...as I guess Companies want to get their announcements out ahead of the latest Bank Holiday weekend. Of note for the virtual Mechanical Compound Income Scores Portfolio there were updates from Character Group (CCT), Howden Joinery (HWDN) and Schroders (SDR & SDRC) which all seemed OK.
Meanwhile back in the real world we also had updates from Berendsen (BRSN) which also seemed fine on an underlying basis but continued to be hit by currency translation as they had previously flagged and as I highlighted recently when I reduced my position. In today's update they suggested on a reported basis, profit before tax for the quarter was lower than last year, again as a result of currency translation. This compares to some modest growth that is currently forecast so they have some work to do in the rest of the year to make this up or they may well see more downgrades. The market seems to be taking this on board now as the share are off 5% or so today and down by over 100p or more than 10% from where I sold them.
Finally from me today we also had a slightly disappointing trading update plus another acquisition from RPS Group (RPS). I say disappointing because having been more reassuring on the oil and gas sector back in February with the final results they now say that this market stabilisation proved to be "fragile". On the back of this they said the following:
"As a result our Energy business has had a slower than expected start to the year, although we have recently seen an encouraging increase in our asset valuation workload, related to transactions and financing. Our clients' E&P budgets for 2015 remain substantial and the cost of executing their projects has reduced significantly. We still anticipate an increased level of activity will develop during the course of the year once specific project costs and plans have been defined. We will also benefit from actions taken recently to reduce our cost base."
So a disappointing turnaround there, but I guess not wholly surprising or were the management being too optimistic back in February? They now also leave themselves anticipating increased levels of activity which could fail to develop if they prove to have been too optimistic again. However against that they do flag that National Oil Comapnies to which they are more exposed have been less effected than international players. They have also taken action to reduce the cost base and they have made several add on acquisitions, as they have tended to do over the years, to grow their business in other areas. These together should also help to offset some of the potential short fall in the oil & gas sector.
Talking of acquisitions they also announced today that they are acquiring the entire share capital of Metier for a maximum total consideration of NOK267 million (£22.3 million), all payable in cash. Consideration paid to the vendors at completion was NOK166.8 million (£14.0 million). Subject to certain operational conditions being met, two further sums of NOK49.2 million (£4.1 million) and NOK50.6 million (£4.2 million) will be paid to the vendors on the first and second anniversaries of the transaction respectively.
Metier Holding AS ("Metier"), a Norwegian based consultancy providing project management and training services, which operates across Norway from its headquarters in Oslo. The company, which employs approximately 160 staff, was founded in 1976 and works primarily on projects associated with delivering public and private sector infrastructure. In the year to 31 December 2014, Metier had revenues of NOK390 million (£32.6 million), and profit before tax of NOK35.3 million (£3.0 million), after adjustment for non-recurring items. Net assets at 31 December 2014 were NOK45.1 million (£3.8 million). Gross assets at 31 December 2014 were NOK159.1 million (£13.3 million). So it seems like the full price including earn outs will be about 7.4x the current PBT which seems a fair price. The Company says it will be earnings enhancing in the current year which is understandable when you are paying with cash / debt.
The shares have responded negatively to the announcement and are off by around 7% at the time of writing, leaving them in the middle of their recent price range. I guess it is understandable that the shares have fallen today given the turnaround in the commentary on the oil and gas sector. It does however leave them on sub 10x again and with a yield approaching 4.5% on the back of the expected 15% dividend growth which should provide some support.
However, it will be worth watching to see where the earnings forecasts go after today's update and the effects of the acquisition are factored in. Having taken some profits on this one recently in the 240's I'm inclined to run the rest for now but I continue to worry about the effects of the oil & gas sector problems on their business.