AGM, page-16

For me the update is very positive.


I didn't get to the meeting either as I was at another AGM that started at 10.00 am but went far longer than I expected .

In respect to PGC I was very pleased with a confirmation that

1. Revenue is going to be higher than they had expected at June 30 , more likely to be 33 million rather than $30 million

2. The ebit margin is expected to be minimum of 11% compared to the last 2 years improving EBIT margin of 8% then 10% , so even at the conservative ebit number it is continuing to improve

3. Scan medics appears to be transitioned in well already , if the sales are good in just the first month post acquisition you could not be more pleased

4. The comment re staff morale is very important given that PGC is putting businesses that were smallish together in to a larger business , if the staff are happy they will work harder for a bigger career opportunity in a much larger enterprise

5. Tanner's comment that they intend to grow at 10% organic plus acquisitions is very substantial, even better was the hint the next acquisitions will be scrip and cash from the bank facility is super positive when you consider the model of buying a small business giving the owners some cash and shares so they can stay in the business and benefit makes a lot of sense. This is confirmed when you look at the history Cheong , Turner and co have not sold any shares and appear to be more engaged now than when they first sold there businesses in to the aggregation play

If the company is generating $4 million cash, the debt will be paid off very quickly and can be continually redrawn to buy the next and the next business roll up
If they are using scrip for 50% , and cash for paying less than 4 times ebit the payback of the debt 50% is very quick

I could easily see based on this meeting the $ 50 million revenue number and the 15% ebit number being achieved as early as next financial year

Any company showing 60% jump in revenue and EBIT year on year is going to attract the instos once it gets over $25 million in revenues and $3 million in profit , which on this news seem to have just occurred.

$50 million revenue at 15% margin = $7.5 million ebit .

This target gives me confidence we will see the stock head to $1.00 on that type of result.

On today's summary this does not seem over exuberant to me and should give the larger brokers and instos sufficient confidence to now buy PGC for their small cap funds

Hopefully they are seeing the likes of Paradise , WAM , and Magellan