ferret s stock to watch

The labour market is still tight and it could be even harder to
find workers as the Government's new Infrastructure Fund gears into
action.
Already road construction is going full blast with the flow of
Commonwealth funds increasing and more workers being encouraged to come
to Australia to work and be placed, especially in the WA and Qld mining
sectors.
One company likely to benefit from all this lift in activity is
Skilled Group Ltd (ASX:SKE), the human resources and employment services
company which has been around since 1994.
Yesterday, Skilled Group attracted market attention when it
announced it had just completed an extension of its syndicated bank debt
facility for a three-year term.
The total facility is $350 million comprised of two tranches of
$175m each.
Tranche A, previously a one-year facility maturing in August, has
now been extended to August 2011.
There has been no change to tranche B which matures in August
2010.
Skilled says the renegotiated debt facility remains with the
company's existing banking syndicate made up of National Australia Bank,
ANZ and Westpac.
The extension has been achieved with no significant change to
financial covenants.
The bank margin applicable to the extended tranche has increased
by 70 basis points, in line with the extension of the term and current
credit market conditions.
There has been no increase in the margin applicable to Tranche B.
"We have been able to strike a very competitive deal with our
existing banking syndicate and that's a clear sign of the strong support
shown for our business," said Greg Hargrave, chief executive and managing
director.
"We're very happy with the terms on which the facility has been
renegotiated and the extended maturity date will provide certainty of
funding until 2011.
"We have considerable headroom within our debt facilities and
we're very comfortable with our ability to service current debt levels.
This is a great outcome for the business," he said.
Meanwhile in an open briefing with Corporatefile, Mr Hargrave and
CF0 Terry Janes declared that Skilled is a direct beneficiary of the
resources boom.
"Our September 2007 acquisition of drilling and marine crew
provider, OMS (Offshore Marine Services), has taken the oil, gas and
mining sectors to around 35 per cent of our portfolio," they said.
"OMS is performing strongly and is ahead of expectations.
"Our key industrial sectors, manufacturing, transport, logistics
and utilities continue to grow.
"While below earlier expectations, Excelior is ahead of last
year.
"PeopleCo is benefiting from national expansion with 13 new
branches opened in the first half.
"We're seeing stronger regional employment," they said.
Last year the second-half was negatively affected by the flow-on
impact of drought on regional employment in secondary industries
particularly in NSW, South Australia and Victoria.
Skilled's share price has fallen from a high of $5.64 in December
and currently trades around $3.30.
For the year ending June 2007 the company paid a fully franked
total dividend of 22c and on that dividend is yielding better than 6.5
per cent.

SHARE PRICE MOVEMENTS
*********************

Shares of Skilled Group yesterday rose 7c to $3.30. Rolling high
for the year is $5.50 and low $3.07. Dividend is 22c to yield 6.97 per
cent. Earnings per share is 29.92c and p/e ratio 11.03. The company has
121.9 million shares on issue with a market cap of $402.4 million.
In the six months to December Skilled had a net interest expense
of $9.9 million, comprising a net interest cash cost of $6.1 million,
interest of $2.7 million accrued but not paid and a non-cash accounting
charge of $1.1 million representing discount expense on the deferred
payments for acquisitions which have an earn-out component.
"We expect total interest expense on debt for the second half to
be about $10 million and the non-cash accounting charge for the discount
expense on the deferred acquisition payments to be about $3 million," Mr
Janes told Corporatefile.
"This means we expect the FY08 interest expense on debt to be
around $19 million and the non-cash accounting charge for the discount
expense on deferred acquisition payments to be about $4 million.
"Based upon our FY08 EBITDA guidance of between $92 and $97
million, excluding the profit on our recent divestment of SEM Fire and
Rescue, our ratio of EBITDA to interest expense at year end will be
around five times.
"Our anticipated EBITDA growth in FY09 will take our interest
cover higher."



CFO Janes explained there were four main reasons why our December
half cash flow from operations was negative.
Firstly, there is the seasonal influence where closing
receivables for the December half are higher and creditors lower than at
the end of June.
This is due to the difficulty of collecting debt during the
Christmas holiday period, which then pick-up in January and February.
In terms of creditors, accrued wages for field employees are
generally lower at December 31 than they are at June 30.
Secondly, the working capital requirements of the OMS business
are greater than the company's traditional businesses because OMS's
multi-national oil and gas industry clients are on longer payment terms.
With strong sales growth in the months post acquisition,
additional working capital investment of about $17 million was made in
OMS.
Thirdly, two acquisitions made in the first half - Hudson's Trade
and Industrial and Trade Force New Zealand - were asset purchases, not
balance sheet purchases, and about $5 million of initial working capital
for these businesses had to be funded.
Fourthly, tax payments in the first half were higher than normal
due to balancing or catch-up payments on previous years' incomes.
These balancing payments amounted to around $8.5 million.
In addition, another $3.5 million of pre-acquisition tax
liabilities for OMS were paid for which provision had been made in the
acquired OMS balance sheet.
Mr Janes said cash flow from operations is expected to be
strongly positive in the current half year with lower tax and working
capital outflows as the seasonal influences on debtors and creditors'
balances reverse, and without the one-off issues affecting the first
half.
Both the CEO and MD declared they have no no plans for further
asset sales and have no plans to make any significant sized acquisitions
in the next twelve months or so.
"We'll continue to evaluate acquisition opportunities which we
believe would create long-term value, but in the near term they're likely
to be smaller, bolt-on deals structured around earn-outs," they said.
Whilst it was profitable, the recently sold SEM Fire and Rescue
was a non-core business for Skilled.
"We have been trying to divest this business for a number of
years to concentrate on our core business of staffing services," the
executives said.
"We are pleased that we've been able to divest it now on
attractive terms."
Corporatefile pointed to Skilled providing updated earnings
guidance for FY08 of EBITDA of $92 to $97 million and net profit of $31
to $35 million, which it said implied EBITDA growth of 32 to 40 per cent.
"We are the industry leader in staffing services and there is
still a skills shortage," Mr Hargrave said.
"In 2008, we are seeing the revenue and margin benefits of the
integration of the acquisitions we made in 2007 in organic growth.
"Second-half margins are benefiting from a slowdown in the growth
of corporate infrastructure cost increases, largely in IT and senior
executive appointments, which we put in place to take us to our next
growth phase."
On the dividend outlook for June, the two directors said that in
FY07 the company paid an interim dividend of 8c per share and a final of
14c.
For the first half of the current year Skilled paid an interim
dividend of 9c per share.
"As always, we will assess the final dividend following the end
of the financial year," they said.
"Given our earnings guidance, we expect to at least maintain our
dividend. We would not expect any material change to past dividend payout
ratios which in recent years have been 70 to 80 per cent."
Meanwhile in February Skilled Group the company completed the
acquisition of Longhill Group, which services the civil construction and
mining industry in Victoria and New South Wales.
The acquisition of Longhill Group marks Skilled's fourth
acquisition in the current financial year and is in line with the
company's strategy to lead consolidation within the fragmented staffing
services sector.
As previously advised, the total acquisition price was estimated
at $5 million, based on a multiple of 3.25 times average EBIT for the
2008 financial year, inclusive of working capital of approximately $1.8
million.
The business generates annualised revenue of about $11 million.

BACKGROUND
**********

Skilled Group Ltd is Australia and New Zealand's leading provider
of labour hire and workforce services.
The company has over 170 offices across Australasia with
annualised revenues around $2 billion.
Skilled partners with clients to improve their workforce
efficiency and increase their productivity levels and provides staffing
services to the industrial, healthcare and contact service centre
sectors.
Skilled has approximately 6,200 shareholders, predominantly in
Australia.
ENDS