Robert, I did see the press release that you refer to. I do not know
what to make of it however. It is typical of the information that CTY
hands out: long on Bull Sh!t, short on details. For instance, the
report gives no indication of how much they paid for the company or
even how much revenue, or how much revenue HST group gets.
The descriptions of what HST group does, and CTY's business is
hilarious. I thought I knew what CTY did until I read these
statements, not I'm not sure :-).
Assuming that HST has 50 people that they can bill out at $70 / hour,
and bill about 1750 hours per year, they can get revenue of about $6.5
MM from HST. Assuming that CTY continues to grow its sales by 26% to
the end of the year, then they will do about $58MM of sales this
(excluding the products division which they have dumped). This will
put them back to where they were in 1995. If this is the case, then
they might make about $0.35 / share (before taxes and any other costs/
write offs relating to acquisitions and sales of business). This is a
Scientific Wild-Assed Guess (SWAG), and as with any SWAG, there are
lots of unstated assumptions.
Regarding HST, I'm not even sure what this company does. The release
is loaded with MBA and information systems type jargon, which is
always a laugh to read because it uses so many words to say nothing at
all. I just gots to gets me some of them thar buiness transformation
and renewal services.
I like the statment: "HST's approach is both unique and balanced. The
approach not only combines the principles of structural change and
behavioural change; but also uses as one of its cornerstones, the
structuring of corporate knowledge to build a picture and a path for
change that is understood and supported at all levels within the
organization". What the hell does this mean?
Look at what Larry O'Briens says about CTY: "We see substantial
opportunities for continued growth within our current services
offerings and within new technology services that complement our
existing offerings." Ok that makes sense: he beleives that CTY's
existing and new businesses will grow (why would he buy a new business
that he doesn;t think is going to grow). But then he says "We believe
that HST Group Ltd. represents one of these new service offerings."
To paraphrase: "We beleieve that this new company that we bought
provides new services that we have to sell". We're paying this guy who
makes statements like this to run the company.
Also look at another thing about this company. Last year they made net
earnings of $1.3 MM. The year before they made $3.0 MM. Executive
compensation was as follows:
Name 1996 Amount 1995 Amount
Larry O'Brien $189 k $271 k
Dugald Buchanan $237 k $299 k
Ray Basler $160 k $196 k
Glen Gray $187 k $137 k
Edward Lambert $167 k $206 k
TOTAL $940 k $1109 k
i.e., the amount of money that the owners of the company got out of
the company (in terms of retained earings) decreased by 67% while the
amount of money that the management got decreased by 20%. To me, it
looks like the company is being run for the benifit of the management,
rather than for the benifit of the owners. As I have said in the past,
my opinion is that the management of this company is lazy, and is not
interested in the shareholders in the least. Their annual reports
provide little information that is of use to the shareholders, and
their press releases are a joke.
In my experience, companies either make a go of it, or they hang
around stinking the place out for years. I think that CTY might fall
into the latter category.
Regards,
John Sladek |
