Not your typical recruiter
The 2019 prelims are a clear endorsement of RTC’s strategy with gross profits and dividend meeting expectations, and net debt declining from £4.5m to £2.8m. PBT came in at £1.8m, the same as last year. Due to the diversified source of earnings (65% of revenues are from recurring sources and are non-cyclical), a clear distinction between RTC and its small-cap recruitment peer group is emerging. This, we believe is starting to be recognised and while the shares have started to perform (up 27% YTD), RTC should enjoy higher ratings especially with it offering a dividend yield of 6% and an improved cash position. Even at our price target of 100p, the 2020E PE rating and dividend yield would only be 10x and 5%.
24 Feb 20
Benefits from non-UK, non-cyclical, activity
RTC has reported EBIT of £0.8m (2018: £0.8m) for the six months to June 2019 and delivered increased cash from operations of £1.1m (1H2018 it was an outflow of £1.3m). RTC’s sole source of financing is its invoice discounting facility, utilisation of which has reduced from £6m at June 2018 to £4m. It has also grown the interim dividend by 7.7% to 1.4p. Looking forward, its non-UK and non-cyclical activities, i.e. GSS and Ganymede continue to trade well, though to reflect the subdued trading environment in its UK based recruitment division, ATA, we have reduced our full year adj. PBT from £2m to £1.9m (2018: £1.9m). Nevertheless, with RTC trading on a 2019 PE rating of 6x and a dividend yield of 7%, we maintain our buy recommendation.
05 Aug 19
Small Cap Feast
Techniplas –global producer and support services company providing highly engineered and technically complex components, making the supply chain to original equipment manufacturers more efficient. FYDec17 rev $515m. Loungers plc—the operator of 146 café/bar/restaurants across England and Wales under the Lounge and Cosy Club brands, announces its intention to seek admission on AIM, offer to raise £61.6m at 200p with market cap of £185m, expected 29 April 2019. SDX Energy plc—a North Africa focused oil and gas company, announces its intention to complete a Canadian plan of arrangement under section 192 of the Canada Business Corporations Act and will have shares de-listed from the TSX-V and admitted to trading on AIM. Expected 28 May 2019, anticipated market cap of £76m Renold plc—a leading international supplier of industrial chains and related power transmission products, announced that it will cancel the listing of the Company from the premium segment and apply for admission on AIM. Expected 06 June 2019. Distribution Finance Capital Holdings plc — specialist lender which builds relationships with manufacturers and then provides working capital solutions up and down their supply chains to drive their growth is looking to join AIM. No raise, secondary offering of £19.8m at 90p, expected market cap of £95.98m. Expected 09 May 2019.
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24 Apr 19
‘Highly optimistic about its future’
The 2018 prelims not only addresses the two concerns raised at the interims of meeting full year expectations and reducing the net debt, they also highlight the success of the strategy of gaining exposure to engineering, manufacturing and infrastructure markets on long term contracts with bluechip clients in the UK and overseas. Following confirmation of organic PBT growth of 58%, the best in the sub-sector, we have increased our price target from 95p to 100p. With RTC trading on a 2019 PE rating of 5x and offering a dividend yield of 7% (2.4x covered), we maintain our buy recommendation.
25 Feb 19
HCM UPDATE -28.01.19 (CPS.L; EMR.L; HYDG.L; NAK.L; RTC.L)
CPL Resources plc (CPS.L, 525p/£144m) Half year results to 31.12.18 (24.01.19) | Empresaria Group plc (EMR.L, 66.5p/£32.6m) Full year trading update to 31.12.18 (23.01.19) | Hydrogen Group plc (HYDG, 63p/£21.3m) Full year trading update to 31.12.18 (25.01.19) | Nakama Group plc (NAK.L, 1.025p/£1.2m) Q3 trading update to 31.12.18 (21.01.19) | RTC Group plc (RTC.L, 56.5p/£8.3m) Full year trading update to 31.12.18 (25.01.19)
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28 Jan 19
RTC has released a favourable trading update for the 12 months to December 2018, confirming PBT of £1.8m, representing growth of 54% and a reduction in net debt from June 2018 levels. Trading on a 2019 PE rating of 5x and offering a dividend yield of 8% we maintain our buy recommendation and price target of 95p. At this level, the 2019E PE rating and dividend yield would still be only 8x and 4% respectively.
25 Jan 19
Small Cap Feast
Techniplas –global producer and support services company providing highly engineered and technically complex components, making the supply chain to original equipment manufacturers more efficient. FYDec17 rev $515m. Circassia Pharma (CIR.L) - specialty pharmaceutical company focused on respiratory disease transferring from the Main Market. No funds being raised. Due 4 Feb. Greenfields Petroleum (TSX-V:GNF) production focused company with operated assets in Azerbaijan seeking AIM dual listing including $60m private placement. Mkt cap $12.6m CAD. Expected late January 2019. Chaarat Gold Holdings—RTO, the Company intends to acquire Kapan Mining and Processing CJSC, which owns the Shahumyan medium-sized polymetallic mine in Kapan in the Republic of Armenia. No raise, market cap of £110.1m, due early Feb
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25 Jan 19
Upbeat interims confirm full year forecast
Adjusted PBT at the interim was £0.83m representing growth of 27% with management remaining confident of ‘continuing the performance in the second half’. Trading on a 2018 PE of 6x and offering a dividend yield of 7%, having increased the interim dividend by 8%, we maintain a buy recommendation and price target of 95p (72% upside). At this level, the 2018 PE rating and dividend yield is still only 9.5x and 4% respectively.
30 Jul 18
Allenby Capital HCM Update 05.03.18
Harvey Nash Group plc (HVN.L, 88.6p/£65.1m) Full year Trading Update to 31 January 2018 | RTC Group plc (RTC.L, 61.5p/£9.0m) Full year results to 31 December 2017 | Robert Walters plc (RWA.L, 650p/£489.5m) Full year results to 31 December 2017
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05 Mar 18
Adjusted PBT ahead of expectations
Adjusted PBT at £1.5m for the 12 months ended December 2017 represented growth of 22% and was ahead of our expectation of £1.4m. In turn, this supported dividend growth of 13% against an expected 6%. Net debt was £4.4m though allowing for an unwind in receivables of £1.5m in January 2018, the underlying net debt position represents a significant improvement on the December 2016 position. Looking forward, we are leaving our adjusted 2018 PBT forecast unchanged representing adjusted PBT growth of 25% but note RTC’s commentary of ‘pursuing acquisitions’. Our 2018 forecast is underpinned by the material contributions expected from the SSE contract which becomes fully operational in 2018. We also introduce a 2020 PBT forecast implying a 3yr CAGR in PBT of 18%. Trading on a 2018 PE of 6x and offering a dividend yield of 6%, we maintain our buy recommendation and price target of 95p. At this level, the PE rating of 9x is in-line with peers
26 Feb 18
In-line interims: accelerating growth
RTC has released an in-line set of interims with PBT at £0.6m, representing growth of 32%. The interim dividend was also up 9% to 1.2p. For the full year we will be leaving our forecasts unchanged implying PBT and DPS growth of 16% and 7.5% respectively. Net debt at June 30th , also slightly improved from £4.2m at the beginning of the year to £4.0m. These interims follow the recent announcement confirming the new contract with SSE Plc which significantly de-risks the earnings profile. We estimate 76% of gross profits (ex DCC) can be viewed as recurring and confirms our argument that RTC deserves a higher rating as it should not be viewed as just a cyclical recruitment company. RTC currently trades on a 2017 and 2018 PE rating of 9x and 7x respectively and offers a dividend yield of c5%. We reiterate our buy recommendation with a price target of 95p – 36% upside.
09 Aug 17
Material contract win – PBT upgrades
RTC has announced a material contract win with SSE Plc. It has been awarded a 3yr contract to source, train and provide at least 250 ‘Dual Fuel’ installers for the roll-out of SSE’s smart metering programme. The revenues will be £28m for the period November 2017 to December 2020. As a result, we have upgraded our 2018 and 2019 PBT forecasts by 13% and 11% to £1.8m and £2.1m and increased our price target from 85p to 95p. The contract significantly derisks the earnings profile with 76% of gross profits (ex DCC) now deemed recurring and confirms our argument that RTC deserves a higher rating and should not be viewed as just a cyclical recruitment company. With it trading on a PE rating of 7.7x for 2018 and offering a sustainable dividend yield of c4%-5%, we re-iterate our BUY recommendation.
26 Jul 17
2017 PER of 7x and a dividend yield of 7%
There are numerous reasons to buy RTC. Improved visibility due to its exposure to recurring, higher margin, contracts in the robust UK engineering sector now account for c46% of revenues – up from 25% in 2014. Following a strong start to 2017 we forecast adjusted PBT growth of 16%, a ROCE of 19% and a sustainable dividend and FCF yield of 7% and 11% respectively. With a PE rating of just 7x we initiate with a BUY recommendation and a price target of 85p, representing 73% upside.
08 Mar 17
Small Cap Breakfast
Rainbow Rare Earths has published a prospectus. It has raised $8m to fast-track fully permitted high grade Gakara ‘rare earths’ project to production in Burundi. Intends to join the Standard List of the LSE. Impact healthcare REIT— Intends to float on the main market. Seeks to raise £160m to acquire a portfolio of up to 58 care homes. Expected Admission 7 March. Diversified Gas & Oil—According to LSE website first day of trading on AIM now expected for 30 January.
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27 Jan 17
Hybridan - Small Cap Wrap
FOUR Final results, BNK Settlement of Lawsuit, BDI Contract Win, CAZA $4m Convertible Loan, CGNR* Interims, CHAR 2D Seismic Programme , CLIN Adds New Program, CNC Product Launch, FITB* Appeal and Integration with Samsung, IMTK Contracts win, Herschel heaters connected by LWRF, MARL* Equity Raising, Conversion and Drilling Update, MWE Financial Results, OPTI* Board Appointment, PEG* Contract Win, ROL Acquisition, RTC Network Rail award, SAR* Interims and Research Update, SND AGM Statement, TPET Placement
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04 Mar 15