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AWF annual profit drops 14% on construction recruiting weakness, white-collar work booms

Tuesday 29th May 2018

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AWF Madison Group, the country's biggest contract labour firm, reported a 14 percent fall in annual profit, even as revenue rose as its white-collar recruiting business countered weakness from construction recruitment.

Profit dropped to $5 million in the year ended March 31, from $5.9 million a year earlier, as revenue rose 9 percent to $279.3 million. Employee expenses rose 10 percent in the year to $253.2 million and other operating expenses lifted 12.8 percent to $12.4 million, cutting into profit. Net bank debt dropped 8.3 percent to $29.7 million.

Looking forward, the company was positive, saying it had a good pipeline for new client acquisition across all its businesses. The company declared an 8.2 cents per share dividend, and said subject to NZX approval it will introduce a dividend reinvestment plan, allowing shareholders to reinvest up to 50 percent of their dividend in new equity. It said majority shareholder Simon Hull, chief executive Simon Bennett and the remainder of its board will participate.

The Absolute IT segment, the specialist ICT recruitment group which AWF bought in November 2016, lifted revenue 51 percent to $148.9 million with earnings before interest and tax up 77 percent to $6 million. That's the first time that the white collar segment has accounted for more than half the company's revenue, AWF said.

"Our acquisition of Absolute IT has delivered a strong capability in the rapidly changing IT sector. It is a sector where ‘contract resource’ is the norm, where internal recruitment teams are less effective recruiting directly, and do not tend to manage contractors," AWF said. "The robustness of our white collar business countered what was a challenging year for AWF."

CEO Bennett said there had been difficulties in recruiting migrant labour around the election and in the construction sector in the year, specifically in Auckland where there are cost constraints and the sector is fragmented.

"Continuing delays in obtaining approvals across the construction sector meant that we were unable to optimise the logistics of matching supply and demand of contingent labour," Bennett said. "Unfortunately we received negative publicity from our Filipino migrant business, where several factors including delays made smooth deployment difficult. The skilled migrant sector is important to AWF and NZ and we will continue to work with the regulators to ensure we have an efficient and compliant model." 

The shares last traded at $1.82, and have dropped 38 percent in the past 12 months.


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