 4.6

Always a bit off putting when brokers can't even add up properly............

[battlebus2] 19/3/2012 14:09

Thanks for that GHF, love the highlighted section.

[glasshalfull] 19/3/2012 12:59

Here's Allenby's bullish update following results.

WORK GROUP  (WORK, 12.75p, £4m)                      FINAL RESULTS
 
Work Group continued its steady progress in spite of less than conducive markets. Armstrong Craven, its Talent Management business, which has been less affected by macro volatility over recent years, delivered revenue and net fee income (NFI) growth, albeit the rate of y-o-y growth slowed markedly  in the second half, and operating profit reduced by 5% in H1 and 9% in H2. Divisional operating profits fell by 7% for the year to £0.9m (£1.0m), nevertheless we are anticipating a resumption of growth in the business in 2012. The great success in 2011 was the return to profit in the Work Communications division where a H1 loss of £278k was followed by a H2 profit of £460k leading to a full year profit of £182k versus a loss of £21k. Earlier work by management to restructure the business and reduce the cost base has born fruit and hopefully with recruitment advertising now accounting for just 9% of income this difficult market becomes even less significant to the business. 

The two overseas offices in New York and Hong Kong also boosted the Communications division posting a strong improvement in NFI over the year and delivering maiden profits. The group's balance sheet remains strong and although there was a cash outflow of £440k in the year the group still enjoys a cash balance of £1.3m and no debt; indeed a positive net cash position has been a major factor in the group's resilience for at least the past five years.

It seems likely, even though markets remain uncertain, that with the Work Communications division entering the new year in a strongly profitable position the group as a whole can post a significant rise in profits in 2012. At 13p, on £1.1m clean PBT (£0.54m) we estimate a 25% taxed EPS of 3.3p. The resulting PER of just 3.9x and EV/NFI of 0.17x simply does not reflect the progress achieved by the board to date and more especially the significant rise in profits anticipated in the current year.

On this basis we would expect to see the share price rise significantly over the coming twelve months.

Regards
GHF

[battlebus2] 16/3/2012 22:56

Work Group Plc (WORK:LSE), the employer marketing, communications and talent management services provider, reported on Thursday that revenues in 2011 went down to £21.7 million from £22.8 million in 2010. But gross profit increased by +5% and amounted to £13.1 million from £12.5 million in the previous year.

In the preliminary results for the year ended 31 December 2011, the firm also revealed that it made no profit after tax as in 2010 the Group experienced a loss of £0.3 million.

However, Chairman Simon Howard was positive and commented that the Group was moving in the right direction, stating that 2011 was "a year of progress."

The UK contributed most of the revenue although performance there was down from £21.1 million in 2010 to £19.3 million in 2011. The USA, however, saw sales almost double to £1.1 million while in Europe revenues declined to £0.3 million from £0.4 million. In 2011 The Rest of the World increased sales to over £1 million from £0.6 million in 2010.

Armstrong Craven, the search & intelligence provider, saw income increase in the year as the business mix improved and there was a strong profit contribution. But revenue was up only marginally from £4.03 million in 2010 to £4.35 million in 2011 while net fee income also rose to £4.4 million from £4 million.

But the Work Communications segment which specialises in managing organisations' reputation saw revenues drop to £17.3 million in 2011 from £18.8 million in 2010 as costs were rationalised and an office closed.

Overall the trends in each of the businesses showed an improving position throughout the year, although the firm continued to be impacted by high levels of uncertainty within its clients as different sectors adjusted to changing market conditions.

Mr Craven said that the firm had built "a stable client base meaning that we are not over-reliant on any individual client or any single sector. In 2011, we doubled the number of clients from whom we earned more than £500,000 net fee income (NFI) while we retained the diverse nature of our client base: Finance & Banking remained our largest single sector (2011: 25%; 2010: 30%) followed by Business & Professional services (2011: 17%; 2010: 17%). The Public Sector has never been significant for us and accounted for less than 2% of income in 2011." Internationally, the firm also reported good client wins resulting in a +60% increase in income and first profit contributions.

Commenting on future developments, Mr Howard added "The Group today is substantially different from that which came to the AIM market in 2006. Since then the business environment has changed beyond recognition, and today Work Group is better placed with better skills to exploit the reality of changing economic conditions."

Work Group provides services in talent acquisition and talent management to help employers attract and retain key staff. It aims to reduce employers' reliance on third-party recruiters, such as head-hunters and recruitment firms, by helping them establish and maintain a direct relationship with prospective employees. The Group also assists employers in reducing their staff attrition costs through better employee engagement and improved internal communications.

After the firm announced its results this morning it values the company at £3.56 million.

[battlebus2] 16/3/2012 22:47

RESULTS: Work Group gross profit up 5%
Fri, 16 Mar 2012
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Recruitment consultancy Work Group's gross profit for the year ended 31 December 2011 was up 5% to £13.1m, with operating profit before exceptional items up from £300k to £500k.

According to the chairman's statement: "Our results for 2011 show the Group is moving in the right direction and demonstrates confidence in our range of services."


Income increased within the Europe-wide executive recruitment arm of the business, Armstrong Craven, while within recruitment marketing firm Work Communications, "costs were rationalised, an office closed and a profit returned".

The statement continues: "The trends in each of the businesses showed an improving position throughout the year, although we continued to be impacted by high levels of uncertainty within our clients as different sectors adjusted to changing market conditions."

Finance & banking and business & professional services remain the firm's largest divisions in terms of net fee income (NFI).

[battlebus2] 16/3/2012 13:35

All gone 14p for 5k :))

[battlebus2] 16/3/2012 09:15

Last few shares under the offer,now 13.25 for 15k.

[battlebus2] 15/3/2012 22:50

Des just had a thought reading that last line of how tidy a sum a dividend would be to the % holders, just a thought lol.

[battlebus2] 15/3/2012 19:20

Recruitment firm Work Group has highlighted the contribution Armstrong Craven, the head-hunting firm based in Hale which it bought in 2005, made to its performance in 2011 as it returned to the black. Group revenues for 2011 were £21.7m, down from £22.8m, with pre-tax profits of £59,000, up from a loss of £157,000 in 2010. Armstrong Craven increased its revenues from £4m to £4.35m, but profit fell from £1m to £934,000. A redundancy programme across Work Group's operations in Hale and London and the closure of an office in Scotland saw the group's workforce cut by nine per cent from 171 to 156, which generated exceptional costs of £419,000. Group chairman Simon Howard said: "Our results for 2011 show that the group is moving in the right direction and demonstrates confidence in our range of services. "In Armstrong Craven, income increased, the business mix improved and there was profit contribution. "In the course of 2011, the board reviewed the strategic options for the group and concluded that the right direction was to remain committed to organic growth, while maintaining a strong and secure balance sheet." He said the group had successfully diversified its client base and reduced its reliance on the finance and banking sector, which remained its largest sector generating 25 per cent of revenues, down from 30 per cent. The group is not proposing to pay any dividend.

[battlebus2] 15/3/2012 19:17

Great post Des let's hope it comes to the attention of a few more traders. Welcome GHF great to see you here and perfect timing as hopefully we are at the bottom of this recent dip and as the seller clears it should be upwards with each new buy. I reckon nows the time for any newcomer to buy as they can get well within the spread because when the seller clears it'll be a 20/25% spread not the current 12.

[deswalker] 15/3/2012 11:07

FYI just posted this on TMF ....

-----

Hi All,

Quick heads up on WORK. Finals out this morning ...



The share price is down at 13p due a seller these last few weeks (see chart). IMO he's using the liquidity around results time to get out perhaps for tax planning. I think he's very misguided as the results this morning show.

At 13p the market cap is £3.63m. As of 31 December 2011 they had £1.33m in net-cash giving an EV of £2.3m.

In the second half of last year they did a pre-exceptional EBITDA of £637k and look well on the way to meeting Merchant Securities 2012 EBITDA forecast of £1.2m which would put them on an EV / EBITDA ratio of 1.92. The Outlook Statement in the Finals reads quietly very confident IMO but even if they miss the forecast by a mile they're still very cheap.

They've taken lots of exceptional costs out of the business during the hiatus of the last five years but margins have improved strongly and if we are seeing an upturn in recruitment then any increase in Revenue will lead to large profits. Back in 2006 this share traded at 80p.

In addition to offices in London and Manchester they have expanded into New York and Hong Kong and have seen strong growth there last year and maiden profits. Vacancies on their website indicate that trading is good and at least one is to work on the Continent so further expansion in the pipeline. No reason why they can't roll their business model out globally in due course - they are not a traditional recruiter but claim to offer something different.

Finally the share register is full of people who will be eyeing strong growth and then a trade sale to a major at a multiple of the current share price. The largest shareholder is Jon Moulton (of private equity fame) with 19%. He is long at a level a fair bit higher than today and will be looking for a very good return in due course.

I've held this for about two years and have built up about 1% of the company over that time. The current share price weakness alongside strongly improving results and arguably an improving macro environment would seem to offer an excellent time to get on board. An EV / EBITDA below 2 offers quite a margin of safety.

IMO, DYOR

Des

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[deswalker] 15/3/2012 09:41

SteMiS,

I agree with your comment regarding exceptionals. However one should see them in the light of an acquisition made in Nov 2006 (at completely the wrong time) and all the hiatus that has gone on since then. They've closed a few offices (not just Scotland), completely changed and rationalised the way they work on larger projects and have had start up costs with the overseas branches. Nonetheless, point well made and conceded. They need to demonstrate that exceptionals are indeed exceptional.

I also agree with your point about last H2 being more about cutting costs than growth. Indeed the Revenue line has fallen slightly over the last three years. As I understand it from our CEO lots of rationalisation was made in July so the Merchant Secs note from Septemeber was right to say that they would recoup a fair proportion of the redundancy costs in reduced ongoing costs for most of the six month period. So it has proved.

It's awkward to look across at Gross Margin due to a reallocation of admin costs but Operating Margin is improving strongly. If they can start to grow Revenue too then this should lead to much larger profits with a reduced headcount.

The Register is chocked full of people who must have at least one eye on a trade sale when conditions allow. One would suspect that to be at least 3 years away to allow the global economy some time to heal (hopefully no longer on its deathbed) and then we'll see where we are. I don't think the large shareholders would entertain anything like 25p right now. I suspect double that is much closer to the mark.

Also agree about the spread but they have been for sale pretty close to the bid this last couple of weeks.

[stevemarkus] 15/3/2012 09:35

Hi Stemis. You can normally buy well inside the spread. I have held Work Group for some time and have usually managed to buy near to mid-price - in fact, my last buy (unfortunately at 14p) was exactly mid-price.

I share everyone's views regarding the results - look fairly positive. It is such a tiddler that it would not be more than a mouthful for some of the larger operators.

Cheers,
Steve.

[stemis] 15/3/2012 09:16

I might have bought a few more but not with the spread as it is. I'm increasingly not interested in playing in a game where you lose 10% straight away and can never sell your shares other than by taking another 10% loss.

[stemis] 15/3/2012 09:10

No exceptionals for this year - I hope you are right. Work has had exceptionals for every one of the last 5 years amounting to £2.1m in total.

The company had a decent second half but I think it was more down to cost reduction than growth. However if they can sustain the £588k (pre exceptional) profit in H2, then brokers forecast of £1.1m looks do'able (there doesn't seem to be any evidence of an historic H2 weighting in their results).

Hopefully that would be enough to generate a bit of cash and get net cash up to £1.5m+. At that level we'd be looking at a valuation of about 1.6 x ebitda.

I don't see the market very giving WORK a decent rating but hopefully we'd at least see 20p. The only way we'll see any real value though is in a trade sale. Armstrong Craven alone must be worth 20p a share (a super little business doing £1m profit on £4m sales) and then cash is another 5p. I guess they'll not want to sell at the bottom of the market.

[deswalker] 15/3/2012 08:59

Welcome GHF,

You got a bargain and I genuinely feel that this could grow and grow. They've made some huge changes to the business whilst protecting the Balance Sheet and sound very quietly extremely confident to me.

I've got no idea why there's been a seller about lately but feel they are very misguided.

Des

[glasshalfull] 15/3/2012 08:51

I agree des & battlebus.

Just picked up a few ;-)

Regards
GHF

[deswalker] 15/3/2012 08:28

My spreadsheet now assumes that there will be no exceptionals for this year (no reason why there should be with all the rationalisation behind them) and that they will do a PBT of £850k. This is still well below that forecast by the house broker but I'll stick with that.

Such a number implies an EBITDA of approx £1m and at current prices we have a Mkt Cap of £3.6m and an EV of £2.3m.

Seems crackers to me for a growing share with the whole world to shoot at.

[battlebus2] 15/3/2012 08:25

Yes Des the last few months must have been stronger to turn these around from the halfway stage. At this rate we may see a PBT of around 1 million next time.

[deswalker] 15/3/2012 08:21

At first my biggest gripe with the results was that there was no Outlook statement. But I think this says it all just in a slightly less straightforward way ...

The future

Our job is to help employers change the way they recruit and retain talent, and we continue to witness a greater demand for the wide range of services we have developed. As employers create more resourcing and talent functions they increasingly need to buy in expertise. That is good news for us as we sell the expertise they need.

The Group today is substantially different from that which came to the AIM market in 2006. Since then the business environment has changed beyond recognition, and today Work Group is better placed with better skills to exploit the reality of changing economic conditions.

Reading between the lines the first paragraph plus the job vacancies they are looking to fill is surely an indication that trading is strong and quite possible getting stronger.

The second paragraph indicates the huge changes we have seen over the last six years, that they are now well placed to offer a broader range of skills than before and that the changing landscape may eventually turn out to be very positive for WORK.

[deswalker] 15/3/2012 08:04

Hi bb - I agree. These are miles too cheap simple as that. Just had another 15k at 12.5. Still some available below 13p. Ought to be at least 20p right now IMO.

[battlebus2] 15/3/2012 07:30

That's a great set of results imv given their market conditions. A lot of light at the end of the tunnel. Profit of 0.1 which is a turnaround from a loss, Optimal consultancy services proved to be a strong offering in these times of uncertainty, recording a 50% growth in NFI.New York has made a maiden profit. Work has returned to profit and Armstrong Craven sales 9% ahead. Cash balances of 1.3 million which shows cash burn has turned to cash positive given last years expenses. Overdraft facility reduced to 1 million from 2 which is also positive. Time to see these rise.

[battlebus2] 14/3/2012 12:15

I think that's a buy at 12.5p but i'm hoping it's a sell! Roll on tomorrow.

[battlebus2] 13/3/2012 16:39

More selling at 11p obviously they have no confidence in Thursday's results.