Stan Beer
Wednesday, 30 July 2008 19:37
IT People -
Recruitment
Page 2 of 3
"I can't tell you what our debt is going to be because we
release our results in about three or four weeks but we've got less
than two times EBITDA cover for our debt and our debt is less than 40
million," he says.
"It is not an issue. The banking facilities we've
got in place are also not an issue because we got them back in December
so we would have had to pay probably two to three times the margin
we've actually got our three-year loans on at the moment. We were quite
fortunate in that sense."
The merger with Ambit has provided Peoplebank with a good spread of
clients across the government and corporate sectors, as well as more
even geographical diversity. However, some industry watchers have
postulated that the company may be vulnerable because it's client base
is heavily weighted toward the contractor market space rather than
permanent placements.
Not surprisingly, Mr Lau rejects this argument, saying that in fact the opposite is true.
"That's a plus for us going forward in the current economic cycle. If
business confidence becomes a slowing economy, which it apparently is,
if you have a high permanent recruitment component of your business,
you will suffer more than if you have a high contracting component.
"The reason is that when business confidence drops and people stop
hiring, they stop hiring permanents to keep their headcount down.
Contractors tend to stay on for the life of the projects.
"What happens then is that new projects may not get started but there's
always a fixed 12 to 18 months lag time if you're going into a very
steep downturn for contractors to get laid off. That's only happened to
my knowledge twice in 27 years.
"The general rule in the cycle is that the more contracting you've got
in a downturn, the more resistant you are to a downturn in the economy
because that's an ongoing revenue and margin coming in. If you're
heavily biased towards permanent, that falls off a cliff in two or
three months and you're caught there with all your infrastructure,
salaries, staff and the rest of it."
So what of Navis, who bought a controlling interest in Peoplebank at
about double the current share price? Are they happy with the way
things are going?
Latest Headlines from IT PEOPLE
