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Jax Daily Record Tuesday, Aug. 11, 201512:00 PM EST

Derek Dewan has an 'acquisition platform' with General Employment Enterprises

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by: Mark Basch Contributing Writer

General Employment Enterprises Inc. last week announced its first acquisition since Derek Dewan took over as CEO, which was no surprise to Roth Capital Partners analyst Jeff Martin.

Martin last week initiated General Employment’s first significant analyst coverage with a “buy” rating, saying the company is looking for big things under Dewan.

“General Employment Enterprises Inc. is a contract and placement staffing company that serves as an acquisition platform for former MPS Group Chairman Derek Dewan to emulate his previous M&A success,” Martin said in his report.

“Management’s goal is to create a $1 billion staffing company over the course of the next seven years. At MPS Group, Mr. Dewan achieved a similar goal inside of four years,” he said.

Dewan was CEO of Jacksonville-based Scribe Solutions Inc. before Scribe was acquired by Illinois-based General Employment in April. After the merger, Dewan became CEO of General Employment.

Of course, as Martin said, Dewan made his mark by building Jacksonville-based MPS into a major staffing and consulting firm before it was acquired by Adecco Group Inc. in 2009.

General Employment’s first deal under Dewan was the acquisition of Atlanta-based Agile Resources Inc., which provides information technology staffing and consulting services.

General Employment said in a Securities and Exchange Commission filing last week it bought Agile for $1 million in General Employment stock and up to $3 million in cash.

The company said it expects the acquisition to be accretive to its earnings per share, but it didn’t give any figures.

According to Martin, this deal is only General Employment’s first step.

“We look for several acquisition announcements in the relatively near future that will validate management’s strategy,” he said.

Rayonier breaks even

Rayonier Inc. last week reported a break-even second quarter, as the Jacksonville-based timber and real estate company continues to be impacted by weak demand from China.

Rayonier owns timberland in the Southeast and Northwest U.S. and New Zealand. Pricing for its Northwest and New Zealand timber has been impacted by the Chinese market.

The company also said its real estate results were lower in the second quarter, due to fewer sales of non-strategic timberlands and the timing of closings.

“As we look through the remainder of 2015, we expect continued strong pulpwood demand in our core markets and improving saw timber prices over the long-term, but limited upside in the near term as end market lumber prices continue to be constrained,” CEO David Nunes said in Rayonier’s conference call with analysts.

“We also anticipate continued near-term weakness in the China log export markets, but slowly improving conditions later in the year,” Nunes said, but he is optimistic about the long-term prospects for the Chinese market.

The second-quarter results were not a surprise, with analysts expecting Rayonier to report anywhere from a net profit of 5 cents a share to a net loss of 2 cents, according to Thomson Financial.

Still, Rayonier’s stock fell as much as $2.12 to $22.27 Thursday after the earnings report, the lowest level since it spun off its performance fibers business 13 months ago into a separate company called Rayonier Advanced Materials.

Regency beats forecasts

Regency Centers Corp. last week reported core funds from operations of 75 cents a share for the second quarter, up from 71 cents last year and above the average analysts’ forecast of 72 cents, according to Thomson.

Funds from operations are basically earnings excluding depreciation and amortization expenses and are considered the key earnings metric for real estate investment trusts like Regency.

In its conference call with analysts, CEO Hap Stein pointed to the Jacksonville-based shopping center developer’s nearly 96 percent occupancy rate as a key example of Regency’s success. He also pointed to the company’s net operating income (NOI) increase of 4.4 percent in the first half of the year.

“The portfolio is well positioned to sustain future NOI growth by benefitting from historically low levels of new supply, robust tenant demand across our markets, the substantial purchasing power in our infill trade areas, the drawing power of our anchors and our ‘Fresh Look’ initiative that is further enhancing the merchandising and place-making of our centers,” Stein said.

FRP earnings rise

In its first full quarter after it split up with trucking company Patriot Transportation Holding Inc., commercial real estate company FRP Holdings Inc. reported earnings rose 17 percent in the third quarter ended June 30 to $2.05 million, or 21 cents a share.

Revenue rose 11 percent to $8.5 million.

Jacksonville-based FRP develops and manages commercial properties mainly in the Baltimore-Washington-Northern Virginia markets. It also owns land that is leased to construction materials companies for mining, a legacy of its origin as a spinoff from Florida Rock Industries Inc.

FRP said its higher third-quarter results were due mainly to the addition of a new build-to-suit building at a Virginia business park and improved volumes at several of its mining properties.

“We are pleased with the health of our business and feel good about our ability to grow our portfolio of income-producing assets,” CEO Tom Baker said during FRP’s conference call with investors.

FRP’s stock rose $1.36 to $30.24 Wednesday after the earnings report.

Vulcan stock jumps on earnings

Vulcan Materials Co.’s stock surged to its highest level since the recession after a strong second-quarter earnings report last week.

The Alabama-based construction materials company reported adjusted earnings of 66 cents a share, up from 36 cents in last year’s second quarter and 3 cents higher than the average analysts’ forecast, according to Thomson.

Revenue rose 13 percent to $895 million.

Vulcan said Florida was one of its strongest markets.

“Florida continues to be extremely healthy. I think we were up some 11 percent (in materials shipments) in Florida for the quarter,” CEO Tom Hill said in the company’s conference call with analysts.

Most of Vulcan’s Florida operations came from its 2007 acquisition of Jacksonville-based Florida Rock for $4.2 billion.

Vulcan’s stock rose as much as $7.58 to $97.24 Tuesday after the earnings report.

Loss sends PHH stock down

PHH Corp.’s stock plunged to its lowest level since the recession Thursday after the mortgage banking company reported a big second-quarter loss.

Analysts were anticipating a loss, but the $1.20-a-share loss was bigger than expected.

“We have encountered delays in executing our strategies to drive organic growth and our servicing segment continues to operate at a loss,” CEO Glen Messina said in a news release.

“Provided market and interest rate conditions materialize as expected and we successfully complete our strategic initiatives, we expect core earnings before one-time items to improve from the second quarter levels and approach break even for the second half of the year. On the same basis, we expect to return to profitability in 2016,” he said.

PHH’s stock fell as much as $10.31 to $13.78 Thursday before closing at $16.28, down $7.81 for the day.

The Daily Record reported last month that New Jersey-based PHH is planning to downsize its Jacksonville office and has been looking for a site to relocate, with Deutsche Bank expected to lease the PHH building at 5201 Gate Parkway.

Allstate drops on lower earnings

Allstate Corp.’s stock dropped sharply last week after a disappointing earnings report, attributed to high auto insurance claims.

Operating earnings of 63 cents a share were down 38 cents from last year and well below the average analysts’ forecast of 97 cents, according to Thomson.

In a news release, CEO Thomas Wilson said the lower earnings were caused by “increased frequency and severity of auto accidents. The increase in auto accidents is broad-based by state, risk class, rating plans and the maturity of the business, and consequently appears to be driven by external factors.”

Allstate’s stock dropped $7.04 to $62.34 Tuesday after the earnings report.

St. Joe reports loss

The St. Joe Co. last week reported a second-quarter net loss of $200,000, due to previously reported expenses from an SEC investigation.

The real estate development company disclosed in January it would be subject to possible SEC action related to accounting issues in 2010 and previous years, when the company was headquartered in Jacksonville. St. Joe moved its offices to WaterSound in the Florida Panhandle in 2010.

St. Joe’s second-quarter results included a reserve of $3.5 million for potential settlement costs for the SEC investigation and $3.9 million in related legal expenses.

Analyst upgrades Web.com

After Web.com Group Inc. reported better-than-expected second-quarter earnings, BWS Financial analyst Hamed Khorsand last week upgraded his rating from “hold” to “buy” on the Jacksonville-based website services company.

“Web.com posted results of another quarter where the story is coming together,” Khorsand said in a research note.

“Web.com has tried to reinvent itself with the small business customer who is looking to create and maintain a website. In an industry that is very competitive, Web.com started to offer a free service that allows the customer to use Web.com to help create a website,” he said.

Khorsand said the new service is leading to increased average revenue per user, an important indicator of Web.com’s financial performance.

“Success within the small business customer category leads us to believe this is not a short term event and Web.com could see further customer growth in coming quarters,” he said.

Tax holiday shift impacts Stein Mart

Stein Mart Inc. last week reported a small increase in July sales, which were impacted by the timing of sales tax holidays.

The Jacksonville-based fashion retailer said total sales for the four weeks ended July 1 rose 1.8 percent to $76.6 million and comparable-store sales rose by just 0.2 percent.

Comparable-store sales are sales at stores open for more than one year and are considered the key measure of a retailer’s performance.

Stein Mart said the shift of sales tax holidays from July to August in eight states impacted sales at 102 of its 269 stores.

July 2014 sales were also inflated by liquidation sales at three stores that were relocated, it said.

For the entire second quarter ended Aug. 1, total sales rose 4.5 percent to $311.6 million and comparable-store sales rose 3 percent.

“We are pleased with our second quarter sales results, despite the weaker July which was clearly not in line with our current trend,” CEO Jay Stein said in a news release.

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