I'm reposting my last CND post from June this year as, unlike...

I'm reposting my last CND post from June this year as, unlike almost every other post on this thread, the predictions I made then are turning out to be reasonably accurate (even if Lloyd Morgan is no longer failing).

From June 17, 2008:
Relative to FY07 or expected FY08 earnings CND looks like a solid buy, paying a massive dividend.

However, the macro economic indicators suggest that there will be a significant downturn in the white collar sectors that CND specializes in (esp Banking and Finance) over FY09 and probably FY10 as well. Less permanent positions will equate to a significant contraction in CND's margins.

ABN Amro is expecting FY09 earnings to fall by 10% relative to FY08. I think the fall will be closer to 20%, especially if you factor in higher interest payments on CND's debt.

And we still do not yet know if the Lloyd Morgan business has been successfully turned around.

I'd expect CND to cut its dividend next FY from 19c to 14c. They would be wise to use their cash to pay off debt.

The only HR company big enough to buy out CND is skilled, but Skilled is itself in big trouble because it is carrying massive amounts of debt and is in no position to make acquisitions until debt becomes cheap again (unlikely for years).

If you look at CND's 10 year chart, the stock traded below $1 through much of 2002-2003, in what was a mild employment contraction relative to what most commentators are expecting over the next 1-2 years.

I'd be surprised if CND falls below $1 this time round, but if the current downturn (labour market softening) continues for an extended period (which currently looks likely), I think CND could bottom out near the $1 mark and trade sideways for the next year or so.