PeopleIn presented their half year results today. Nothing too surprising, and market had mostly neutral response (up 3% but that's typical daily fluctuation for PeopleIn). Overall doesn't change my previously posted valuation. Here are my notes for those interested:

• Presentation by CEO Ross Thompson and CFO Adam Leake
• Key message is that charge rates are up (9%, from from higher margin work and dropping some unprofitable accounts) but hours are down (12%, from continuing private sector recession)
• Revenue down 5% v pcp: $603m to $573m
• EBITDA/revenue margin stable around 26%, well above peers that Ross believes are around high teens; down substantially from H1FY23 34% and H1FY22 36%
• Expect challenging conditions “for at least the next 6 months”; but “we don’t expect financials to worsen, and are slowly starting to turn the corner”
• Normalised EPS declined to 9.7c, acknowledged “not good enough” and are focused on improving; actual EPS loss of -3.8c
• Stat loss before tax of -$1.7m (NPAT -$3.9m in Appendix 4D, resulting from income tax expense of $1.7m from previous period and $0.5m attributed to non-controlling interests)
• Operating cash flow of $22m; helped by $23m favourable change in receivables and payables (is this temporary or sustainable?); enabled $21m net debt repayments
• In cash flow they report $643m in receipts from customers, unclear how this reconciles with $572m revenue?
• Depreciation and amortisation of $8.6m
• Costs are down 5%, improved billing per consultant; over last 2 years, removed $15m in annual costs, but that’s about done now, “I think most of the savings are structural” (ie not too much should build back once revenue increases; PL note: assume some will re-appear)
• Claim that project UNITE (business efficiency and technology integration across brands) has been successful and has now finished, moving into BAU
• They used this to explain some of the drop in capex from $4.6m to $1.2m.
• From the outside difficult to tell how much of this is exec hype vs genuine efficiency improvements.
• Continued pause in dividend
• There’s a lot of reporting of “normalised” results; in most costs the normalisations are acceptable/small so they don’t distort too much; however they do exclude employee performance rights for which the only performance criteria is remaining employed 1 year later, but the impact is relatively small: for H1FY25 the value was $0.6m
• Expecting a boost in coming years from Qld 2032 Olympic build and delivery (positive impact for brands AWX [mining, construction, manufacturing, technical jobs] and Vision Surveys [infrastructure, renewables jobs])
• Some hyperbole from CEO explaining challenging economic environment: “cost of living crisis” and “business confidence at historic lows” (not really, business confidence currently around neutral, although it has been improving from lower scores over last year)
• Of 9 brands, 4 growing, 2 steady, and 3 softer. Of the softer:
• Halcyon Knights (IT), hours down 6%
• First Choice Care (public and private hospital), rates up 15% but hours down 29%
• Expect a Star (early childhood education), hours down 45%
• Debtor days staying within 31-32 days range
• Expectation that Federal election in Apr/May will create period of uncertainty, with confidence/certainty growing from May onwards
• Expect ongoing average 80-90% cash conversion from normalised EBITDA
• Largest provider of Pacific labour, market share is stable, hoping for small improvements in margins
• Q3 is usually lowest earnings quarter in year due to Jan always being quietest month

Impact on my valuation of $1.60 and 5-yr ROI of 28% pa (based on current share price around $0.90):

• No change; revenue and loss were marginally worse than expected (eg 5% drop in rev for H1 vs 2% expected for full FY25) but the results are in line with longer-term expectations