HY Summary details are below

 Revenue of $40.71m up 37% on 1HFY22 ($29.82m) 

 Gross profit $4.94m up 21% on pcp

 EBITDA of $3.23m up 10% on pcp

 Net profit before tax $3.17m up 10% on pcp

 Net profit after tax $2.25m up 14% on pcp  Interim dividend of 5.0 cents per share

As noted, it is the 8th consecutive period of increase in revenue, EBITDA and profit.

But I have sold today, happy to make next to no capital gain but between 5-8% dividend yield over a number of years.

They have flagged:

"The Australian Government has targeted a reduction in ICT contracting in some agencies. We have seen a reduction in contracting agreements leading into the end of the calendar year, however, there are several Government agencies still looking to bolster their talent pool, especially in the cyber security and digital infrastructure space which should counter the other agencies’ reduction."

I have decided to sit on the sidelines and see if this is true.

The SP rarely varies much and could probably re-enter at much the same price as I sold out today, should in six months I prove to have been chicken-little.



HIT reported yet another record result - their 8th consecutive year of double digit growth.

Headline figures are:

• Operating revenue is $63,096,126, an increase of 49.7% over the previous corresponding period (pcp) (FY21: $42,168,504).
• Gross Profit is $9,304,117, an increase of 31.8% over pcp (FY21: $7,059,491).
• NPAT is $4,403,625, an increase of 21.1% over pcp (FY21: $3,636,602).
• EBITDA is $6,757,822, an increase of 29.6% over pcp (FY21: $5,214,886).
• The directors have declared a fully franked dividend of 6 cents per share to be paid on 16 September 2022 to shareholders registered on close of business on 2 September 2022.

Full result here

As per my previous straws, one of my concerns was the liberal use of options to the Hazouri brothers who are founders and controlling shareholders with 65% of the registry.

Pleasingly EPS also tracked up from 9.32 to 10.73

The share price is up ~8% at 2.12 which equates to a FF yield of 5.2%

They have not provided guidance but sounded optimistic about the coming FY.

Its a family firm, with the 2 0f the 3 Hazouri brothers running the business as Executive Chairman and Executive director. The third brother Sam is on the board. There is high inside ownership: fully 70% of the  company is owned by these three.

While this aligns interests with shareholders, I wonder whether this introduces risks of nefarious activities that a wider spread of executives might prevent.

An example of this might be issuing options, or paying themselves too handsomely:

And indeed nearly a million options were exercised at a price of 0.58c by one director and there are another 3million outstanding with an exercise price of 0.75. This (combined) represents 10% of the float. The annual report states: "Options issued to directors are approved by shareholders at annual general meetings." Clearly, with the Hazouris owning 70% of shares, they can approve whatever they want.

This concern is partly allayed by the fact there has been a consistent increase in EPS and no further granting of options for the last 3 years or so. But when those 3 million options land, EPS will no doubt take a hit.

Secondly they do pay themsleves well: $576k and $275k.

The combination of these two findings has been a red flag too big for me to ignore. I owned back at ~85c a share when it yielded 10%, but sold due to these concerns.

Since then, I have watched the dividends slowly increase and the SP more than double with record result after record result. So, whilst these fundamental issues have not resolved, the rewards to shareholders have not been impacted over the last 4 years that i have been watching.

Hitech group are a Recruitment & ICT Consulting services provider.

They find and hire ICT employees, provide temporary ICT workers and most recently provide project data as a service (PDaaS - good grief)

ICT is clearly an area that has grown enormously, and is predicted to grow further. These guys (see management straw) have been in this line of business for ~30 years, and listed on the ASX since 2015.

They have become preferred providers of talent to numerous government departments and hence have a very stable customer base. 

Since that time revenues have steadily increased from $15m to $42m,  NPAT from $800k to $3.2m, EPS from 2.6c to 9.3c. They announced record results fo the last 7 periods, with NPAT demonstrating a CAGR of > 10%.

ROCE and ROE are consistently over 30-40% over the last 5 years.

They paid a combined dividend this year of 9c reflecting a 100% franked yield of 4.8%.

there are two areas I dont like:

firstly the issues outlined in the Management straw: dilution of ordinary shareholders by the Hazouris issuing options to themselves at 0.75c.

secondly the reduction in working capital: there is still plenty of cash ($5.6m) in the bank, and no debt, but I believe the pay out ratio was over 100% this year, which obviously cannot continue ad infinitum. (there are movements of cash into short term interest bearing investments, whch make it a little hard to work out whats going on)