companies

Woodspeen Training

EPIC: WSTP
Mid-price: 44.5p
Spread: 42p – 47p
Total no. of shares: 20,520,000
Market cap: £9.13 million
12 month range: 42p – 47.5p
Website: woodspeentraining.com
Sector: Support Services

Background

Woodspeen Training is a provider of vocational training which was founded in 2007 and listed on PLUS in March 2008. The company joined the market with a remit to acquiring existing businesses that provide training, primarily for young people. Woodspeen believes that the training market, particularly the government funded one, is highly-fragmented and that it can create synergies by consolidation.

Woodspeen currently operates three subsidiaries, Futures Training Centres, A&R Training Services and S&S Training Services, which variously offer training under the ‘Apprenticeships’, ‘Entry to Employment’, ‘Learndirect’ and ‘Train to Gain’ schemes set up by the government. The firm expects the market to grow significantly as the school leaving age is raised successively from 16-18 over the next four years, with some teenagers opting for vocational training over a more formal academic education.

Futures Training has branches in Sussex, Dorset and Northamptonshire, and deals with providing training for those currently in work and those looking to attain a qualification. In October 2009, it won a contract to deliver the Flexible New Deal programme in the East Midlands. The A&R Training subsidiary covers childcare, general care training and customer service. It has traded for more than twenty years, and operates across the north of England, including Bradford and Halifax. It employs around 90 staff and currently has around 700 people on its books. S&S was founded in 2001, and focusses on occupational programmes in business administration and IT. Along with the other two firms, it runs the ‘Entry to Employment’ programme, which is aimed at unemployed 16-18 year olds (or, in modern parlance, NEETS – Not in Employment, Education or Training). S&S currently has 110 learners on its programmes, overseen by 12 staff.

Woodspeen’s operations were previously overseen by the Learning and Skills Council, which has now been superseded by the Young People’s Learning Agency (YPLA) and the Skills Funding Agency (SFA). The YPLA directs the support and training efforts for 16-19 year olds, while the SFA funds and regulates the training for adults throughout England and Wales in the context of policy set by its parent department, the Department for Business, Innovation and Skills. The new coalition government has announced further support for the apprenticeships programme, with an additional £150 million being made available for the various schemes. This is expected to generate around 50,000 new places on apprenticeship courses, aimed in particular at small and medium-sized enterprises. Business Secretary Vince Cable has also indicated the government’s commitment to training, saying that it would choose to favour increased funding for apprenticeships instead of throwing money at industry in general, while universities minister David Willetts has indicated that he would like young people to consider apprenticeships as an alternative to university education.

Financials & Current Trading

Woodspeen enjoyed an impressive performance in the year to 31st March 2010, with pre-tax profit jumping to £619,650, from just £48,564 in the previous year. Revenue increased by just over 2.5 times, to £5.1 million pounds, as the newly-acquired subsidiaries began to make their presence felt.

The expenditure on acquisitions caused a 64% fall in cash reserves, to £693,308, leading to an overall 27% drop in net current assets, to £1.6 million. Net assets however rose by 51% to £4.7 million.

On the current trading front, Woodspeen noted that there may be some impact from the coalition government’s emergency budget, with some funding cut. However, it is of the opinion that the government will continue to fund vocational training in response to concerns raised by business. All three businesses were reported to be trading well, with prospects continuing to look bright. In addition, Woodspeen said that it continued to seek new acquisitions in line with its consolidation strategy.

Management

Si Hussain – Chief Executive – Hussain is a chartered accountant and was an executive director of the main board of professional training firm BPP and left in October 2009 when it was acquired by the Apollo Group. He was responsible for the professional training and development division at BPP.

Lynn Chandler – Finance Director – Ms Chandler is a chartered accountant and was the Finance Director of BPP for 10 years until she retired from full-time employment in 2005. She is also a non-executive director of the A2Dominion Housing Group.

Charles Prior – Chairman – Prior was one of the founder shareholders and directors of BPP. BPP joined the Unlisted Securities Market of the London Stock Exchange in 1986 and obtained a listing on the London Stock Exchange in 1987. Prior was its CEO until his retirement in August 2007.

Compton Hellyer – Non-Executive Director – Hellyer worked in the City for over 20 years, first as a stockbroker and then as a financial advisor on commodities and futures. In 1991 Compton founded Sporting Index which soon became the world leaders in spread betting. He left Sporting Index when it was brought by a private equity firm in 2003 and is now chairman of six small private companies. Compton is a member of the Jockey Club and is a non-executive director of Epsom Racecourse.

Investment Recommendation

Woodspeen looks to have positioned itself well in the training sector, taking advantage of the various government programmes on offer. The firm’s existing subsidiaries are making their presence felt, and will provide a good base from which to make more acquisitions, while the encouraging noises being made by the new government indicate that it will not suffer too heavily from budget cuts. Trading on a historic multiple of just over 20 times we believe that the shares are a good long-term play on the sector given the consolidation opportunities and the excellent record of the management team at BPP. Buy.