I recently invested in Allsec, so clearly my views are positively biased. Having said that, i found this company after i ran a screen on interest coverage ratios. I have zero understanding of the BPO business or Payroll processing. However i went through the ARs for the last few years and found that the company made some bad decisions regarding clients and market focus which based on what i have read they seem to have rectified ( as is evident from the numbers ). They let go of the unprofitable clients and found new markets. All of this with very less debt.
Following is an extract from the 2013 AR
"...The Company was in the process of re-pricing all the Domestic Contracts so that all contracts are profitable. Due to this, we did not renew contracts with 2 major Clients whose pricing was not
acceptable to us..."
Following is an extract from the 2014 AR
"....Domestic business saw a decline of 14% compared to last year and it is mainly due to your Company’s conscious decision not to renew contracts with 2 major clients whose pricing was not profitable. Despite that we have added quite a few clients in the Domestic market during the year to offset this and the Pricing with these new Clients were negotiated at normal levels..."
Following is an extract from the 2015 AR
"..Your Company has progressed well in the Domestic business during the year and has added clients with better pricing, resulting in an increase of 33% in revenues over the previous year. Capacity utilization
in domestic business is better and we expect that the profits from this division will increase in the coming
Following is an extract from the 2016 AR
"..Your Company has also progressed well in the Domestic business during the year. Pricing in the market has been increasing gradually. We now have good capacity utilization in this business at rates which are much higher than what we were getting 2 years back. The plan is to keep looking for strategic contracts where we can command higher rates and improve margins..."
Following is the share of income from the domestic business
2013 - 53%
2014 - 50%
2015 - 66%
2016 - 66%
Since employee cost is a major contributor to the expenses i looked up the head count numbers
2013 - 2479 employees
2014 - 2553 employees
2015 - 2765 employees
2016 - 2407 employees
While the business has grown the number of employees has more or less remained stable. in fact number of employees has gone down in 2016 after going up for the past 3 years.
So it seems to be that they have found some optimum mix of employees, clients and markets that can serve them profitably in the years to come.