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AWF Madison reports 60% drop in full year net profit

Thursday 30th May 2019

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AWF Madison Group reported a 60 percent drop in net profit because of the impact of tough times in the construction sector on its blue-collar division and as regulatory issues stopped it from redeploying migrant workers to cities and regions where they were needed. 

The labour-hire firm said net profit was $2 million in the year to March 31 while total revenue was down 4.1 percent to $268 million.

In the blue-collar AWF division revenue fell 10.8 percent to $115.8 million. Its profit contribution fell to $1.3 million from $4.8 million as a number of customers in the construction sector were placed in receivership or liquidation, impacting earnings and resulting in bad debt write-offs of $1.1 million. 

Yesterday's ANZ business outlook survey didn't point to a positive change, in particular regarding hiring in the sector. The May survey showed a net 0.3 percent of respondents expecting to shed staff, whereas in April a net 4.3 percent were expecting to hire. Critically, however, the construction sector's employment intentions were at a 10-year low, with a net 22 percent expecting to cut staff.

The recent failures and losses in the construction sector were unprecedented in AWF’s history, the company said.

According to chief executive Simon Bennett this meant a number of customers were unable to pay money owed to AWF, and in addition, company liquidations around the country left some AWF migrant workers stranded.

Regulatory issues also impeded AWF from redeploying migrant workers on guaranteed wages to cities and regions where they were needed, at a direct cost of $1.5 million, plus lost opportunity margin.

"The uncertainty and inflexibility of officialdom around the placing of key skilled migrant workers in the major centres added significant non-recoverable costs," said chair Ross Keenan. 

Bennett said the company made the decision to retain and pay them "and we are engaging with officials to see how we can avoid these roadblocks in the future." 

He said the group is still committed to the AWF offer, but "needed to address the division's focus, as announced during the year." It now has a cost base for a lower level of business to ensure it can be more selective with its clients, it said.  

The company also said Madison’s revenue and earnings contributions were lower than in the prior year, which had included a large one-off managed service contract. Madison and Absolute IT contributed profit of $5.6 million versus $6 million in the prior year. However, revenue from both was $152 million versus $149.5 million in the prior year.

Absolute IT continued its strong financial performance in its second full-year contribution since acquisition in late 2016. The IT recruitment market remained buoyant throughout the year, allowing Absolute IT to increase revenue, gross profit and earnings before interest, tax, depreciation and amortisation, it said. 

A fully imputed dividend of 8.2 cents per share will be paid on July 9 to shareholders on the register on June 24. The final dividend of 16.2 cents is unchanged on the year. "We expect to be able to steadily grow dividends as we move ahead from here," Keenan said. 

It also announced the acquisition of JacksonStone & Partners, post balance date. The transaction is structured with an initial payment of $6.7 million on closing and an estimated $3.8 million payable in three installments over the next couple of years, subject to JacksonStone achieving defined performance targets, it said.

AWF Madison said the outlook for the current financial year is positive. 

"Madison and Absolute IT are performing strongly, underwritten by continued high levels of economic activity and JacksonStone will contribute positively to 10 months of the current year,"  it said. 

The shares last traded at $1.70 and have increased 4.3 percent so far this year.


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