Ireland’s largest recruitment agency, CPL Resources (LSE: CPS), has got too much cash!
The most prominent feature of today’s full-year results announcement is a proposal to return €25m of the firm’s almost €34m net cash pile to shareholders through a tender offer.
Cash back
If approved at the AGM, the company will offer €6.75 per share to those wishing to sell back up to 12% of their holding to the firm. Based on today’s exchange rate, that’s a premium to the current 520p share price running at about 19%, by my sums.
The firm thinks the money’s better in its investors’ pockets than sitting on the balance sheet earning low interest, and the €9m it is hanging on to will be enough to invest in further growth. The preferred method of expansion is organic, the directors reckon, but it seems likely some will go into more bolt-on acquisitions, I reckon.
Chief executive Anne Heraty explains in the report that “CPL has a strong balance sheet with net assets of €103.7 million generated over the 27 years of continuous profitability.” That record continues with these results, which show revenue up 5% compared to a year ago and profit before tax rising 3%. The directors pushed the total dividend up 4.5%.
Expanding abroad
Around 25% of fee income comes from abroad, and during the year the company opened offices in Munich and Boston and has more than 40 offices in 10 countries. Such geographic spread should help to minimise the effects of any regional economic weakness that may appear. The report mentions Brexit as a source of uncertainty, but the firm thinks it can navigate through any fallout that could weaken trading in Britain or continental Europe.
City analysts following the firm predict a 17% uplift in earnings for the current year to June 2018, so there’s no sign of trading weakness yet. Meanwhile, the forward price-to-earnings (P/E) ratio runs at just under 11 and the forward dividend yield at 2.2%. Those forward earnings should cover the payout more than four times. I think CPL Resources looks like good value.
Defensive growth
McBride (LSE: MCB) also reported full-year results today with a 5.9% decline in revenue offset by a 21% rise in cash from operations and an 18% lift in adjusted diluted earnings per share. Although tough markets caused an easing of revenue, the firm’s focus on costs and margins has delivered a pleasing outcome, which makes the recent restructuring exercise look worthwhile.
The company makes laundry, household cleaning and personal care products for supermarkets and others to sell under their own name and manufactures from centres in six countries across Europe. I reckon the firm’s business has defensive qualities similar to those of Unilever, PZ Cussons and others, but without the strength of brand-backing.
Net debt declined by 17% and part of the firm’s recent recovery plan involved refinancing with its lenders, which reduced ongoing interest payments. Now the directors have their sights set on growth and backed their optimism with a 19.4% hike in the dividend.
Meanwhile, City analysts following the firm expect earnings to advance 20% for the year to June 2018, which isn’t bad for a forward P/E running at just over 12.
