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Highams Systems Services Group / Nakama Group

  • BY: Andrew Hore |
  • POSTED: 27/09/2011 |

Nakama is reversing into fellow technology recruitment services provider Highams Systems Services Group via an all share deal that should be earnings enhancing. 

Nakama’s boss Stefan Ciecierski will take over as chief executive of the combined entity which will be known as Nakama Group to reflect the greater international presence of the brand. Highams became aware of Nakama a year ago but the business was still relatively new and serious talks did not start until a couple of months ago.

The deal is valued at £1.28m at the current share price of 2.625p. The shares issued for Nakama are equivalent to 41.4% of the enlarged share capital.

On the face of it, this could look a risky deal because Nakama only started trading in October 2009. However, it is profitable and Ciecierski and the other founders have significant experience in the recruitment sector. Ciecierski helped to build up PSD Group and he was still there when it floated in 1997 so he has some experience of a quoted environment.

Nakama initially opened a London office and then expanded in Melbourne and Sydney last year. The Hong Kong office opened in March and Highams may use this as a base to service existing clients with operations in Asia. Further international expansion appears to be on the cards.

The insurance sector is the main customer base for Highams’ technology consultants, while Nakama specialises in the digital media sector, as well as financial services, retail and travel sectors. There may be some cross-selling opportunities.

Nakama is one of the main recruitment agencies in the digital media sector and this has helped it grow rapidly. 

House broker Seymour Pierce had been forecasting a 2011 profit for Highams of £400,000. At the current share price of 2.625p, that had put the shares on just over five times prospective earnings. Nakama made a profit of £234,000 on revenues of £4.7m in the eight months to August 2011. Trading remains strong and Nakama could make £350,000 profit or more this year.

On top of that there are some cost savings from integrating the businesses. Back office work can all be done at Highams’ Caterham site and Nakama’s London office can be shared.

This suggests that the group is trading on a modest multiple of the potential 2012 profit. There is also potential for additional bolt-on acquisitions.

Download the September 2011 edition of AIM Journal at http://www.hubinvest.com/AIMPDFSeptember2011_24.pdf

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