Yes, that's granted. But remember the labour hire payroll is...

Yes, that's granted. But remember the labour hire payroll is Skilled's responsibility, so it naturally follows that all of their employee entitlements are too.

As you would be familiar with in this type of business, they occasionally do need to cut into this variable cost base when the business cycle calls for it.

Usually this results in redundancy / restructuring costs for qualifying employees on their books.

I wonder though, and admittedly, they've managed it pretty well in the past, but if the cycle cuts really, really deep, and they have to shave a significant portion of the people on their payroll, what kind of skeletons are there in the closet?

In the past redundancy / restructuring costs haven't exceeded 0.5% of revenue in any one year, but I've only gone back to 1999, and there is no period where revenue has completely fallen off a cliff (maybe this speaks of the durability of their business, but it may also point to decent external operating environment).

For me, that's probably the biggest torpedo that could hit this business.... if they are forced to act very fast, it could wipe out a few years of earnings, and cause a capital squeeze.

I also note that PRG has mentioned the "internet threat" a bit in the last 18 months in their presentations, an angle that doesn't often come up for these businesses. I'm not particularly worried about it for SKE, but something to keep an eye on, in the world of evolving big data matching.