(RTG) ReThink Group

ReThink recruits more followers BUY
25/10/2011 Robert Tyerman
http://www.growthcompany.co.uk/recommendations/1664028/rethink-recruits-more-followers.thtml


Recruitment and consulting specialist ReThink Group is looking abroad and upmarket after doubling first-half pre-tax profits to £423,000. Mounting economic uncertainties at home and abroad are not denting this specialist company’s enthusiasm or growth.

Acquisitive London-based ReThink, which increased turnover 27 per cent to £34.4 million in the six months to June, says it improved profits and margins. The company, steered by chief executive officer Jon Butterfield, cites ‘healthy demand across the board’, driven by technology changes and a booming oil and gas sector.

AIM-quoted ReThink lifted revenues from contract and recruitment process outsourcing 26 per cent to £30 million in the first six months and won a three-year contract with Boots in September last year, which will have a continuing impact on profits and turnover. Under the terms of the deal, ReThink is providing full recruitment process outsourcing for almost all of the company’s IT contract and interim staff.

The company has established a managed service team on-site at Boots UK, which serves as a single point of contact for recruitment advice, ordering, administration, management of information and payments. ReThink maintains that it has so far enjoyed ‘encouraging feedback’ from Boots.

Elsewhere, the company’s Aiimi business transformation and technology arm grew revenues 80 per cent to £1.8 million. According to ReThink, Aiimi has made a ‘significant investment’ in cloud technology and expects appreciable growth from its strategic focus on delivering subscription-based solutions to clients in local government, central government agencies, energy, life assurance, food and beverages and the media.

ReThink’s interim results, achieved in the teeth of what Butterfield describes as ‘very difficult market conditions’, reflect only a few weeks’ contribution from Berkley Recruitment, a leading supplier of permanent and contract staff to pharmaceutical, life sciences and other concerns with a focus on Europe and the Asia-Pacific region. The company bought Berkley in June for £2.3 million upfront, with a further £3.7 million due if certain targets are met, and Butterfield reckons that Berkley will itself take the company’s foreign business from 8 or 9 per cent to between 15 and 20 per cent of the total.

ReThink has merged its operations in Singapore with Berkley, whose former chief executive officer, Steve Greenwood, now has responsibility for continued expansion in this region. In the next stage of integration, the company says it intends to establish the Berkley Pharmaceutical and Life Science brand within its existing UK office structure and hopes to build on the formidable track record that Berkley has built in this market, both in Ireland and Asia.

ReThink Recruitment has already been showing growth in the Middle East as well as in the UK. The company says operating profits on Middle East activities alone rose 119 per cent in the first half, before allocating their share of group overheads.

That international trend will be reinforced when ReThink opens an office in Houston, Texas, later this year, having already received £100,000 for hiring ten specialist oil traders for one client. Butterfield and colleagues, who are keen to move the company up the fees scale by filling more senior vacancies through its executive search (headhunting) and other divisions, are contemplating acquisitions in outsourcing and other fields.

ReThink doubled earnings to 0.302p a share in the first half-year and is upping the interim dividend 82 per cent to 0.0986p a share. Analysts now see the company doubling full-year pre-tax profits to £1.9 million and lifting earnings to 1.31p a share, with £2.5 million pre-tax and 1.55p a share on the cards for 2012.

ReThink shares, which have traded between 12

16th September 2011

Analyst: Steve Moore
Email: steven.moore@gecr.co.uk
Tel: 0207 562 3370

ReThink Group* - Interim Results comment. Reiterate 'Buy' at 10p, Target Price 17p

Key Data

EPIC

RTG
Share Price

10p

NMS

5,000

Spread

7.5p - 9.5p

Total no of Shares

101.37 million

Market Cap

£10.14 million
12 Month Range

5.375p - 12.25p

Market

AIM

Website

www.therethink-group.com

Sector

Business Training & Employment Agencies
Contact

Jon Butterfield, CEO Tel: 07831 593646


ReThink Group, the recruitment and consulting business, has announced results for the six months ended 30th June 2011 which show more than 31%, largely organic, Net Fee Income growth. This compares to competitors, on the whole, struggling to achieve growth in the UK - and the company also notes “in view of the current demand levels, the board believes that the group is positioned positively to meet full year market expectations, and continues to view the future with confidence”. We consider such an outlook to remain from far reflected in the company’s valuation and reiterate a 17p target price and stance of buy.
The results showed underlying pre-tax profits up by more than 124%, to £473,000, compared to the first half of 2010, and earnings per share by even more - from 0.16p to 0.38p. This was achieved on revenue 27.5% higher at £34.39 million and Net Fee Income (gross profit) up 31.7%, to £7.83 million. There was a net £520,000 generated from operating activities - comfortably covering £131,000 of organic investment (the depreciation charge was £104,000), £74,000 of financing (borrowings and lease) repayments and £125,000 of dividend payments. However, the 17th June acquisition of Berkley Recruitment Group meant a net cash position of £1.14 million at the end of 2010 turned into a a net debt position (including deferred consideration liabilities) of £1.79 million at 30th June 2011. On this the company noted “with facilities renewed in the UK and new banking relationships added as a result of the acquisition of Berkley, the group's funds remain adequate for both its immediate purposes and for its future commitments”. At period end net current assets totalled £1.10 million, with there £2.20 million of non-current liabilities.

The company’s confidence is further highlighted by a significantly increased interim dividend - 0.0986p per share being declared. This is up from 2010’s interim payment of 0.054p, and is payable on 7th October to shareholders on the register at close on 23rd September. Encouragingly, every area of the ReThink group grew in the period - with permanent recruitment revenue up almost 24% (to £2.64 million), contract recruitment revenue up more than 11% (to £21.71 million), business transformation & technology services revenue up more than 70% (to £1.77 million) and recruitment process outsourcing revenues not far off doubling (to £8.27 million).

There was recruitment growth in both the UK and Middle East and the acquisition of Berkley is noted to have integrated well. ReThink “continues to see increases in both contract and permanent revenues, as well as a strong pipeline in the business transformation & technology services division”. This latter business (Aiimi) is benefitting from a growing customer base - securing projects with new clients in local government, central government agencies, energy, assurance, food & beverage and the media sectors. Likewise, ReThink’s recruitment process outsourcing offering is also benefitting from a growing customer base - an agreement with Boots growing in line with expectations and another significant client added during the first half of 2011. Further investments in this business have been made to take advantage of opportunities currently being seen in this marketplace.

ReThink CEO, Jon Butterfield, emphasised “we are continuing to deliver on the long term strategy to expand into additional high-value markets both organically and

Equity Research Merchant Securities
http://bit.ly/n7TBnn

September 15, 2011 -

The ReThink Group* (RTG.L) Support Services BUY
We reiterate our Buy recommendation and price target of 15p.
Price 11.75p
Target price 15.0p
Market cap £11.9


first half performance
 Following a trebling of adjusted PBT in 2010 ReThink has increased H1 2011 adjusted
PBT by 125%, all of which was organic and practically all generated from the UK.
 NFI from recruitment grew by 23%, a far better result than its immediate peer group has
achieved and indicates market share gains.
 The acquisition of Berkeley was completed in June and will therefore be included for a
full 6 months in H2, as well as further organic growth. Our forecasts are unchanged.
 The shares at 11.75p are still 5% lower than they were after the July trading update,
being affected by the weakening sentiment for recruitment stocks. However, ReThink
has shown that it is nimble and dynamic enough to drive growth even in tough economic
conditions and its 2011 PER of 9x falling to 7.6x in 2012 does not do justice to its
achievements.

ReThink doubles interim profits
15/09/2011 Robert Tyerman
http://www.growthcompany.co.uk/news/1655318/rethink-doubles-interim-profits.thtml


Recruitment and consulting specialist ReThink Group (RTG) is looking abroad and upmarket after doubling first-half pre-tax profits to £423,000. The acquisitive London-based company, which increased turnover 27 per cent to £34.4 million in the six months to June, says it improved profits and margins, helped by 'healthy demand across the board', driven by technology changes and a booming oil and gas sector.

AIM-quoted ReThink, steered by chief executive officer Jon Butterfield, lifted revenues from contract and recruitment process outsourcing 26 per cent to £30 million in the first six months and won a three-year contract with Boots in September, which will have a continuing impact on profits and turnover. The company's Aiimi business transformation and technology arm grew revenues 80 per cent to £1.8 million.

ReThink's interim results reflect only a few weeks' contribution from Berkley Recruitment, a leading supplier of permanent and contract staff to pharmaceutical, life sciences and other concerns with a focus on Europe and the Asia-Pacific region, which the company bought in June for £2.3 million up-front and another £3.7 million due if certain targets are met. Butterfield reckons Berkley will itself take the company's foreign business from 8 or 9 per cent to between 15 and 20 per cent of the total.

That trend will be reinforced when ReThink opens an office in Houston,Texas, later this year, having already received £100,000 for hiring 10 specialist oil traders for one client. Butterfield and colleagues, who are keen to move the company up the fees scale by filling more senior vacancies through its executive search (headhunting) and other divisions, are contemplating acquisions in outsourcing and other fields.

ReThink doubled earnings to 0.302p a share in the first half year and is upping the interim dividend 82 per cent to 0.0986p a share. Analysts now see the company doubling full-year pre-tax profits to £1.9 million and lifting earnings to 1.31p a share, with £2.5 million pre-tax and 1.55p a share on the cards for 2012.

Highlighted by Growth Company Investor in July at 11.5p, ReThink shares, which have traded between 12.25p and 5.5p over the past year, now stand at 10p, down 1.75p this morning, valuing the company at £10.9 million. On a prospective price earnings ratio of 6.4 and yielding 2.5 per cent, the rating looks grudging.


Tags: AIM market, Berkley Recruitment, Boots contract, Executive search, Jon Butterfield, US expansion

Sector: Support Services

Companies: ReThink Group (The)