August reporting season continues to move full steam ahead with eye-catching results from both PeopleIn Ltd (PPE.ASX) and Resimac Group Ltd (RMC.ASX)...
PeopleIn Ltd (PPE.ASX)
PeopleIn Ltd (PPE.ASX) shares rallied today after yet another positive result from the recruitment services company. FY22 revenue was up 53.6% to $682.4M, and normalised EBITDA was up 23.9% to $47.2M. The result was a record for the business and came out ahead of guidance. PPE has consistently delivered for shareholders with a 27.6% CAGR for revenue since FY15. The results were driven by favourable operating conditions with the strength of the employment market (3.4% unemployment) and unprecedented demand from clients operating in defensive sectors. PPE has continued to pursue acquisitions as part of its aggressive M&A strategy and contributed $6.6M in EBITDA in FY22. PPE will be targeting their focus on the government/healthcare sectors and are starting to leverage international recruitment post covid. Looking forward, PPE is guiding towards a normalised EBITDA of $62-$66M, signalling over 30% growth in earnings. PPE continue to benefit from low levels of unemployment and higher turnover of its clients’ employees, driving demand for recruitment services. The company is also well placed in an inflationary environment as wage inflation will drive higher margins for the business. PPE M&A pipeline remains strong and has around $30M of balance sheet capacity.
Resimac Group Ltd (RMC.ASX)
Resimac Group Ltd (RMC.ASX) shares traded flat after releasing sound and conservative FY22 results. During the financial year, RMC grew its loan book by 11% to $15.3bn and achieved an NPAT of $104M, which was flat in terms of growth. Home loan settlements were up $6.3bn, to 30%. However, loan book growth was constrained due to fierce competition in the home loan origination market and higher run-offs due to both; customers prepaying, and the plethora of government incentives available post covid. RMC’s credit quality is peaking alongside their lending peers - with low arrears, prepayments at highs and lower LVR ratios.
RMC always err toward the conservative side of things. While most banks have been releasing provisions, RMC recorded a considerable $9.5M provision expense in the second half. This leaves RMC well covered for whatever economic hardship lies ahead and could provide upside to profits as these provisions are able to be released in future results. RMC’s NIM slipped 26bps (to 181bps) over the year, and management said the NIM exit rate was roughly 165bps. As mentioned in the other banks we covered in reporting season, NIM was impacted by fierce competition in the home loan market, and RMC also saw their funding costs increase due to BBSW spikes which happened before rate rises. Looking forward, we expect RMC to shift more focus to the asset finance segment as the housing market faces challenges. We also expect NIMs to stabilise on the back of the recent rate rises. These rate hikes are now getting priced into new loans and weren’t reflected in these results.
Disclaimer: Both PPE.ASX and RMC.ASX are currently held in TAMIM portfolios.
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