Here is what I wrote about VRS in my decision journal when I bought them -
VRS - I have found a new company that I really like the business, in the mining services sector but well diversified.
The core of the business is a roll-up model of acquired premium survey companies, so surveying, design, town planning etc.
They also provide non process infrastructure construction and maintenance services for government, resource and related industry sectors. In-house capabilities cover design and construction, hydraulics, maintenance, communications and asset management. This was the core of the business before they developed the strategy of entering the Surveying sector via the acquisition roll-ups.
The metrics all look good for the business, the only issue i discovered in my analysis was
"so far the only real concern I have is that the profit for last year is inflated by about 100% or $10m by tax benefits- including a one off due to overpayment of tax previously.
I have tried to price the impact of the tax benefit. Overall the income statement shows tax benefits of $9.75m, when you break this down its hard to separate out the way the $7m tax credit impacts the bottom line - the AR says the impact is $4.2m on income and $4.2m as a deferred tax asset on the balance sheet. (which i can't get my head around, I suspect they are offsetting the $3m tax that otherwise would be owing)
I have assumed an impact of $4.2m on NPAT which means when you take the one off out EPS drops to 5.8c from 7.4c
It still looks very cheap on those metrics, I just wonder how the market will react when the next report shows a significant drop in NPAT due to the normalising of tax benefits.
(Posted elsewhere & quoted)
I will enter by picking up a small parcel in our personal portfolio.
Re-reading the bolded part is prophetic indeed!! An absolute dog of a company, the contract for Nauru finished, which was the only thing making them any money, and the reason for the extra tax benefits. Profit went to ZERO! Not enough research, too much reliance on past performance and missed the end of the Nauru contract. One to put down to experience. - As Howard Marks wisely noted, "Experience is what you got when you didn't get what you wanted."
FY 2018 Not much joy, more losses, more negative cash flow, more debt.
H1 19 - Its always a bad sign when the first page of the presentation to investors specifically doenst mention earnings and focuses on EBITDA(EE) (Everything Else). So while crowing about positive EBITDA(EE) we have a loss of $35m thanks to impairments. Of course the impairments flow straight to the balance sheet in a massive fall in assets and therefore a huge drop in equity. There was also some good news, a reduction in debt and revenue growth, plus some decent cash flow, but this business is under stress and needs to execute with precision to extract value from here on.
price taker, no moat
