AGL - Accordant Group. was previously AWF Madison, Allied...

[Snoopy]

And there was me thinking construction and civil were booming industries. I'm not sure what legislative compliance costs they are referring to - cant think of too many recent changes.


Probably just catching up with the implementation of what has been already legislated. Listening to the MDs AGM address from 2017, he said that even unqualified construction road workers have to be assessed as being "construct safe" (an industry procedure).



Followers of this stock need to follow the Triangular Employment relations bill going through parliament, as well as minimum wage


Why? Don't AWF "clip the ticket" no matter what the underlying wage rate is?

SNOOPY

[minimoke]

Probably just catching up with the implementation of what has been already legislated. Listening to the MDs AGM address from 2017, he said that even unqualified construction road workers have to be assessed as being "construct safe" (an industry procedure).
Thats not a legal requirement





Why? Don't AWF "clip the ticket" no matter what the underlying wage rate is?

SNOOPYGenerally clipping is done on a % basis. So there is a compounding effect when costs go up - which makes labour hire less attractive.

[Snoopy]

Thats not a legal requirement


Having a road worker passed as "Constructsafe" may not be in the legislation. But employers can choose their own standards. In the case of the NZ Transport Agency, from their website:

https://www.nzta.govt.nz/safety/zero-harm/latest-news/constructsafe-update/

"ConstructSafe provides a consistent and transparent way to independently check the competency of any person on site, regardless of their employer. It provides all of us with reassurance that those that are working on our sites are competent and safe to do so. ConstructSafe is not a training course; it helps us to ensure that training programmes meet the needs of our industry."

"From 1 July 2016, the scheme will be principal’s requirement for new and existing projects and contracts. There will be a 12-month implementation period to allow our supply chain partners to plan how people will access testing and how to increase the capability of those not meeting the Tier 1 (Foundation Health and Safety) competency standard."

So whether it is a legal requirement or not, workers on NZ Transport Agency projects will not be employed unless they are "ConstructSafe".


Generally clipping is done on a % basis. So there is a compounding effect when costs go up - which makes labour hire less attractive.

Yes, but are you not assuming that there is plenty of labour available? One of the remarks that CEO Simon Bennett made in the AGM 2017 speech

http://www.awfmadison.co.nz/video-awf-madison-annual-shareholders-meeting-july-2017

was that, unlike the old days, they had jobs for every competent man or woman who sought them. I deduce from that that if you want a skilled worker you now have to pay up. So AWF will clip a juicier ticket, thus increasing their profits. Roll on wage rises for skilled workers'....

SNOOPY

[Snoopy]

What margin are they achieving in the core business?



Divisional Net Profit MarginFY2014FY2015FY2016FY2017


AWF Net Margin2.893%2.706%2.339%2.990%


Madison Net Margin1.788%3.673%3.040%0.913%


Absolute IT Net Margin2.931%


Net Margin Error: Modelled vs Derived+2.38%-11.5%-5.44%+5.23%



'Net margin' is 'divisional net profit after tax' divided by 'divisional turnover'.

SNOOPY

[minimoke]

was that, unlike the old days, they had jobs for every competent man or woman who sought them. I deduce from that that if you want a skilled worker you now have to pay up. So AWF will clip a juicier ticket, thus increasing their profits. Roll on wage rises for skilled workers'....

SNOOPYYou can keep clicking teh ticket until costs get so high automation or process redesign becomes economic

[Leftfield]

Last sale on the market was $1.80. Using this valuation model, I think AWF Madison is now trading at a 33% discount to fair value.

SNOOPY

discl: holder

Appreciate your good work on this Snoopy. On a FA basis you may have found an unloved, undervalued stock, however, on a TA basis the Trend does not look to be your friend........yet?

I would be waiting for a 'golden cross' signal before getting too excited.

Disc - non holder.

[Snoopy]

Divisional Net Profit MarginFY2014FY2015FY2016FY2017


Madison Net Margin1.788%3.673%3.040%0.913%





It is an open secret that net margin crashed at Madison over FY2017. Simon Bennett's speech revealed what happened. All the 'hot shot' sales people in Auckland were run off their feet. So Madison decided to ramp up growth by putting a new person alongside every successful one and told them to go out and get new business while under the watching eye of a successful mentor. Business did not increase as expected and many of the underling 'growth staff' had to be laid off. Madison have 'learned their lesson' apparently.

Further on in the speech, Bennett outlined the very different business dynamics in the different business units. AWF is almost 100% a temping business. Madison is almost 50/50 temporary and permanent worker placement. Permanent employee placement means 'make a placement', 'get a fee' and then you have to start again. There is much more continuity, from an AWF Madison perspective, from running temp workers. The Madison business unit will therefore always be more volatile than the AWF business unit from an earnings perspective. The second half of the year FY2018 covered the period of the general election, and the coming to power of the Labour lead government. Traditionally the coming of a Labour government is unsettling to big private employers. Hiring decisions will be put on hold. So I am expecting a relatively poor performance from Madison again over FY2018 for new placements. As Simon Bennett so aptly put it:

"You live and die on those deals."

But on the temping side, I expect Madison to have a boost in the second half, because of the one off Census contract. Statistics NZ were hoping for 50% of us filling in the forms on line. Any less than that and AWF Madison should do consummately better than expected. More people will need to be hired on the ground to follow up! It will all be a one off though.

SNOOPY

[winner69]

Snoops - the company says FY18 (just completed) to be less than FY17. Your model has it higher

You than go on and think that FY19 will be a struggle as well .....maybe FY19 will be less than FY18

Doesn’t that suggest your 33% undervaluation ( to your dividend model) is a bit awry? Maybe hoping dividends will remain pretty high is a bit optimistic

[Snoopy]

Snoops - the company says FY18 (just completed) to be less than FY17. Your model has it higher


I have just read the March 1st press release Winner.

"As a consequence of the above, profit, as at 31 March 2018, is expected to be behind that of the prior year."

But what figure are they referring to when they say the prior year? One thing you may not have considered is that the acquisition 'Absolute IT" was only on the books for five months of FY2017. If you look on p55 of AR2017, you will see that the reference earnings performance for comparison with previous years will be $7.5m, not the actual profit declared for FY2017. My earnings projection for FY2018 is $7m, so it is a reduction.: A 7% reduction on the previous year.



You than go on and think that FY19 will be a struggle as well .....maybe FY19 will be less than FY18


On the contrary. I expect the performance of Madison will improve, albeit from a low base, once private business figures out the Labour lead government isn't so bad. 'Weather permitting', with construction still growing, I don't see why AWF shouldn't improve too.



Doesn’t that suggest your 33% undervaluation ( to your dividend model) is a bit awry? Maybe hoping dividends will remain pretty high is a bit optimistic.


The dividend capitalisation model is a crude tool, that is true. But I am basing my valuation on average dividends over the business cycle of 15.6cps. Over FY2018, the actual payout was 16.2c over the financial year. So I am modelling dividends to be modestly (4%) less than those paid over FY2018. The dividend capitalisation model does not depend on actual profits. But I put them in there anyway so that investors could see if their dividends were covered. The historical dividend payout ratio has been 86% averaged over the five years. I think it will take a significant fall in earnings for the directors to reduce dividends below 15.6c annually. So in this instance I feel the dividend capitalisation model gives a valuation that is credible.

The fly in this dividend picture is that Madison was only acquired in November 2013. So you could argue that dividend data from FY2014 and earlier is not representative.

SNOOPY

[winner69]

Snoops ...surely in saying that Fy18 Profit will be lower than prior year they mean it will be less than $5.9m - which is the reported prior year profit. Can’t be anything else.

If that $7.5m if IT division had been there all year is meaningful (ie normalised or something) than FY18 at less than $5.9m is a shocker eh (down 20% plus)

Cash flows ‘remain strong’ so maybe the 16 cent plus dividend will be maintained ....while still hoping that the ‘resilience’ and ‘optimism’ they talk about brings better results in the future.

[Snoopy]

Snoops ...surely in saying that Fy18 Profit will be lower than prior year they mean it will be less than $5.9m - which is the reported prior year profit. Can’t be anything else.


Go to the video feed of AGM 2017 Winner

http://www.awfmadison.co.nz/video-awf-madison-annual-shareholders-meeting-july-2017

Fast forward to 21 minutes into the presentation, and listen for the next minute and a bit. Simon Bennett says that the start point for growth is the 'combined business', as though it was owned for the full year. You may be right and I may be wrong. But I will be horribly disappointed if Bennett has done a back flip and retreated to the actual profit figure for FY2017 as a growth baseline.



If that $7.5m if IT division had been there all year is meaningful (ie normalised or something) than FY18 at less than $5.9m is a shocker eh (down 20% plus)


Less than $5.9m will be a shocker. But the company would still be financially strong enough to pay a steady dividend, because capital requirements going forwards are not great.
A reduction in profit to $7m is more what I would expect. Not sure how the earn out payment for Absolute IT ($3.42m estimated, p55 AR2017) will affect the declared profit, but that forecast payment is a oncer.

I am still picking $7m, excluding any one off payments.



Cash flows ‘remain strong’ so maybe the 16 cent plus dividend will be maintained ....while still hoping that the ‘resilience’ and ‘optimism’ they talk about brings better results in the future.


I am keeping the faith, until results show otherwise.

SNOOPY

[winner69]

From a disclosure point of view if a company says ‘lower than prior period’ that means lower than what was reported ...unless they state something more specific which they did not in that latest announcement. I think they would be in trouble with the authorities if they had a different prior period number than what was reported.

Seeing H1 profit was down 13% even though it included 6 months of IT business (not in prior period eh) being 20% down or thereabouts for the full year seems a pretty reasonable outcome. In other words a shocker.

You may be right but i’ll put my money on less than $5.9m

Also worth considering - seeing companies can’t help themselves boasting if the number was $7m wouldn’t they be touting a 20% increase in profits over prior year? instead of below prior year. Think about it.

I think the current share price says it is lower than $5.9m

[winner69]

Snoops - ‘A reduction in profit to $7m is more what I would expect. Not sure how the earn out payment for Absolute IT ($3.42m estimated, p55 AR2017) will affect the declared profit, but that forecast payment is a oncer.’

Accounted for 2017 Accounts

If ‘earned’ only affects cash flow.

Should only adversely impact profitability if more than $3.4m is ‘earnt’ (Ie they under estimated the liability) - then again if the hurdles weren’t reach that would have a favourable impact.

Was based on performance to Nov 2017 so you would think whatever it is to be would be allowed for in their profit below prior period guidance.

That’s how I see it anyway

[winner69]

Snoops - I hadn’t realised how made that first half really was

That Absolute IT made $1.508m (nothing pcp)

Means rest of Group made $1.910m compared to $3.930 in pcp

Jeez that’s a 50% odd earnings decline from the two old divisions

Pretty bad .....no, more than pretty bad .....no wonder they are saying they are going to make less than $5.9m for the full year (including Absolute IT)

[winner69]

...and If they were to achieve $5.9m in Fy18 there would have been a huge growth in AWF/Madison earnings compared to pcp ...maybe this Census bonanza they harp on about is helping ......but FY18 heaps less than pcp.

Absolute IT putting a little credibility into the performance this year.

[winner69]

Share price peaked $3.20 last May about the time of full year results and subsequent presentations

Jeez nearly down 50% since

Punters didn’t believe the rhetoric about ‘resiliance’ and ‘growth’ and ‘optimism’ and that stuff

Maybe FY2019 will be the year ...not of ‘consolidation’ but of ‘growth’ as this ‘resiliance’ shines through.

Might be tempted if the May announcement is a real shocker

[percy]

AWF went from a growth stock to a dividend stock,and is now a stock whose dividend appears to be under threat.
The current and the previous CEO did not make a lot of headway.
I keep wondering whether the controlling shareholder keeps holding the company back.?

[winner69]

AWF went from a growth stock to a dividend stock,and is now a stock whose dividend appears to be under threat.
The current and the previous CEO did not make a lot of headway.
I keep wondering whether the controlling shareholder keeps holding the company back.?

Could well be the case percy

Not always good having one big controlling shareholder is it ...esp one who is Managing Director

[percy]

Could well be the case percy

Not always good having one big controlling shareholder is it ...esp one who is Managing Director

As always arguments for and against.
In this case it looks as though it is working against the company.

The shareholder list makes for interesting reading,but unfortunately they remain just back seat passengers.Pity.
I doubt I will buy back in while the controlling shareholder remains in control.

[Snoopy]

Not always good having one big controlling shareholder is it ...esp one who is Managing Director.


You may be confusing the two Simons Winner. The controlling shareholder is Simon Hull with a 51.7% stake. Simon Hull is on the board, but has no day to day role in the company any more. The CEO is Simon Bennett. It is easy to confuse the two because although they are unrelated, at a casual glance they look quite similar!

SNOOPY

[Snoopy]

I doubt I will buy back in while the controlling shareholder remains in control.


Simon Hull indicated in his re-election to the board spiel that his family trust that controls the company may sell down at some point in the future. But he will continue to maintain a close personal interest in the company nevertheless.

SNOOPY

[Snoopy]

I keep wondering whether the controlling shareholder keeps holding the company back.?


You might be interested in what chairman Ross Keenan said about Simon Hull, before Simon gave his own re-election spiel Percy.

Fast forwards to 45 minutes into the presentation.

http://www.awfmadison.co.nz/video-awf-madison-annual-shareholders-meeting-july-2017

"...but I always admire Simon for not dominating the boardroom as often in the early days people suggested that he did, but he didn't. Always being supportive but questioning too and certainly a major contributor to the board of the group."

Of course you might argue that Ross Keenan would say that!

SNOOPY

[Snoopy]

Net Profit Margin = Net Profit/Sales

2013: $5.076m /($138.852m - $8.375m)= 3.89%
2014: $4.180m /$148.691m = 2.81%
2015: $5.447m/$197.514m = 2.76%
2016: $5.210m/ $214.589m = 2.43%
2017: $6.324m/ $256.428m = 2.47%

Note: For FY2013 I have removed the since sold healthcare unit profit and the associated turnover.

One uptick in the data in FY2017 is so far a welcome blip rather than a trend.





Generally clipping is done on a % basis. So there is a compounding effect when costs go up - which makes labour hire less attractive.




You can keep clicking the ticket until costs get so high automation or process redesign becomes economic.


Minimoke may have a reputation on this thread as a portent of AWF doom. But I wouldn't agree with the point that increasing wages and automation will do away with the role the likes of AWF has in finding and hiring good people. That said, the sliding net profit margin does look to be an unwelcome trend. I don't really understand the nuts and bolts of the business enough to figure out why as the business gets apparently more sophisticated, AWF cannot earn the same margin by recovering their costs.

I agree with Percy to the extent that AWF is now a dividend play rather than a growth play. But the prospect of al 40% capital gain, while enjoying an 8% gross dividend yield at the end of it, certainly has my attention!

SNOOPY

[percy]

Simon Hull indicated in his re-election to the board spiel that his family trust that controls the company may sell down at some point in the future. But he will continue to maintain a close personal interest in the company nevertheless.

SNOOPY

At that time,so long as the present chairman is replaced,it may be worth re analysising the business.
Currently the share price is back to where it was 4 or 5 years ago,with the dividend under threat.
As an aside, it appears to me the way this sector operates has changed, and AWF, instead of being at the forefront of change, have been left behind.

[minimoke]

Minimoke may have a reputation on this thread as a portent of AWF doom.
Shall we just let teh charts do teh talking.

(not sure what the fuss with Census is - it was mainly on -line and a much smaller pool of people this year than previously. Watch for news on construction industry exposure and check they (Madison) haven't been hit by latest scam)

[winner69]

You may be confusing the two Simons Winner. The controlling shareholder is Simon Hull with a 51.7% stake. Simon Hull is on the board, but has no day to day role in the company any more. The CEO is Simon Bennett. It is easy to confuse the two because although they are unrelated, at a casual glance they look quite similar!

SNOOPY

I was mislead by Hull’s profile on their website where it says he is Managing Director

Annual Report says he was MD ......and he only gets Director fees and no wages so I presume he doesn’t have much to do with day to day stuff leaving that to the CEO

[winner69]

Snoops - where do you get your NPAT and EPS numbers from ....they seem to be different from what is in the Annual Report

[Snoopy]

The exercise of trying to normalise results is not always easy, as there are always 'judgement issues' to consider. And whatever numerical tools you think you have to assist with your investment decisions, you must still use judgement to assess the validity of those tools.

Management in AR2016 and AR2017 have gone on about this 'one off' bad debt, but haven't adjusted for it in AR2016 (when they still produced their own 'underlying earnings' figure). While a big account going wrong like this is unusual, is it unusual enough to distort the normal earnings of the business? I am forced to conclude that while management have put in extra checks and will no doubt learn from the experience, there is still a good chance it will all happen again. In this instance I have taken my queue from management, and not made any 'underlying adjustments' for this account gone bad. Doing nothing in this instance is also the more conservative thing to do. Conservatism, when valuing an investment, gives you an extra safety factor.

By contrast I have now decided to adjust my 'normalised results' for property, plant and equipment sales under the broader concept of adjusting for asset sales. Once an asset it sold, it cannot be sold again. So it seems right to remove property plant and equipment sales to give a better picture of operating results. However the actual adjustments in relation to profit are quite small (for example in FY2017, $50,000 on a $6.324m normalised profit is less than 1%). So doing this breaks my other rule of 'keeping things as simple as possible' and not being distracted by minutiae. However I decided to do it anyway, because not all asset sales are trivial. And if I am going to include the non-trivial asset sales when they occur, I need to include the trivial ones of today to be consistent.




Just to show there is more than one way of doing things, I have slightly changed the way I am calculating underlying profit. I am now removing property plant and equipment sales profits/losses from all of my calculated profit figures.

2013: ($4.952m+$0.124m)/ 25.805m = 19.7cps
2014: ($3.952m-$0.025m+0.72x($0.095m+$0.257m) )/ 25.805m = 16.2cps
2015: ($5.416m+$0.031m)/ 32.463m = 16.8cps
2016: ($5.202m+$0.008m)/ 32.463m = 16.0cps
2017: ($5.867m-$0.050m+0.72x($0.262m+$0.442m) )/ 32.463m = 19.5cps

Notes:

1/ Due diligence cost for "Madison" removed from FY2014. "Madison Business" acquisition costs removed from FY2014.
2/ "Absolute IT" acquisition costs removed from FY2017. Legacy software write down removed from FY2017



Snoops - where do you get your NPAT and EPS numbers from ....they seem to be different from what is in the Annual Report

I have normalised the NPAT earnings Winner as above. The figures above in bold should be those that appear in the annual report and my normalising adjustments follow. As for the 'eps' figures, these are simply the normalized earnings divided by the shares on issue at the end of the financial year. When new shares are issued during the year, I don't attempt to do a 'weighted average' adjustment because:

1/ Those extra shares will all be with us in the future, and it is the future 'eps' earning potential of AWF, while using like with like comparison metrics, that is of most interest to me.
2/ It is conservative from an 'eps' perspective to assume all shares issued during the year were on issue for the whole year.
3/ I am lazy.

SNOOPY

[winner69]

Snoops - that naughty debtor whoever it is owes $1.4m and is in liquidation

AWF have only provided $0.8m of this as being bad ...they reckon they’ll get the other $0.6m

Be a bugger if they don’t eh ...another $0.6m off the bottom line (be abnormal item eh Snoops)

Auditors believed the story that was spun last year ..even though the amount provided increased from $0.3m to $0.8m

Might not be too believing this year .....then again it might even be paid in full by mow and AWF can writeback the $0.8m to profit. That be good

[minimoke]

I don't really understand the nuts and bolts of the business enough to figure out why as the business gets apparently more sophisticated, AWF cannot earn the same margin by recovering their costs.

Its one of the simplest businesses around. You simply hire out worker labour to hiring employers at a rate higher than your all up costs.

Two common reasons for business failure, aligned with cashflow:
- not enough worker labour to meet employer demand
- not enough employers demanding available working labour.

[winner69]

I think the debt relates to this

Aussie company caught up in Chch rebuild and I see Fletcher’s are mentioned.

What you reckon

https://app.companiesoffice.govt.nz/companies/app/service/services/documents/A0094390D7990C729D27057178416D87

[minimoke]

Snoops - that naughty debtor whoever it is owes $1.4m and is in liquidation


Where has $1.4m come from. They usually provision half a mil with around 100k actually written off. At $100 charge rate an hour that's 14,000 lost hours. Where is the "risk management and cautious trading terms"?

[minimoke]

I think the debt relates to this

Aussie company caught up in Chch rebuild and I see Fletcher’s are mentioned.

What you reckon

https://app.companiesoffice.govt.nz/companies/app/service/services/documents/A0094390D7990C729D27057178416D87Fletchers were a secured creditor (one of 3, AWF not one of them) and were owed $304k

[winner69]

Fletchers were a secured creditor (one of 3, AWF not one of them) and were owed $304k

AWF hold a personal quarantee from Mr Godek

He's an Aussie and the Compromise Offer said he had recently divorced and had little assets and the guarantees were worthless

I'd say good luck to AWF in getting much out of this mess ....seems $600k of $1.4m is a pipedream

Cant see auditors allowing this to be carried forward .....another abnormal one off Snoops

[minimoke]

AWF hold a personal quarantee from Mr Godek


That seems like risky management and a lack of caution in terms of trade.

[Snoopy]

The exercise of trying to normalise results is not always easy, as there are always 'judgement issues' to consider. And whatever numerical tools you think you have to assist with your investment decisions, you must still use judgement to assess the validity of those tools.

Management in AR2016 and AR2017 have gone on about this 'one off' bad debt, but haven't adjusted for it in AR2016 (when they still produced their own 'underlying earnings' figure). While a big account going wrong like this is unusual, is it unusual enough to distort the normal earnings of the business? I am forced to conclude that while management have put in extra checks and will no doubt learn from the experience, there is still a good chance it will all happen again. In this instance I have taken my queue from management, and not made any 'underlying adjustments' for this account gone bad. Doing nothing in this instance is also the more conservative thing to do. Conservatism, when valuing an investment, gives you an extra safety factor.

By contrast I have now decided to adjust my 'normalised results' for property, plant and equipment sales under the broader concept of adjusting for asset sales. Once an asset it sold, it cannot be sold again. So it seems right to remove property plant and equipment sales to give a better picture of operating results. However the actual adjustments in relation to profit are quite small (for example in FY2017, $50,000 on a $6.324m normalised profit is less than 1%). So doing this breaks my other rule of 'keeping things as simple as possible' and not being distracted by minutiae. However I decided to do it anyway, because not all asset sales are trivial. And if I am going to include the non-trivial asset sales when they occur, I need to include the trivial ones of today to be consistent.



AWF hold a personal quarantee from Mr Godek

He's an Aussie and the Compromise Offer said he had recently divorced and had little assets and the guarantees were worthless

I'd say good luck to AWF in getting much out of this mess ....seems $600k of $1.4m is a pipedream

Cant see auditors allowing this to be carried forward .....another abnormal one off Snoops

Very good sleuthing Winner, to trace all this.

Deciding what should be taken in or out of results to normalise them is a judgement call. And depending on your view, one investor can legitimately take a position that a particular transaction is beyond the norms of formal business practice and should be ignored when judging the ability of a company to earn going forwards. Another investor might judge the same transaction as part of normal, and who are you or I to say who is right or wrong?

If you read my own take on this issue, as I have re-quoted above, you will see that I have not made any adjustments to profits either above or below the provisions that management already have on the books for this default. If another $0.6m comes off the result this year, AWF will 'take it on the chin' and as a shareholder so will I: Not nice, not pleasant for fellow shareholders. And yes another deal in the future could go wrong along the same lines. Nevertheless, If others want to conclude that this $1.4m deal gone bad is in fact a one off, I see that as a legitimate alternative position, albeit one that I don't personally agree with.

My valuation of the company is based on capitalized dividends. If the dividend to be paid in FY2019 is cut, then my valuation will be affected, albeit for only one year out of my five data input points. The previous dividends declared and my own normalised earnings calculations were all done assuming $800k has already been written off on this deal. So far I see no reason to change my fair valuation of the company from $2.70.

SNOOPY

[winner69]

Very good sleuthing Winner, to trace all this. Deciding what should be taken in or out of results to normalise them is a judgement call. And depending on your view, one investor can legitimately take a position that a particular transaction is beyond the norms of formal business and should be ignored when judging the ability of a company to earn going forwards. Another investor might judge the same transaction as normal, and who are you or I to say who is right or wrong?

If you read my own take on this issue, as I have requoted above, you will see that I have not made any adjustments to profits either above or below the provisions that management already have on the books for this default. If another $0.6m comes off the result this year, AWF will 'take it on the chin' and so will I. Not nice, not pleasant for shareholders. And yes another deal in the future could go wrong along the same lines.

SNOOPY

In some ways you are almost saying ‘normalising earnings’ is amost meaningless and doesn’t really give any insights into what might happen into the future (if things are ‘normal’)

Isn’t it best to assume bad stuff happens in some years and in some years some good stuff happens ......and over time (ie the future which you are assessing) the good and the bad neutralise each other .....or if there is more bad stuff than good stuff over time it’s normal stuff anyway.

Companies that ‘normalise’ things always seem to be problem children of the market .....and to me any ‘normalisation’ attempts is a red flag

Back to AWF bad debt the real issue is it’s a worry they had a $1.5m bad debt in the first place ....as mini says they must have been really slack in managing this customer.

[Snoopy]

In some ways you are almost saying ‘normalising earnings’ is amost meaningless and doesn’t really give any insights into what might happen into the future (if things are ‘normal’)

Isn’t it best to assume bad stuff happens in some years and in some years some good stuff happens ......and over time (ie the future which you are assessing) the good and the bad neutralise each other .....or if there is more bad stuff than good stuff over time it’s normal stuff anyway.


For bad debts, yes IMO. But there were a whole lot of costs incurred around acquiring Madison. No more acquisitions are planned AFAIK. Management seem comfortable where they sit now. So I think it is absolutely legitimate to remove those costs from the FY2014 result. I use a similar argument to remove the one off acquisition costs spent acquiring Absolute IT in FY2017. Likewise putting to bed the legacy group software in FY2017, I see as a 'one off' that distorts the real earnings capacity of the group.



Companies that ‘normalise’ things always seem to be problem children of the market .....and to me any ‘normalisation’ attempts is a red flag


That is why I like to do my own normalizations! But I too find it unsettling when companies try to normalise their own results. Normalisation is best left to the judgement of well informed individual shareholders.

SNOOPY

[winner69]

epsdps (imputed)


201416.215.6


201516.814.8


201616.015.2


201719.616.0


201821.6 (*)16.2


Total90.277.8


5 year Average15.6



(*) Based on projected FY2018 NPAT earnings for the year of $7m.

For a leading market player in a nevertheless fragmented service profession I would accept a 7.5% gross dividend yield. However, with the vulnerability to weather permissible building projects as evidenced in the first half, I am pushing out my acceptable gross dividend yield to 8%

Implied Acceptable Share Price = (Gross Dividend) / (Acceptable Yield)

= (15.6c / 0.72) / 0.08 = $2.70

Last sale on the market was $1.80. Using this valuation model, I think AWF Madison is now trading at a 33% discount to fair value.

SNOOPY

discl: holder

if you only expect 8% pa return and IF AWF grew that dividend by 2%pa you could pay up to $3.60 odd

So about 50% off sale at the moment

Spooky eh

[Snoopy]

if you only expect 8% pa return and IF AWF grew that dividend by 2%pa you could pay up to $3.60 odd


Sounds reasonable. I don't want to be greedy.



So about 50% off sale at the moment

Spooky eh

Fibonacci ?

SNOOPY

[winner69]

Sounds reasonable. I don't want to be greedy.



Fibonacci ?

SNOOPY

Spooky eh

As long as AWF profits don’t do a Fibonacci - like spiral downwards - all will be OK

I take it you have heaps of these Snoops

[Snoopy]

I take it you have heaps of these Snoops


Got a few yes, but my average buy price is a lot more than $1.80 unfortunately :-(. It is well less than $3.60 though ;-). I am hedging my bets. Bought a few recently. Will wait until the result comes out before buying the next tranche. If you go by last years profit release I have a month to wait!

SNOOPY

[minimoke]

Got a few yes, but my average buy price is a lot more than $1.80 unfortunately :-(. It is well less than $3.60 though ;-). I am hedging my bets. Bought a few recently. Will wait until the result comes out before buying the next tranche. If you go by last years profit release I have a month to wait!

SNOOPY
I cant figure why people hang onto dividend yield stocks when the SP is in a downtrend like AWF's has been over the past year. Sure 8% is attractive, but if you bought at $3.00 and now sitting on $1.80 you need a lot of dividend to make up that kind of loss. (SKT the same)

[Snoopy]

I cant figure why people hang onto dividend yield stocks when the SP is in a downtrend like AWF's has been over the past year. Sure 8% is attractive, but if you bought at $3.00 and now sitting on $1.80 you need a lot of dividend to make up that kind of loss. (SKT the same)


Some of us, even with what are quite modest sized holdings in gross terms, can't sell out because the total shares on the buy side is less than the number of shares we have. So we can't get even the low market price quoted, because if we sold the share price would go even lower. In my earlier days of sharemarket investing I used to worry about this with my low liquidity investments. But I figured that if I have studied the share well enough and paid a fair price to acquire the shares the chances of me wanting to sell out completely at well below my acquisition price are low. Sometimes I can take the top off my holding, or add a bit to the holding pie by lopping off or buying a small slice.

I don't know when the downtrend will end. But where a share is trading at a good margin of safety to my fair valuation (like AWF), I am pretty comfortable holding, no matter what price Mr Market is offering on the day. You have to remember that the price Mr Market offers is only an offer to buy. No share owner is obliged to accept his offer. Likewise I can't stop other shareholders selling out at what I see as a low ball price. I don't mind suddenly entering the market to buy those same shares low ball though!

SNOOPY

P.S. BTW AWF is currently trading on a much higher modelled gross yield than 8%.

Snoopy Modelled business cycle yield: (15.6c/0.72) / 175c = 12.4%

Historical yield FY2018 perspective: (16.2c/0.72) / 175c = 12.9%

Is there any other share trading on the NZX with a higher gross dividend yield than that?

[Baa_Baa]

I cant figure why people hang onto dividend yield stocks when the SP is in a downtrend like AWF's has been over the past year. Sure 8% is attractive, but if you bought at $3.00 and now sitting on $1.80 you need a lot of dividend to make up that kind of loss. (SKT the same)

The best analogy I can come up with to understand this logic is to s-l-o-w it down, a lot, by looking at an alternate long term investment and seeing whether there are comparators.

Say someone buys a commercial building, lets say they do it because the yield is good by their calculations (why else would they). So they've sunk a dollop of capital into this building (probably but not certainly, they have a debt overhang) but as long at it remains occupied and the leased space income comes in and exceeds expenses so their yield remains attractive, then it's really irrelevant to them or their calculations whether the market 'at this or any moment in time' would buy their building for more or less than their purchase price.

So they don't worry much about what the market thinks the capital value is, while they enjoy the ongoing income yields (analogous to dividends). This could go on ad infinitum until one day they have to sell for some reason and are exposed to the market's capital valuation whatever it may be at the time, or they see that the market valuation is way above their calcs and they are better off flicking the building for capital gains than holding for X years yield, or the market valuation is well below (hence yields are attractive) and they leverage their building to buy another building, all the while enjoying a nice yield.

Something like that.

[Snoopy]

As long as AWF profits don’t do a Fibonacci - like spiral downwards - all will be OK


I always buy with optimism, but with any transaction there is always a downside risk. There is nothing I could find on banking covenants in the Annual Report. But I remember Simon Bennett putting up a slide at the AGM video presentation where he mentioned banking covenants. It is slide 8 in the presentation for those who want to look it up.

The two targets mentioned were:

1/ 'Interest Coverage' ratio to be greater than 3
2/ 'Leverage Ratio' to be less than 3.

I looked up the 'investorwords' (www.investorwords.com) definition of these two terms.

'Interest Coverage' ratio is equal to Earnings Before Interest and Tax (EBIT) for a time period, often one year, divided by interest expenses (I) for the same time period.
'Leverage Ratio' What the debt/equity ratio measures.

Rather disconcertingly, AWF does not use these definitions. AWF define these same terms as follows:

'Interest Coverage' ratio is equal to " EBITDA / I "
'Leverage ratio' is " 'Net bank Debt' / EBITDA "

I find it very disconcerting when companies play fast and loose with such definitions. But for the purpose of this exercise, I will go with the AWF definition view. I was able to derive all the numbers in the year by year table in slide 8 from the respective annual reports, except for the EBITDA figures.

I calculated EBITDA from the income statement using the formula: EBITDA = NPBT + I + DA

The discrepency is not huge, as you can see below. But I will go with my figures for EBITDA, not AWFs, as I can't figure out how they calculated them, and I need figures that are consistent with my own future EBITDA estimates.



Financial Year201520162017


EBITDA (AWF produced)$12.617m$11.710m$13.454m


EBITDA (Snoopy produced)$12.729m$11.945m$12.751m



Now, let's see how close AWF is going to get to those covenants!

SNOOPY

[Snoopy]

Financial Year201520162017


EBITDA (AWF produced)$12.617m$11.710m$13.454m


EBITDA (Snoopy produced)$12.729m$11.945m$12.751m



Now, let's see how close AWF is going to get to those covenants!



What follows is my recreation of the table presented in slide 8



Financial Year2015201620172018 (HY Annualised Estimate Scenario)2018 (Horror Scenario)


EBITDA (Snoopy produced *) {B}$12.729m$11.945m$12.751m$12.046m$7.728m


Finance Cost {C}$2.109m$1.333m$1.193m$1.659m$1.659m


Interest Coverage {B}/{C} (target >3)6.09.010.77.34.7


Net Bank Debt {D}$18.608m$21.870m$32.383m$23.183$23.183m


Leverage ratio {D}/{B} (target <3)1.51.82.51.93.0



(* I calculated EBITDA from the income statement using the formula: EBITDA = NPBT + I + DA)


So what does all this mean?

The situation we don't want is the 'horror scenario' which sees the 'leverage ratio' banking covenant broken (bottom RH corner in bold). Note that even in this 'horror scenario', the interest coverage ratio remains OK. I have made the following assumptions in my FY2018 estimates:

1/ The net bank debt is unchanged from HY2018 (the latest balance sheet information published).
2/ My first estimate simply doubles the earnings from an already depressed half year result.
3/ For my second estimate (the horror scenario), I have reduced EBITDA down to a level so that the banking covenants are broken, without changing my net debt assumption.

However, AWF does not tend to emphasize the EBITDA figures when announcing their results. They speak in terms of NPAT. So what does an EBITDA of $7.728m imply in terms of NPAT?
Assuming the interest costs and Depreciation and Amortisation costs carry over from the half year to the full year:

NPAT = 0.72 x [ EBITDA - I -DA ]
= 0.72 x [ $7.728m - 2($0.741m) - 2($1.864m)] = $1.813m

However, a $3.418m profit has already been declared for the half year. So to produce an annual result like that, would require a second half loss of :

$1.813m - $3.418m = -$1.605m

We have been told that AbsoluteIT are tracking to budget and Madison will have the benefit of the Census contract to boost their second half result. To produce this 'horror result' will require a massive second half loss to be posted by the AWF division, to drag down the other two (which should be nicely profitable) via the group result into the red. Even writing off the remaining $0.6m outstanding from the much talked about 'bad debtor' won't do it. While such a loss is possible, it just doesn't seem likely. The AWF banking covenants look pretty safe to me.

SNOOPY

P.S. Ross and the rest of the board wants the leverage ratio below 2

[winner69]

Phew .... that’s a relief Snoops

[Snoopy]

Phew .... that’s a relief Snoops

Market agrees? Up 3c to $1.78 today.

SNOOPY

[winner69]

I don’t think AWF are playing fast and loose in respect of their convenant definitions

They probably are what their bank uses in these matters.

Wouldn’t want them to borrow to keep paying that high divie would we ....that would upset some ratios

[minimoke]

We have been told that AbsoluteIT are tracking to budget and Madison will have the benefit of the Census contract to boost their second half result.

SNOOPY
We have been told that "The demand for recruitment talent has had some impact on the Madison business with pressure of competition for current and future talent by growing internal recruitment teams. This has softened the Madison result." This suggests to me that finding 3,500 - 4,000 was more challenging that anticipated. Meaning greater staff overhead and reduced margin due to higher wages of census workers. Those big contracts always run on slim margins and tend to distract from core business. I wouldn't necessarily call it a "benefit"

[Snoopy]

But on the temping side, I expect Madison to have a boost in the second half, because of the one off Census contract. Statistics NZ were hoping for 50% of us filling in the forms on line. Any less than that and AWF Madison should do consummately better than expected. More people will need to be hired on the ground to follow up! It will all be a one off though.


Oh no!

https://www.stats.govt.nz/news/census-on-track-for-70-percent-online

Looks like all the grey haired grizzle beards, got their sons, daughters or wives to fill in their census forms via the computer! 70% on line completion rate, if achieved, bad news for AWF shareholders. Could this be a temp fizzer for Madison, after all the promise made last year? 2HY2018 for Madison not so rosy after all?

SNOOPY

[winner69]

No .... good news for AWF Snoops ....still keeping all the extra people busy I reckon

[Snoopy]

I have made the following assumptions in my FY2018 estimates:

1/ The net bank debt is unchanged from HY2018 (the latest balance sheet information published).
2/ My first estimate simply doubles the earnings from an already depressed half year result.
3/ For my second estimate (the horror scenario), I have reduced EBITDA down to a level so that the banking covenants are broken, without changing my net debt assumption.


P.S. Ross and the rest of the board wants the leverage ratio below 2

The 'Keenan preference' was made in passing by Simon Bennett in the AGM address. Time to put some numbers on what would cause the board concern:



Financial Year2018 (HY Annualised Estimate Scenario)2018 (Board Shock Scenario)2018 (Horror Scenario)


EBITDA (Snoopy produced) {B}$12.046m$11.592m$7.728m


Finance Cost {C}$1.659m$1.659m$1.659m


Interest Coverage {B}/{C}7.36.84.7


Net Bank Debt {D}$23.183$23.183m$23.183m


Leverage ratio {D}/{B}1.92.03.0



AWF does not tend to emphasize the EBITDA figures when announcing their results. They speak in terms of NPAT. So what does an EBITDA of $11.592m imply in terms of NPAT?
Assuming the interest costs and Depreciation and Amortisation costs carry over from the half year to the full year:

NPAT = 0.72 x [ EBITDA - I -DA ]
= 0.72 x [ $11.592m - 2($0.741m) - 2($1.864m)] = $6.328m (FY2018 profit, not a great result)

However, a $3.418m profit has already been declared for the half year. So to produce an annual result like that, would require a second half profit (still down on the first half) of:

$6.328m - $3.418m = $2.964m

Boards hate cutting dividends. If the FY profit is there or thereabouts and the outlook is OK, I pick the dividend will be maintained. But if the FY profit is really below that reported last year (as opposed to below the result of counting Absolute IT in the fold for twelve months), we shareholders might get a dividend cut. I guess it all depends how good that cashflow is.

SNOOPY

[winner69]

Snoops - I’m still convinced that ‘less than prior period’ means earnings less than $5.9m ...but keep your hopes up

[winner69]

Snoops, so hoping cash flows are strong to maintain dividend

Do you ever look at the Cash Flow Statement and it’s component ....quite interesting

Or are you ne of these analysts who use ebitda as a proxy for operating cash flows.

[Snoopy]

Snoops, so hoping cash flows are strong to maintain dividend

Do you ever look at the Cash Flow Statement and it’s component ....quite interesting

Or are you one of these analysts who use ebitda as a proxy for operating cash flows.


I normally invest in companies with cash flows so strong, that I don't need to look at them Winner :-).

But since you mentioned it, I did have a look at the latest half year cashflows in HYR2018. I see a very strong increase in cash coming into the books over the latest half year and the pcp. + $9.2m is more than enough to cover the dividends for the whole year, almost two times over! However, last year the cash balance started at $6.967m at the end of the first half, yet it shrunk down to $1.137m by the end of the FY2017 financial year. Of course AWF acquired AbsoluteIT in 2HY2017 ($9.903m) which goes a long way to explaining where that cash went. Nothing is being acquired in 2HY2018 so cashflow ought to be pretty good over the second half year. Have I missed anything?

I am a bit surprised that the ASB bank uses EBITDA as a proxy for cashflow. I suppose taking a very short term view you could do that. But I would have thought that letting your office get shabbier and shabbier, using outdated computer software and driving around in old cars might not be good for business in the medium term?

SNOOPY

[winner69]

Snoops - AWF operating cash flows are quite seasonal with changes in working capital

Wouldn’t be a surprise to see negative operating cash flow for second half of the year ...could be a good exercise where a lot of that ‘strong’ first half cash flow came from

[Baa_Baa]

Snoops - AWF operating cash flows are quite seasonal with changes in working capital

Wouldn’t be a surprise to see negative operating cash flow for second half of the year ...could be a good exercise where a lot of that ‘strong’ first half cash flow came from

You seem to be enjoying winding-up the Snoop dog who takes the bait most times, but while cash flow is important (essential) to short term management operational measures it's secondary as you almost certainly know, to fundamental metrics around profitability and more importantly for shareholders, net earnings and payouts.

Cash flow can be volatile month to month even in a company that maintains a steady or growing annual earnings, so best to look at it from a perspective of what underlying fundamentals make AWF a good, or not good, long term investment, rather than the monthly, quarterly or half yearly fluctuations in cash flow which results from burn rates, one-off acquisitions, sitting on cash etc etc.

Given that a severe sustained cashflow deficit is a big warning, and vice versa, more often that not shorter term cash movements are a secondary and minor consideration to growing revenue, less expenses and profits arising, resulting in dividends, ergo paying out cash that is otherwise not required to grow or fund the company.

Modern accounting likes to make these basics more complicated than they really are.

[winner69]

AWF cash flows over the last 4 years. These redone in a way that beeper represents cash flows from day to day stuff and those associated with acquisitions and funding.

I always like looking at how much of free cash flow gets paid as dividends

In AWFs case the amount paid in dividends invariably exceeds cash generated on a day to day basis (excluding cost of acquisitions)

AWF have essentially had To increase debt to keep paying the dividends. That’s how I see it anyway. Note that changes in debt and the capital raised is slightly more than what they spent on acquisitions ...the extra gone to keep the dividends up

I would say this year probably won’t be much different.

[winner69]

At that time,so long as the present chairman is replaced,it may be worth re analysising the business.
Currently the share price is back to where it was 4 or 5 years ago,with the dividend under threat.

As an aside, it appears to me the way this sector operates has changed, and AWF, instead of being at the forefront of change, have been left behind.

Very perceptive of you percy.

I probably wasted a bit of time watching that AGM video and from that I think your insights are correct.

Maybe Absolute IT is a bit different but their AWF and Madison businesses seem to be dogs.

Loved how one of the Simons used words like adjacenties in his presentation ...he’s read the right books.

[Snoopy]

At that time,so long as the present chairman is replaced,it may be worth re analysising the business.


What is the issue with Chairman Ross Kennan? The only thing that I have specifically noted is this



Ross B Keenan: Ordinary Shares HeldRoss B Keenan: Restricted A Shares heldRoss B Keenan: Restricted B Shares held


[TD]EOFY2015188,75018,00012,000


EOFY2016156,87518,00012,000


EOFY2017156,87518,0000



So Keenan has sold down some head shares during FY2016 and the Restricted B shares he held expired on 1st June 2016 (during FY2017) have not been converted to actual shares at $2.50 (because they were out of the money?)



Currently the share price is back to where it was 4 or 5 years ago,with the dividend under threat.
As an aside, it appears to me the way this sector operates has changed, and AWF, instead of being at the forefront of change, have been left behind.

Not sure how 'being left behind' squares with trying to evolve the business towards the health sector (which admittedly did not work), the white collar sector (with Madison), and the IT sector (with AbsoluteIT). What alternative path forward were you thinking of?


Very perceptive of you percy.

I probably wasted a bit of time watching that AGM video and from that I think your insights are correct.

Maybe Absolute IT is a bit different but their AWF and Madison businesses seem to be dogs.

Loved how one of the Simons used words like adjacenties in his presentation ...he’s read the right books.


Simon Bennett, when appointed, was touted as a new generation of leader. You are saying Winner he is a 'new man' in an 'old shirt'?

Being the only listed business in this sector on the NZX makes it difficult to determine how well AWF are doing compared to their competitors. They claim to be number 1 in New Zealand. But number 1 of what exactly? I was struck by this comment from the 'Our Strategy' section of AR2016 (p11)

"Even the larger players in the New Zealand Recruitment services market have less than 5% share by sector."

An admission that even though AWF Madison is number 1, there is lots of competition out there? I don't know if this competition includes any Human Resource managers of big companies that engage in direct in house recruitment themselves.

Reading through the last three annual reports again, with the benefit of hindsight, can throw up the odd investor gem. When an economy is going well, companies are more concerned with retaining their staff talent. So it is harder to prise staff away from where they are working already. With less people looking to change jobs it is harder to fill new roles. AWF Madiosn get their big pay day when they fill a new role. But if they have to expend more effort to find suitable candidates, they may not be paid for the extra time they have to spend. Contrast this to a more recessionary climate where companies have a culture of employing more temporary talent, so they can turn off the temporary tap when the workloads drop off. Perversely, this means AWF Madison will have higher profit margins when the economy is not so buoyant. This to an extent answers my concerns about lower profit margins in recent years.

The other factor is that there is less competition for placing people in the provinces. Provincial profit margins tend to be higher. I think it is fair to say that over the last three years (FY2015, FY2016 and FY2017) the provinces have not done as well as the cities. Perhaps the current rural upturn will be positive for the AWF unit going forwards?

SNOOPY

[Snoopy]

AWF cash flows over the last 4 years. These redone in a way that better represents cash flows from day to day stuff and those associated with acquisitions and funding.

I always like looking at how much of free cash flow gets paid as dividends

In AWFs case the amount paid in dividends invariably exceeds cash generated on a day to day basis (excluding cost of acquisitions)

AWF have essentially had To increase debt to keep paying the dividends. That’s how I see it anyway. Note that changes in debt and the capital raised is slightly more than what they spent on acquisitions ...the extra gone to keep the dividends up

I would say this year probably won’t be much different.

Hey Winner why have you taken off annual PPE expenditure when looking at operating cashflow, but not included the Depreciation and Amortitsation annual expenses that are the offsetting book allowance to balance the future PPE expenditure?

SNOOPY

[winner69]

Snoops .....in that table we are only looking at cash flows - reflecting cash movements in the year they occur

Depreciation and amortisation (and a few other things) are not cash items so are not part of Operating Cash Flows - consequently the cash cost of PPE needs to shown separately (as Investing Cash Flows).

[percy]

Ross B Kennan.His career has been mediocre,not out standing, such as Rob Campbell,Geoff Ricketts or Elizabeth Coutts.Current director Ted Van Arkel would add more mana.
I wonder whether the likes of LinkedIn and Seek,are the future,and the future may already be here,and AWF is being left behind.?

[Baa_Baa]

... I wonder whether the likes of LinkedIn and Seek,are the future,and the future may already be here,and AWF is being left behind.?

Neither of those platforms generate recruitment fees or contractor margin revenue, they are advertising platforms that charge a fee for the job adverts, and both are used by recruiters and hirers.

[Snoopy]

I wonder whether the likes of LinkedIn and Seek,are the future,and the future may already be here,and AWF is being left behind.?


There was an article in the FY2015 annual report (p18) titled "Brave New World" by group general manager Kerrie Gregory. There is a lot of information there about how AWF Madison are now using the internet to engage with both workers and workplaces.

"When I started in recruitment nine years ago, we reached candidates by putting an ad in the newspaper or on on-line job boards."
"It is far more diverse now. Things have changed dramatically and social media have played a huge part in that."

Madison are now using 'active engagement'. Kerrie is using social media to get 'passive candidates' (those that may not be actively looking for new work, but have the skills). Madison sign a 'preferred supplier agreement' with potential employers. They go out to those employers go inside the business and go to great lengths to understand the business, who the people are and how they work. Everything about the employers organization are then displayed prominently using the company's social media (which is created if they don't have it).

I would say that 'Seek' and 'Linkedin' are just two of the web tools that Madison or AWF can and do use. And yes I just went to Seek and looked up engineering jobs in Christchurch (cos I know Madison can supply such workers) and yes Madison was there with a job description on page 3! It looks to be like Madison are 'on the ball' with the current internet toolbox. Whether they are the best operators of that toolbox is of course another matter!

SNOOPY

[percy]

[QUOTE=Snoopy;712700] Whether they are the best operators of that toolbox is of course another matter!

That is the 'heart' of the matter.
Recent share performance would suggest they are not.?

[BlackPeter]

Great research and discussion, guys!

I was sort of wondering whether I want to take them on my watch-list, but now I think I can use this space for better candidates ;);

[percy]

Great research and discussion, guys!

I was sort of wondering whether I want to take them on my watch-list, but now I think I can use this space for better candidates ;);

AWF's full year result is due at the end of May,so not far away.
I expect they will surprise us.
However,I very much doubt it will be a pleasant surprise .

[winner69]

AWF's full year result is due at the end of May,so not far away.
I expect they will surprise us.
However,I very much doubt it will be a pleasant surprise .

You probably be right there percy .....even worse than they have already indicated?

[percy]

You probably be right there percy .....even worse than they have already indicated?

For shareholders I hope I am wrong,but I would guess it will not be better.

[Snoopy]

AWF cash flows over the last 4 years. These redone in a way that better represents cash flows from day to day stuff and those associated with acquisitions and funding.


Winner, while I accept your figures, I don't think that I would compile such a chart in quite the same way. The property plant and equipment expenses that you have deducted may have been spent in the current year. But the benefits to the company should flow to AWF shareholders for many years. It doesn't make much sense to me to subtract those figures (* with one exception, see paragraph end) from operational cashflow for just the current year to measure the cash generating ability of the company. It would make a lot more sense to me if you compared the sum of PPE expenditure over, say, a five year period to the equivalent depreciation and amortisation of property plant of equipment over that same period. (*) Where your calculation would make sense is if the company is in danger of running out of cash, to the extent that it would compromise the AWF's ability to keep operating as a going concern. But I think we can both agree, that with no pressure on the banking covenants, there is little risk that this will happen.




I always like looking at how much of free cash flow gets paid as dividends

In AWFs case the amount paid in dividends invariably exceeds cash generated on a day to day basis (excluding cost of acquisitions)


There is plenty of positive operating cashflow to pay dividends on an annual basis if you don't subtract the P.P and E expenditure.



AWF have essentially had To increase debt to keep paying the dividends. That’s how I see it anyway.


That is a fair view and you are entitled to it. But it would be equally fair to say that AWF have increased their debt to 'create a bigger machine' with the acquisition of both Madison and AbsoluteIT, which is the way I would look at it. The increase in borrowings wasn't exclusively 'tagged' to increasing dividends.



Note that changes in debt and the capital raised is slightly more than what they spent on acquisitions ...the extra gone to keep the dividends up


All figures below are from Winner's table:



Change in Debt (EOFY2017 to EOFY2015):$32.383m - $18.608m = $13.775m


Capital Raised$13.563m


Total Cash Resources Raised$27.338m


Acquisitions FY2014 to FY2017 (Cash Spent):$26.627m + $6.000m + $9.903m = $42.530m



Your table figures don't back up what you are saying Winner! Mind you I suspect you need to use the debt figures from EOFY 2013, not EOFY 2015 to align the change in debt with the acquisition cashflow over a comparable period!

SNOOPY

[winner69]

Snoops - as I said yesterday depreciation and amortisation (and a few other things) are not part of (ie not included) in Operating Cash Flows ...and yes PPE is an investment to hopefully produce future profits (be it replacement stuff or some new technology)

You will note I have kept cash movements for acquisitions and funding seperate.

What the top half of the table reflects is how much cash (not profit) AWF generate from day to day operations (Operating Cash Flow) and what they do with it like buy some new computers and stuff (PPE) to keep the business going and then how much they give to shareholders as way of dividends. Anything left over either used to reduce debt or saved up for a rainy day.

So what I’m saying Snoops is that in FY17 they generated $7.7m in cash from day to day operations of which they spent $3.0m on new computers and other PPE which leaves $4.7m spare and then they gave shareholders $5.3m which was $0.6m more than they generated. See where I am coming from. They have done this for 3 of the last 4 years - to the tune of $3.8m in total. Where did the divie money come from I ask

But FY18 will be different eh

PS - all numbers from Cash Flow Statements - just set out different

[Snoopy]

Snoops - as I said yesterday depreciation and amortisation (and a few other things) are not part of (ie not included) in Operating Cash Flows ...and yes PPE is an investment to hopefully produce future profits (be it replacement stuff or some new technology)

You will note I have kept cash movements for acquisitions and funding seperate.

What the top half of the table reflects is how much cash (not profit) AWF generate from day to day operations (Operating Cash Flow) and what they do with it like buy some new computers and stuff (PPE) to keep the business going and then how much they give to shareholders as way of dividends. Anything left over either used to reduce debt or saved up for a rainy day.

So what I’m saying Snoops is that in FY17 they generated $7.7m in cash from day to day operations of which they spent $3.0m on new computers and other PPE which leaves $4.7m spare and then they gave shareholders $5.3m which was $0.6m more than they generated. See where I am coming from. They have done this for 3 of the last 4 years - to the tune of $3.8m in total. Where did the divie money come from I ask

But FY18 will be different eh

PS - all numbers from Cash Flow Statements - just set out different

Winner, I am not saying you are wrong. I am saying you can look at the cashflows in an alternative way.

1/ First you pay out your dividends out of operating cashflow. This can be covered with no borrowing.



1HY20152HY20151HY20162HY20161HY20172HY20171HY2018S um Total


Net cashflow from operating activities$8.330m-$2.145m$6.495m-$4.437m$11.399mm-$3.773m$11.879m+$27.748m


Dividends paid-$1.986m-$1.916m-$2.660m-$2.392m-$2.636mm-$2.602m-$2.705m-$16.987m



You can see that there is plenty in the kitty to do this, not withstanding operating cashflow tending to be negative in the second half year.

2/ Next you borrow some money to add to what coperating cashflow you have left to make up what you need to invest in P,P & E.

Looked at this way, the borrowing is done to 'invest in the business'. Although the business has lost the balance of their cash generated and now have a bank loan, they have gained 'some new computers and stuff '. And for each $1 invested in PP&E, they will hopefully earn a lot more than $1 in the future from each $1 that has been invested. Looked at this way AWF are optimizing their balance sheet gearing and planning for the future - being responsible. Sounds much better than 'drawing down the house mortgage to pay the grocery bill', which seems to be the viewer angle you are coming from with the same data.

SNOOPY

[winner69]

Snoops - i’ll wait until we know what H2 looks like before I critique your numbers ...but I think we will agree to disagree anyway.

Like that bit about about drawing down the mortgage to pay for the groceries, quite good ......although a better analogy might be increasing the mortgage to buy the computer or fridge or TV that needs replacing (also bought by increasing the mortgage a few years earlier). That’s being responsible by optimising the household balance sheet!

[winner69]

AWF have more than respectable ROE and ROIC numbers

So respectable that it deserves a higher P/B of 1.5 where it is now.

[Snoopy]

Like that bit about about drawing down the mortgage to pay for the groceries, quite good ......although a better analogy might be increasing the mortgage to buy the computer or fridge or TV that needs replacing (also bought by increasing the mortgage a few years earlier). That’s being responsible by optimising the household balance sheet!


The concept of analysing a company by looking at cashflow has a certain raw appeal. Profits are ultimately important. But a company can manipulate declared profits several ways:

1/ By classing a bad debt as collectible when it is not.
2/ By carrying goodwill on the books using optimistic future sales scenarios when those sales levels will be very difficult to achieve.
3/ By setting up bad debt provisions that allow the shifting of profits from one financial period to the next.

However, cashflow is 'day to day' important, because having a cash dividend deposited into your bank account is a gold standard kind of investment return that cannot be manipulated. Money in your bank account is tangible and spendable, contrasting with declared profits that amount to an indirect promise of a return of cash in the future.

I want to carry on with Winner's analogy and imagine you as a homeowner are running an in house business putting your tweenagers out to work selling lemonade at the end of the driveway, while simultaneously giving them free spending (pocket) money. Now tweenagers demand some pocket money, and generally use their accumulated (lack of) wisdom to make poor decisions and waste it, or use it on instant gratification. Nothing wrong with that, it is all part of the learning and budgeting experience. From a homeowners perspective, the pocket money paid out is analogous to a company paying dividends to shareholders. Once the pocket money is paid out, all control of what happens to it passes from the homeowner's hands.

To support the lemonade venture, our homeowner uses some leftover household cashflow, plus bumps up the mortgage to buy a brand new fridge. As well as being more efficient than the original fridge, it is much bigger to hold the vast litres of ice cool lemonade to satisfy the summer satiated pedestrians walking by the end of the driveway. Selling lemonade becomes a highly profitable home business for our homeowner. When discussing their finances, the homeowner could say:

1/ they borrowed money from the bank to pay the tweenagers pocket money (which doesn't sound too responsible) OR
2/ they could say money was borrowed from the bank to buy a new fridge to support the home business venture (which sounds much savvier).

But both of these explanations could be seen as correct though, depending on how an outside observer chooses to see the historic path, along which the homeowners cash was spent.

On the day cash is cash. Whether you give $500 out as pocket money, or put that $500 towards a new fridge, $500 cash will come out of the household bank account. However, no business person plans to invest $500, with a business plan to only recoup $500 from that investment. There has to be a profit at the end of the year. It is the new fridge that enables the selling of the lemonade and our little home business able to operate. After eight years, perhaps a new fridge will be required to allow the lemonade business to continue. Our hapless home owner may once again be forced to draw down the house mortgage to buy it. At this point the value of the original big fridge has been lost (cash value zero). But what hasn't been lost is the utility of using that old fridge over the preceding eight years. Yes the original big fridge capital has gone. But the cashflows from selling the lemonade over an eight year using that fridge were very real.

So what is the moral of this story? On the day, the negative cash effect of giving tweenagers pocket money OR spending that money on a new fridge is the same. But over time, the fridge delivered a positive cash return to our homeowner, while the pocket money simply disappeared (from our homeowners perspective). Thus although all cash starts out as being equal, over time it can end up not being equal. Or coming back out of the analogy, offsetting cash taken in over a one year period with cash spent on something that will produce a return over a multi year period is akin to subtracting apples from apples (from a snapshot perspective) but subtracting oranges from apples (from a multi year perspective).

SNOOPY

[Snoopy]

Winner wrote: "Note that changes in debt and the capital raised is slightly more than what they spent on acquisitions ...the extra gone to keep the dividends up"

All figures below are from Winner's table:



Change in Debt (EOFY2017 to EOFY2015):$32.383m - $18.608m = $13.775m


Capital Raised$13.563m


Total Cash Resources Raised$27.338m


Acquisitions FY2014 to FY2017 (Cash Spent):$26.627m + $6.000m + $9.903m = $42.530m



Your table figures don't back up what you are saying Winner! Mind you I suspect you need to use the debt figures from EOFY 2013, not EOFY 2015 to align the change in debt with the acquisition cashflow over a comparable period!


The following is an HTML rendition of Winner's 'post 560' table, with a couple of relevant end of year net debt figures thrown in:



AWF Madison Cash Flows $000


Day to day Operations20132014201520162017


Operating Cashflow {A}4,4866,1852,0587,626


PPE Expense {B}-1,107-841-224-2,950


Free Cash Flow {A}+{B}=(C)3,3795,3441,8344,676





Dividends Paid {D}-4,859-3,902-5,052-5,286


Cash Retained from Operations {C}+{D}-1,4801,442-3,218-610





Acquisitions and Funding2014201520162017


Acquisitions (E)-26,627-6,0000-9,903


Increase/Decease in Borrowings {F}29,880-9,000-80312,500


Capital Raised {G}013,56300


Cash Impact {E}+(F)+(G)3,253-1,437-8032,597





Net Bank Debt (EOFY)29,31027,53718,60321,87032,383



Winner has looked at what is happening on an individual year basis. But what would happen if you looked at what has happened over the four year period, starting at EOFY2013 and ending at EOFY2017?



Change in Debt (EOFY2017 to EOFY2013):$32.383m - $29.310m = $3,073m


Capital Raised$13.563m


Total Cash Resources Raised$16,636m





Acquisitions FY2014 to FY2017 (Cash Spent):$26.627m + $6.000m + $9.903m = $42.530m



During the period, AWF acquired the Madison business for $36m and AbsoluteIT for $14.718m, of which $3.420m is still due to be paid in FY2018. The amount paid out for these new assets, which have created a much bigger 'earning machine', was $47.298m over four years. Yet the net bank debt is only $3.073m higher. This is quite a different picture to the one that Winner presented of a company constantly increasing debt so they can afford to pay dividends. I can't see any evidence here of dubious or desperate financial practices over a multi year period.

SNOOPY

[winner69]

Snoops ...you haven’t counted the $29,880 increase in borrowings in 2014

Should have noted (to save confusion) I only put the Net Bank Debt figure for information. From that Slide 8 and couldn’t be bothered going back to 2014.

[minimoke]

The concept of analysing a company by looking at cashflow has a certain raw appeal. Profits are ultimately important. But a company can manipulate declared profits several ways:

1/ By classing a bad debt as collectible when it is not.
2/ By carrying goodwill on the books using optimistic future sales scenarios when those sales levels will be very difficult to achieve.
3/ By setting up bad debt provisions that allow the shifting of profits from one financial period to the next.

However, cashflow is 'day to day' important, because having a cash dividend deposited into your bank account is a gold standard kind of investment return that cannot be manipulated. Money in your bank account is tangible and spendable, contrasting with declared profits that amount to an indirect promise of a return of cash in the future.

I want to carry on with Winner's analogy and imagine you as a homeowner are running an in house business putting your tweenagers out to work selling lemonade at the end of the driveway, while simultaneously giving them free spending (pocket) money. Now tweenagers demand some pocket money, and generally use their accumulated (lack of) wisdom to make poor decisions and waste it, or use it on instant gratification. Nothing wrong with that, it is all part of the learning and budgeting experience. From a homeowners perspective, the pocket money paid out is analogous to a company paying dividends to shareholders. Once the pocket money is paid out, all control of what happens to it passes from the homeowner's hands.

To support the lemonade venture, our homeowner uses some leftover household cashflow, plus bumps up the mortgage to buy a brand new fridge. As well as being more efficient than the original fridge, it is much bigger to hold the vast litres of ice cool lemonade to satisfy the summer satiated pedestrians walking by the end of the driveway. Selling lemonade becomes a highly profitable home business for our homeowner. When discussing their finances, the homeowner could say:

1/ they borrowed money from the bank to pay the tweenagers pocket money (which doesn't sound too responsible) OR
2/ they could say money was borrowed from the bank to buy a new fridge to support the home business venture (which sounds much savvier).

But both of these explanations could be seen as correct though, depending on how an outside observer chooses to see the historic path, along which the homeowners cash was spent.

On the day cash is cash. Whether you give $500 out as pocket money, or put that $500 towards a new fridge, $500 cash will come out of the household bank account. However, no business person plans to invest $500, with a business plan to only recoup $500 from that investment. There has to be a profit at the end of the year. It is the new fridge that enables the selling of the lemonade and our little home business able to operate. After eight years, perhaps a new fridge will be required to allow the lemonade business to continue. Our hapless home owner may once again be forced to draw down the house mortgage to buy it. At this point the value of the original big fridge has been lost (cash value zero). But what hasn't been lost is the utility of using that old fridge over the preceding eight years. Yes the original big fridge capital has gone. But the cashflows from selling the lemonade over an eight year using that fridge were very real.

So what is the moral of this story? On the day, the negative cash effect of giving tweenagers pocket money OR spending that money on a new fridge is the same. But over time, the fridge delivered a positive cash return to our homeowner, while the pocket money simply disappeared (from our homeowners perspective). Thus although all cash starts out as being equal, over time it can end up not being equal. Or coming back out of the analogy, offsetting cash taken in over a one year period with cash spent on something that will produce a return over a multi year period is akin to subtracting apples from apples (from a snapshot perspective) but subtracting oranges from apples (from a multi year perspective).

SNOOPY
Much simpler to get the tweenager to mow the neighbours lawn for $20 and give the tweenager $15 pocket money. The only decision is cashflow - do you pay out the pocket money before or after the lawns are mown and paid for.

[Snoopy]

Much simpler to get the tweenager to mow the neighbours lawn for $20 and give the tweenager $15 pocket money. The only decision is cashflow - do you pay out the pocket money before or after the lawns are mown and paid for.


Let's say that you as a parent only have $30 spare cash at the end of the week. If you pay the tweenager $20 to mow the lawn first, then after that give them $15 as pocket money, the bank manager might say that you have drawn down the mortgage to pay pocket money to your kid, not so good? If OTOH, you pay your kid $15 pocket money first, then go to the bank to draw out the last $5 you need to make up the balance to pay the kid for mowing the lawn, then the bank manger might laud you for supporting youth entrepreneurship. But which decision would be the best parenting decision, bearing in mind there may be other factors in the background that I haven't outlined? You and I could argue the pros and cons. But from the bank managers perspective it doesn't matter. Either way, $5 has been drawn down on the mortgage.

My argument would be that you can look at each payment on the day from a straight cashflow perspective. But I would argue that $15 spent on pocket money is longer term less valuable than $15 put towards mowing lawns. Because if the Tweenager does a good job mowing the lawn, there is every chance they will be invited back to mow the lawn again. And that potential for more work in the future has some present day value. And that is why IMO, you should be careful in judging a business just on present day cashflow.

SNOOPY

[minimoke]

Let's say that you as a parent only have $30 spare cash at the end of the week. If you pay the tweenager $20 to mow the lawn first, then after that give them $15 as pocket money, the bank manager might say that you have drawn down the mortgage to pay pocket money to your kid, not so good? If OTOH, you pay your kid $15 pocket money first, then go to the bank to draw out the last $5 you need to make up the balance to pay the kid for mowing the lawn, then the bank manger might laud you for supporting youth entrepreneurship. But which decision would be the best parenting decision, bearing in mind there may be other factors in the background that I haven't outlined? You and I could argue the pros and cons. But from the bank managers perspective it doesn't matter. Either way, $5 has been drawn down on the mortgage.

My argument would be that you can look at each payment on the day from a straight cashflow perspective. But I would argue that $15 spent on pocket money is longer term less valuable than $15 put towards mowing lawns. Because if the Tweenager does a good job mowing the lawn, there is every chance they will be invited back to mow the lawn again. And that potential for more work in the future has some present day value. And that is why IMO, you should be careful in judging a business just on present day cashflow.

SNOOPY
Long and short of it is - if you want to borrow from the bank you want to be making a decent job with your borrowings. Remember back in the IPO days. $74m revenue = $3.1 profit. What do you reckon it will be this year. $280m revenue and $5.5m profit? Doesn't seem to me that cashlfow is the thing to be looking at.

[Snoopy]

Long and short of it is - if you want to borrow from the bank you want to be making a decent job with your borrowings. Remember back in the IPO days. $74m revenue = $3.1 profit. What do you reckon it will be this year. $280m revenue and $5.5m profit? Doesn't seem to me that cashlfow is the thing to be looking at.

My institutional memory doesn't go back that far! But I would imagine Simon Hull working out of a small hut shouting out instructions to temps to 'board a bus', with a street side megaphone on a public pavement office, represented a rather cheaper corporate overhead structure than the multi-office multi brand branch offices used today. Health and Safety rules would have been much easier to comply with back then too.

You have to make investment decisions today, based on the investment story being played out today. Cashflow is but one tool in the investment analyst toolbox. Where

1/ the cash coming in greatly exceeds the net profit AND
2/ the company is not overgeared,

-the situation I would say that fairly represents AWF Madison today-,

then I wouldn't put too much weight on Cashflow.

SNOOPY

[minimoke]

My institutional memory doesn't go back that far! But I would imagine Simon Hull working out of a small hut shouting out instructions to temps to 'board a bus', with a street side megaphone on a public pavement office, represented a rather cheaper corporate overhead structure than the multi-office multi brand branch offices used today. Health and Safety rules would have been much easier to comply with back then too.
Interesting if it were true. At IPO, 21 locations, 90 staff with their own software and proprietary systems. 8,000 in its labor "crew" pool. Health and safety obligations no different from today. (17 years prior to that you are probably right)


Today 22 locations and 3,500 working each day in their crew.

What they are doing is working harder to generate more cash (Eg Census contracts), but less smarter to generate less profit.

[minimoke]

Or howabaout this as a simple number.
Cash revenue = $280m = $5.38m per week or $1,537 per Crew member or $38 an hour. Doesent seem like a lot for the Madison / IT part of the business.

[winner69]

Wasn't that many years ago AWF touted the fact 'we are one of the few companies on the NZX that carries no debt'

Now AWF is one of the more indebted companies on the NZX with $33.5m debt v $37.8m equity.......gearing about 47% (debt to (debt+equity}) ........which is a lot higher than even the likes of FBU which is under 40% (even before the capital raise)

Heck what am I saying here .......

[Snoopy]

Or how abaout this as a simple number.
Cash revenue = $280m = $5.38m per week or $1,537 per Crew member or $38 an hour. Doesn't seem like a lot for the Madison / IT part of the business.


What you have figured out 'minimoke', is that not everyone's salary goes through the AWF Madison book as a gross payment.

I see you have annualised the 1HY2018 revenue for the AWF group, which is probably a reasonable starting estimate for FY2018. But not every deployment means that person is on the books for 365 days. You have taken the (up to) 3500 AWF business unit workers said to be deployed and assumed 3500 workers are deployed 52 weeks per year.

{ $280m Revenue / 52 weeks = $5.38m per week. $5.38m/ 3500 crew = $1,537 per crew member per week. }

That might be true for some, for example construction workers in Auckland. But it wouldn't apply, for instance, to fruit picking and sorting and packing jobs in the regions. Also AWF deploys both 'temps' and 'contractors'. 'Temps' I think means a non contracted worker on a fixed employment work period with a third party employer to accomplish a specific task. That could last anything from a few days to six or more months. It would only be the AWF directly employed contractors that would be on the books for 52 weeks/year though. AWF would only get a commission on the temp's wages, and they wouldn't pay the temps wages (that would be up to the third party employer). I do not know what the breakdown would be between 'temps' and 'contractors'. But the AWF revenue breakdown between these two worker classes through the AWF books would likely be of the order 1 : 10.

If you go to slide 9 of the AR2017 presentation, you will see, over and above those 'up to' 3500 AWF unit workers, Madison deploy 'up to' 1,100 workers daily and Absolute IT deploy 'up to' 450 people daily. But nearly 50% of Madison's deployments are one off permanent replacements (33% for AbsoluteIT). I imagine Madison would earn a one off fee for such a one off placement, probably based on the annual salary package being offered (this is a guess, I am happy to be corrected) . Slide 13 is interesting as it shows the Madison unit alone will deploy 3,000 workers (that shows this is unusually high for Madison deployment, maybe 5 times the number of workers they might normally deploy per month) for a peak period of only a couple of weeks. But on an annualised basis, Madison would employ only 250 Census people per month. The relatively short duration of most of the workers on this project will severely affect the 'average' number of days employed and possibly the average hourly rate too of Madison

What I am saying here is, working out an 'average deployment pay per hour' is a lot more difficult than your original 'back of the envelope calculation might suggest!

SNOOPY

[Snoopy]

Wasn't that many years ago AWF touted the fact 'we are one of the few companies on the NZX that carries no debt'

Now AWF is one of the more indebted companies on the NZX with $33.5m debt v $37.8m equity.......gearing about 47% (debt to (debt+equity}) ........which is a lot higher than even the likes of FBU which is under 40% (even before the capital raise)

Heck what am I saying here .......

You are saying that being a much less capital intensive business than Fletcher Building, and generating higher margins than Fletcher building, and not going through the same boom bust cycles as Fletcher Building (actually AWF Madison is more profitable in a business slump), that AWF Madison can afford to be more indebted over the business cycle?

SNOOPY

[minimoke]

Ive had a look at that slide.
Given its an annual report Id take it that the figures referred to are based on an annual basis. So that is 3,500 temps working for AWF a day for each working day of the year. Plus 1,100 people working for Maddison a day each working day and 340 IT people working every working day.

Where it gets confusing is they are reporting gross profit in total, not gross profit per person deployed. A one off permanent replacement will not be a daily deployment. What would be interesting is total revenue and net profit per division.

Just an off the cuff observation. Seems Madison has twice the staff and twice the daily deployments but arent making twice IT's profit. So dont look well equipped to manage a census contract. Whereas AWF have twice their profit with a few extra staff - they seem the ones set up to run 3,000 census workers profitably.

Edit: GP per staff has Madison lowest ranked at $160,000 a staff and AWF the highest at $290,000 a staff member. That Madison acquisition not looking so good.

[Snoopy]

What they are doing is working harder to generate more cash (Eg Census contracts), but less smarter to generate less profit.


It is going to get more difficult to disambiguate what is happening at Madiosn and AbsoluteIT in the future. For financial reporting purposes they have both been combined under the 'Temporary Contract and Permanent Staff to Commerce' reporting segment. Yet from Section G1 in AR2017 we can get a feel for AbsoluteIT's revenue and profit numbers, over FY2017 at least:



RevenueNet ProfitNet Profit Margin

If AbsoluteIT had been part of AWF Madison for all of FY2017$301.600m$7.500m


less Declared AWF Madison Result for all of FY2017$256.428m$5.867m


equals AbsoluteIT Result for Apr to Oct 2014 (7 months)$45.172m$1.633m


plus AbsoluteIT Result for Nov 2016 to Mar 2017 (5 months)$27.600m$0.809m


equals AbsoluteIT Result for FY2017 (12 months)$72.7m$2.44m
3.36%


We can do a similar exercise for when Madison was acquired during FY2014, using Section 18 from AR2014.



RevenueNet ProfitNet Profit Margin

If Madison had been part of AWF Madison for all of FY2014$186.300m$5.200m


less Declared AWF Madison Result for all of FY2014$148.691m$3.952m


equals Madison Result for Apr to Oct 2013 (7 months)$37.609m$1.248m


plus Madison Result for Nov 2013 to Mar 2014 (5 months)$23.156m$1.265m


equals Madison Result for FY2014 (12 months)$60.8m$2.51m
4.14%


SNOOPY

[minimoke]

It is going to get more difficult to disambiguate what is happening at Madiosn and AbsoluteIT in the future. For financial reporting purposes they have both been combined under the 'Temporary Contract and Permanent Staff to Commerce' reporting segment. Yet from Section G1 in AR2017 we can get a feel for AbsoluteIT's revenue and profit numbers:




Revenue
Net Profit


If AbsoluteIT had been part of AWF Madison for all of FY2017
$301.600m
$7.500m


less Declared AWF Madison Result for all of FY2017
$256.428m
$5.867m



That net profit doesnt look right. 48 staff, say and average of $100k each gets NP down to $5.4m for IT and $5.9 for Maddison

[Baa_Baa]

Anyway you look at it you will find that AbsoluteIT's business of placing higher margin contractors and perms has moved closer to pure recruitment placements like Madison, that's because AbsoluteIT have devolved to the government recruitment market where the volumes are higher but the margins are very slim, which has slashed their overall margin contribution compared to previous years. Either way though, both companies make a decent if not modest margin assuming they can maintain (or grow) volume placements.

Operationally cash flow is obviously important, but whether they can chip away at the massively growing debt burden year on year while sustaining shareholder dividends is another matter entirely. I reckon AWF have over-extended and are winging it. The whole thing could go bang in even a small downturn in placements. Notwithstanding that, the Labour government has always been a lucrative source of contract / consultant revenues as they grow the resource base while obfuscating that against capped FTE permanent employees.

It's been going on for ages, it's just a matter of volumes and market share. Assuming debt doesn't undo them.

[Scrunch]

RevenueNet ProfitNet Profit Margin

If AbsoluteIT had been part of AWF Madison for all of FY2017$301.600m$7.500m


less Declared AWF Madison Result for all of FY2017$256.428m$5.867m


equals AbsoluteIT Result for Apr to Oct 2016 (7 months)$45.172m$1.633m


plus AbsoluteIT Result for Nov 2016 to Mar 2017 (5 months)$27.600m$0.809m


equals AbsoluteIT Result for FY2017 (12 months)$72.7m$2.44m
3.36%


Some thoughts:
Interesting discussion.

So AWF paid $14.7m for an entity delivering a net surplus of circa $2.44m/yr. Either this was a steel or indicates a low sector P/E is appropriate. If the correct PE in this sector should be 6, and AWF delivers $7.5m its market capitalization would be $45m (or $1.38).

There's a group of companies with some earnings doubt, some bank debt and sufficiently large amount of good will that there is a huge gap between Equity/share and NTA/share on the balance sheet. Members of this group include AWF, EVO, GXH, MPG, SKT, TGH. The takeover rescued TGH but the rest are all down heavily this year. Mr Market is nervous around negative NTA companies with borrowing and is continuing to hammer them. AWF may become a buy around the same time some of these other downtrends end.

[Snoopy]

That net profit doesnt look right. 48 staff, say and average of $100k each gets NP down to $5.4m for IT and $5.9 for Maddison


This time I wasn't guessing and all the relevant figures I have referenced in my post 591:

Net profit of $2.44m for AbsoluteIT (FY2017), and $2.51m for Madison (FY2014), are the correct answers, if I got my arithmetic right!

SNOOPY

[winner69]

You are saying that being a much less capital intensive business than Fletcher Building, and generating higher margins than Fletcher building, and not going through the same boom bust cycles as Fletcher Building (actually AWF Madison is more profitable in a business slump), that AWF Madison can afford to be more indebted over the business cycle?

SNOOPY

No I’m not saying that at all

What I’m saying is that AWF is one of the most highly geared company on the NZX. Gearing at 47% is high.

I took FBU (gearing less than 40%) just as an example as punters knew they were relatively highly geared. Another company punters worry about debt with is CAV and their gearing is less than 30%.

Why did AWF raise new capital of $14m in 2015 if debt is a good
thing? Wasn’t to ‘optimise’ their balance sheet was it ..surely not.

Snoops - just as a matter of info except for one division Fletcher’s margins are higher than AWF’s margins

[Snoopy]

No I’m not saying that at all

What I’m saying is that AWF is one of the most highly geared company on the NZX. Gearing at 47% is high.


ASB, the company's new bankers, not only rubber stamped the existing debt levels. They reduced the interest rate payable, which tells you a lot about what they think of the debt risk. As you will recall, ASB and AWF have redefined what leverage means anyway, a good thing to do if you don't like the classical definition. So how does AWF stack up against three blue chip NZX50 companies?



Company & Financial YearMercury 2017 Sky City 2017 Spark 2017 AWF 2017 (AbsIT 12mnths)


[TD]EBITDA(F) {B}$523m$307m$1,016m$15.664m

Finance Cost {C}$95m$31.1m$48m$1.659m


Interest Coverage {B}/{C}5.59.821.29.4


Net Funding Debt {D}$1077m$889m$935m$32.383m


Leverage ratio {D}/{B}2.12.90.92.1





Company & Financial YearMercury 2017 Sky City 2017 Spark 2017 AWF 2017 (AbsIT 12mnths)


[TD]Debt {B}$1,107m$889m$935m$33.608m

Equity {C}$3,308m$1,071m$1,651m$36.935m


Debt Ratio {B}/{B+C}25.1%45.4%36.1%47.6%



As you can see I have used both the classical definition of leverage (Debt Ratio) as well as the ASB/AWF definition.

Why did I choose Mercury Energy (MCY), Sky City Casino (SKC) and Spark (SP) for comparison? Simply because I hold them all and have considered them as relatively highly leveraged investments. For Sky City I have included the deferred casino licence value as part of the company debt, as the book licence value will be transferred and offset against the PP&E of the completed Auckland and Adelaide complexes when finally built (IOW the licences as they appear on the balance sheet are defacto debts).

Of the three, it is Sky City that stacks up the closest to AWF in debt terms, even if they are very different businesses. Mercury looks respectable in both leverage terms because they have been able to raise capital using the 'thin air' method. The Mercury interest cover is easily the weakest of the four. And without the power station revaluations (thin air capital created) it would present as easily the weakest from a Debt Ratio perspective too. Spark is in the strongest position of the four. But they do have a lot of telecommunications equipment on the books that will require more frequent capital reinvestment to keep current.

Looking at this, I am surprised that ASB consider a leverage ratio of anything below 3 as quite acceptable. Sky City is certainly as highly leveraged a company as I would want to invest in, and their debt is set to go higher as construction continues. You would not want AWF Madison to have two bad years in a row with the debt levels they have now. With the old definition of leverage, AWF Madison and Sky City are nearly line ball. The new definition of leverage makes AWF look much better!



Why did AWF raise new capital of $14m in 2015 if debt is a good thing? Wasn’t to ‘optimise’ their balance sheet was it ..surely not.


That was just before I first appeared on the share register, so I don't have any memory of what spin was used to justify that capital raising at the time. Anyone on here remember?

SNOOPY

[winner69]

ASB, the company's new bankers, not only rubber stamped the existing debt levels. They reduced the interest rate payable, which tells you a lot about what they think of the debt risk. As you will recall, ASB and AWF have redefined what leverage means anyway, a good thing to do if you don't like the classical definition. So how does AWF stack up against a couple of blue chip NZX50 companies?



Financial YearMercury 2017Spark 2017AWF 2017 (AbsIT 12mnths)


[TD]EBITDA(F) {B}$523m$1,016m$15.664m

Finance Cost {C}$95m$48m$1.659m


Interest Coverage {B}/{C}5.521.29.4


Net Bank Debt {D}$1077m$935m$32.383m


Leverage ratio {D}/{B}1.50.92.1



Gearing is Debt / (Debt + Equity)

Mercury 25% Spark 40% and AWF 47% - AWF is most highly geared of the three

Debt can be good ...and bad .... generally debt is a way for companies to leverage their value to increase profits for shareholders ....in AWF case hmmmm ...the jury is still out on that one

Low levels of debt usually implies greater financial stabilty ....just saying

AWF might have 'optimal' level of debt in their eyes ...but I am always wary of highly geared companies who pay dividends in excess of free cash flow

(Did try to put the detail of the gearing ratios in your table but too hard

[Snoopy]

Interesting discussion.

So AWF paid $14.7m for an entity delivering a net surplus of circa $2.44m/yr. Either this was a steal or indicates a low sector P/E is appropriate. If the correct PE in this sector should be 6, and AWF delivers $7.5m its market capitalization would be $45m (or $1.38).


I think that generally a takeover offer is made on an EBITDA or EBIT multiple. This gives more an impression of the earnings capacity of the business. The gearing of the business after the takeover is of course up to the purchaser. The purchaser must decide how much of the underlying term debt of the company they have just purchased to pay back. In the case of Absolute IT, there doesn't seem to be any term debt to pay off. Furthermore I can't see anything unusual in what AbsoluteIT is paying in tax. So in this particular instance, your suggestion that AbsoluteIT was purchased on a certain PE ratio look valid. However, the purchase was not made on a multiple of FY2017 earnings alone. If you look at the bottom of page 54, the earn out payment is discussed, suggesting that the amount being paid is contingent on this year's results as well, and maybe even the previous year too (FY2016 about which we shareholders know nothing regarding AbsoluteIT). If the representative takeover PE is a lowly 6 that could be right for a much smaller stand alone business, The mere fact that a company is NZX listed does tend to result in higher PEs. That means I don't think you can extrapolate that PE of 6 to a much larger combined listed entity.

Another rationale for these takeovers is savings via synergy gains. But AbsoluteIT seem to be maintaining their existing market branch presence quite separate from Madison. So I am not sure if there are any synergy gains, other than the diversification of being in different markets that are not always in synchronization. Asynchronization implies a 'smoothing of earnings' effect, which is something that shareholders tend to like..



There's a group of companies with some earnings doubt, some bank debt and sufficiently large amount of good will that there is a huge gap between Equity/share and NTA/share on the balance sheet. Members of this group include AWF, EVO, GXH, MPG, SKT, TGH. The takeover rescued TGH but the rest are all down heavily this year. Mr Market is nervous around negative NTA companies with borrowing and is continuing to hammer them. AWF may become a buy around the same time some of these other downtrends end.


It is right to question the goodwill 'on the books', and company auditors do ask that this is done annually. In the case of the AbsoluteIT purchase, this only happened last year. So I am interested in the juxtaposition of you being worried that the AWF goodwill, which includes that from the AbsoluteIT purchase, is 'overvalued', while in the previous paragraph you had described the purchase price of AbsoluteIT as 'a steal'. I think you have to judge the goodwill on the books of any company on a case by case basis.

The thing that does raise my eyebrow though is the $7.465m of permanent 'Madison Brand' goodwill on the AWF Madison books. Compare that to the $1.980m of permanent 'AbsoluteIT' brand goodwill that came on board in FY2017, and compare the profitability of the two operations. Could a write down of some of that Madison brand goodwill be on the cards? Such a write down would put a real dent in the 2HY2018 results, even though it would be a 'non cash adjustment'.

SNOOPY

[Snoopy]

Just an off the cuff observation. Seems Madison has twice the staff and twice the daily deployments but aren't making twice IT's profit. So don't look well equipped to manage a census contract. Whereas AWF have twice their profit with a few extra staff - they seem the ones set up to run 3,000 census workers profitably.

Edit: GP per staff has Madison lowest ranked at $160,000 a staff and AWF the highest at $290,000 a staff member. That Madison acquisition not looking so good.


I actually thought that the AWF unit was the one doing the census job! That was until I read the presentation more carefully. I think that the intersegment work delegation is all part of the perceived blue collar /white collar culture gap. Send in an unmanicured gruff grizzle-head to collect a census form, or a freshly stuffed starched white shirt? Only one fits the image a government department collecting information might want to project, even if the gruff grizzlehead is equally capable. It would be a different story if the government was interested in trimming overgrowth in their citizen's back yards. The AWF gruff grizzlehead would undoubtedly be dispatched with clippers to do the lopping and no-one would bat an eye lid if our gruff friend relieved themselves against a recently hacked tree stump. OTOH our stuffed starched white shirt picking up a census form, and immediately urinating in the garden on the way out, might not match with the officialdom capability image sought?.

I think much of the poor performance for Madison over FY2017 relates to the double desk policy in Auckland where one junior staffer was hired for each existing consultants desk. And the existing more senior colleagues were expected to act as mentors as well as doing their own recruitment work. Simon Bennett indicated in his AGM talk that this policy had been taken too far too quickly, and that Madison had now 'got it right'. But we will see what Madison excuses are made (if any) at the end of the month for FY2018.

SNOOPY

[minimoke]

I actually thought that the AWF unit was the one doing the census job! That was until I read the presentation more carefully. I think that the intersegment work delegation is all part of the perceived blue collar /white collar culture gap. Send in an unmanicured gruff grizzle-head to collect census form, or a freshly stuffed starched white shirt? Only one fits the image a government department collecting information might want to project, even if the gruff grizzlehead is equally capable. It would be a different story if the government was interested in trimming overgrowth in their citizen's back yards. The AWF gruff grizzlehead would undoubtedly be dispatched with clippers to do the lopping and no-one would bat an eye lid if our gruff friend relieved themselves against a recently hacked tree stump. OTOH our stuffed starched white shirt picking up a census form, and immediately urinating in the garden on the way out, might not match with the officialdom capability image sought?.

I think much of the poor performance for Madison over FY2017 relates to the double desk policy in Auckland where one junior staffer was hired for each existing consultants desk. And the existing more senior colleagues were expected to act as mentors as well as doing their own recruitment work. Simon Bennett indicated in his AGM talk that this policy had been taken too far too quickly, and that Madison had now 'got it right'. But we will see what Madison excuses are made (if any) at the end of the month for FY2018.

SNOOPYYeah - because there are 3,000 freshly stuffed starched white shirt people out there ready to work a six month contract on ;ow wage. That will work profitably!

[Snoopy]

Company & Financial YearMercury 2017 Sky City 2017 Spark 2017 AWF 2017 (AbsIT 12mnths)


[TD]EBITDA(F) {B}$523m$307m$1,016m$15.664m

Finance Cost {C}$95m$31.1m$48m$1.659m


Interest Coverage {B}/{C}5.59.821.29.4


Net Funding Debt {D}$1077m$889m$935m$32.383m


Leverage ratio {D}/{B}2.12.90.92.1







Company & Financial YearMercury 2017 Sky City 2017 Spark 2017 AWF 2017 (AbsIT 12mnths)


[TD]NPAT {B}$184m$143m$418m$7.5m

Net Funding Debt {D}$1077m$889m$935m$32.383m


MDRT {D}/{B}5.9 yrs6.2 yrs2.2 yrs4.3 yrs


Depreciation & Amortisation {C)}$189m$95m$430m$3.2m (*)


D & A / Net Profit {C)/{B} 102%66%103%43%




(*) Estimate assuming AWF historic 30% tax rate

MDRT stands for 'Minimum Debt Repayment Time'. It is the answer to the question:

"If a company put all its efforts into paying back its debt from its current year net profits, then how long would that take?"

Note: In compiling this table, I have made an adjustment to the Sky City declared net profit by removing the goodwill write down from the Darwin casino (a one off non cash item).

The difference between this and the ASB/AWF leverage ratio is that I consider that the depreciation on the company assets and interest payments do matter over time. Spark is again in the strongest position. But look at how much 'lower risk' AWF has become compared to the likes of Sky City and Mercury. You can see that depreciation relative to profits is by far the least at AWF. And that is because AWF is a much less asset intensive business than the others. Being 'asset light' means the company can run at higher debt levels that other companies that have to put aside that much more money each year to ensure their assets do not degrade. So AWF is not nearly as risky as those financiers who simply use the EBITDA to debt ratio as a yardstick think.

SNOOPY

[winner69]

Love your half written posts Snoops

Can’t wait for the next episode (edit)

Seeing you introduced SKC into the discussion their Gearing Ratio is about 26%

[minimoke]

I would fully expect to see AWF debt increase substantially to cash flow manage Census contract. But once that is done debt should, say 4 weeks later depending on Terms, reduce substantially

[winner69]

Where did you get SKC debt figure $889m from?

Half Year accounts had Interest Bearing Liabilities of $509m and Cash of $116m = $393m

Did they pay heaps back in the last six months

[Snoopy]

Love your half written posts Snoops

Can’t wait for the next episode (edit)


I used to write down stuff on scruffy bits of paper and type it out on the forum. These days I just go from the source material straight to the forum: My liittle contribution towards saving more trees. But it does mean that sometimes what the forum gets are my 'scratchy notes' first rather than a finished product.



Seeing you introduced SKC into the discussion their Gearing Ratio is about 26%


Debatable, or a least a debate I am willing to have.


Where did you get SKC debt figure $889m from?

Half Year accounts had Interest Bearing Liabilities of $509m and Cash of $116m = $393m

Did they pay heaps back in the last six months

I was working on the full year FY2017 accounts Winner, with more comprehensive notes (Note 15 in particular) attached:

My calculation was:

(Long term Debt) + (Short Term Debt) - (Cash) + (Deferred Licence Value Liability)

"The deferred licence value relating to Auckland $405m and Adelaide $150m will be transferred and offset against property plant and equipment when the New Zealand International Convention Centre and Adelaide redevelopment have been completed."

This deferred licence value is not owed to a bank and no cash changed hands to get it. But the licence value is in effect owed to the government(s). It will only be discharged when it can be offset against the completed developments. The property plant and equipment that will become offset upon completion certainly is a real asset. It would be unthinkable for SKC to pull out of the deal and not finish building the convention centre. There would be huge financial consequences if they took that option. So given that the 'deferred licence liability' is listed as a real liability on the SKC balance sheet, I think it qualifies as part of the real debt.

SNOOPY

[Snoopy]

I would fully expect to see AWF debt increase substantially to cash flow manage Census contract. But once that is done debt should, say 4 weeks later depending on Terms, reduce substantially

Given the census contract is by far the largest contract that Madison will handle in FY2018, it won't be covered by "permanent temp staff." Lots of external recruits will have been required to complete it. Once the recruits are found, my guess is that Madison will have 'done their job' and they will largely have been 'paid up front' before the project starts. Consequently I wouldn't expect any debt blow out (albeit temporary) at all. But never having worked in the recruitment industry, I could be wrong about this and am happy to be corrected if necessary.

SNOOPY

[winner69]

Snoops - see where you are coming from re SKC, but ......

Re our discussion whether spend on PPE is part of free cash flow or not maybe if you thought of buying those computers and things as a ‘cash expense’ you might come to my of thinking. After all without replacing / buying computers and things they can’t really stay in business so the cash impact is in the year it is spent

[winner69]

From the last announcement - As a consequence of the above, profit, as at 31 March 2018, is expected to be behind that of the prior year.....and the operational plans to improve financial performance, implemented during the year, are having the desired effect, albeit at a rate slower than anticipated.

So first part says profit will be less than $5.9m ....bad

The second part says we are doing good stuff to make more money ......and if we hadn’t done this good stuff profit might will have been less than $5.0m ......really bad.

[winner69]

Another bit ...Another factor has been the continuing increased cost of legislative compliance, into the second half of the year.


Red herring .....need plenty of excuses so this is a good one to come up with

[winner69]

Had not really read that last announcement (except for the profit bit)

This bit The demand for recruitment talent has had some impact on the Madison business with pressure of competition for current and future talent by growing internal recruitment teams. This has softened the Madison result.

Not exactly clear what it means but it sound ominous, especially mentioning competition for future talent . Probably high employment / low unemployment not helping

Percy hinted that they have lost their way and weren’t changing with the times (or something like that). I think he is right

Could also be code that F19 not going to be that good either ...just a subtle warning

[minimoke]

Another bit ...Another factor has been the continuing increased cost of legislative compliance, into the second half of the year.


Red herring .....need plenty of excuses so this is a good one to come up with
Only suggests that they weren't complying previously.

[Snoopy]

Had not really read that last announcement (except for the profit bit)

This bit The demand for recruitment talent has had some impact on the Madison business with pressure of competition for current and future talent by growing internal recruitment teams. This has softened the Madison result.

Not exactly clear what it means but it sound ominous, especially mentioning competition for future talent . Probably high employment / low unemployment not helping.


I don't think this is a revelation Winner. Low unemployment means the economy is doing well. That means employees doing well and so less likely to be looking around to change jobs. It also means that employers will fight to retain good employees. If the employer succeeds in keeping their good employee then this is one less person changing jobs and no commission for Madison. Or perhaps more correctly from a placement perspective, Madison will have to work extra hard to find an employee willing to change jobs: (more time spent means less profits) to gain their placement payment.

Perversely I quite like this feature of the industry. Job placement firms are fundamentally negatively correlated with how well the economy is doing. That means less volatility in earnings through the business cycle and more steady dividends. Great news for a dividend hound such as myself.



Percy hinted that they have lost their way and weren’t changing with the times (or something like that). I think he is right

Could also be code that F19 not going to be that good either ...just a subtle warning

Percy did say that and when pressed thought AWF might be losing out to the pure on line space. Websites such as 'Seek' and web networks such as 'Linked In' were mentioned. Then I pointed out that half the listings on Seek seemed to be agency's anyway (including Madison). IOW Seek was a tool to be used by agencies, not the competition.

LinkedIn is more of a self promotional tool, which I am not sure is really good for job seeking. Has anyone ever got a job just through joining LinkedIn? I would think it might qualify you for getting an appointment with Madison, rather than acting as a 'bypass lane'.

Furthermore on looking at the past three annual reports, it looked like Madiosn was quite proactive via Facebook by plugging into prospective prospects, before they even knew they were looking for another job. I am not saying that Percy is wrong. But I don't see enough evidence yet that Madison is going down the 'wrong path' or has been 'left behind'. I would be pleased to hear more ways in which I might be wrong so that I can investigate further. Thus far, I remain unconvinced there is any inherent weakness in what Madison in particular is doing.

Meanwhile the AWF share price is going like a rocket. Up to $1.82 as I write this on 3,400 shares. I am thinking here in terms of a boutique Rocket Lab launch from Mahia, rather than something mega blasting out of Cape Canaveral.

SNOOPY

[minimoke]

I don't think this is a revelation Winner. Low unemployment means the economy is doing well. That means employees doing well and so less likely to be looking around to change jobs..Conversely it means demand for labour is higher meaning more opportunity for people to change jobs with less risk since if a new job doesn't work out they can high tail it to the next job. Also means, given high demand for labour, margins don't have to be squeezed - a premium can be charged for the good employee.

[minimoke]

Hmm - on the news. AWF under a Labour Inspector investigation for having foreign workers not working. $20 an hour to go fishing on the wharf even though they are construction workers. Also allegedly illegal anti - union membership clauses in the Employment Agreement. Obviously pay with no revenue is going to be a drain on their cashflow. Just what is needed as the Triangular Employment Bill goes through parliament - not great publicity either.

[winner69]

Hmm - on the news. AWF under a Labour Inspector investigation for having foreign workers not working. $20 an hour to go fishing on the wharf even though they are construction workers. Also allegedly illegal anti - union membership clauses in the Employment Agreement. Obviously pay with no revenue is going to be a drain on their cashflow. Just what is needed as the Triangular Employment Bill goes through parliament - not great publicity either.

All sounds a bit messy eh .....and claiming those agreements aren’t AWF ones even though on AWF letterhead and signed by AWF employees ..hmm

http://www.newshub.co.nz/home/new-zealand/2018/05/exclusive-migrant-construction-workers-languishing-in-crowded-auckland-houses-on-illegal-contracts.html

[winner69]

That linked article seems to be in conflict with what AWF told us a few weeks ago -


The demand for Trades, particularly in the Auckland construction sector, is strong; however, the mobilisation of AWF’s migrant workforce channel, which largely supports this function, has been hampered by delays in arrivals to take advantage of this opportunity

[winner69]

Makes you wonder if the Allied part of the business is out of a control ....a real mess

[minimoke]

All sounds a bit messy eh .....and claiming those agreements aren’t AWF ones even though on AWF letterhead and signed by AWF employees ..hmm

http://www.newshub.co.nz/home/new-zealand/2018/05/exclusive-migrant-construction-workers-languishing-in-crowded-auckland-houses-on-illegal-contracts.html"A bit messy" would be an understatenemt. All sorts of red flags not fluttering in a breeze but standing horizontal in a gale. Snoopy needs to put his numbers aside and go talk to the tea lady.

[winner69]

They even said (almost word for word) last September that the migrant workforce has been slow to mobilise etc etc

I think they are treating shareholders (mininority ones) as fools and treating them with contempt as there seems little substances in their updates.

[winner69]

"A bit messy" would be an understatenemt. All sorts of red flags not fluttering in a breeze but standing horizontal in a gale. Snoopy needs to put his numbers aside and go talk to the tea lady.

Snoops will see some good in that article I reckon

That Triangular Employment Bill is bteresting .....must affect AWF somehow

[winner69]

Jeez putting 24 adult males in a four bedroom house doesn’t seem good practice

[minimoke]

Makes you wonder if the Allied part of the business is out of a control ....a real messWell. I've just had a chat to the tea lady here is what she says.
- they had a contract which is why they bought the workers in. But lost the contract.
- the recruitment agents spend all day playing solitaire rather than finding work for these people
- the illegal anti-union clause isnt the only illegal non compliant thing they do.
- saw a dictionary open on a desk and the words "pastoral care" were underlined
- 16 workers at $20 an hour for 30 hours a week for 3 months is $115200 off the bottom line. She didnt know how many hours had to be billed to make up this lost NP ( I was pretty impressed with her math , a trick she she learnt hocking gingernuts off with the coffee. She reckoned she would need a supermarket full of Griffins to make up the loss)
- A union car was spotted out the front with baseball bats in the boot. Apparently workers are worth more than $20 an hour
- The boss's secretary was busy booking a flight for the boss to go to wellington and an uber had been booked for parliament offices
- a newsman had a fat notebook with lots of yellow stickies poking out of it

Then she had to go because a BMW turned up with apparently leagle beagles in it and she has to given them their trim Lattes.

[minimoke]

Jeez putting 24 adult males in a four bedroom house doesn’t seem good practiceNor is stuffing a suitcase full of cash and flying from hawkes bay to Nelson. Another of AWF's problem children with migrant workers. Do leopards change their spots?

[winner69]

So $115,000 paid for nothing

At 3% Margin that needs almost $4m of billing’s to offset ...hmm

[winner69]

Nor is stuffing a suitcase full of cash and flying from hawkes bay to Nelson. Another of AWF's problem children with migrant workers. Do leopards change their spots?

Shat's that all about ...sounds intriguing

[minimoke]

Shat's that all about ...sounds intriguingWell, since you asked. Go back to 2005/2006 when AWF bought Contract Labour Services. They had workers in the wine industry. There was a manager, as I recall flying around with bags of cash in his suitcase. That was when they bought land in Blenheim and set up a caravan park type arrangement for the migrant workers. Heres what Simon Hull said at teh time

It has come to AWF's attention that CLS is under investigation by Police and
Immigration officials in respect of possible offences under the Immigration
Act 1987, including using sub-contractors to provide crew, where such crew do
not have the right to work in New Zealand. Such offences may have occurred
prior to AWF acquiring its shareholdings in CLS and may have continued since
that time, all without AWF's knowledge. AWF has commenced its own
investigation in respect of this matter. It is not known at this time
whether any offences have occurred. AWF received a number of warranties in
the sale and purchase agreement when it acquired its shareholding in CLS.
Simon Hull

[winner69]

Well, since you asked. Go back to 2005/2006 when AWF bought Contract Labour Services. They had workers in the wine industry. There was a manager, as I recall flying around with bags of cash in his suitcase. That was when they bought land in Blenheim and set up a caravan park type arrangement for the migrant workers. Heres what Simon Hull said at teh time

It has come to AWF's attention that CLS is under investigation by Police and
Immigration officials in respect of possible offences under the Immigration
Act 1987, including using sub-contractors to provide crew, where such crew do
not have the right to work in New Zealand. Such offences may have occurred
prior to AWF acquiring its shareholdings in CLS and may have continued since
that time, all without AWF's knowledge. AWF has commenced its own
investigation in respect of this matter. It is not known at this time
whether any offences have occurred. AWF received a number of warranties in
the sale and purchase agreement when it acquired its shareholding in CLS.
Simon Hull

Yes, I do recall that sad state of affairs now

Things haven't changed much

[minimoke]

Just watched the morning news. (http://www.newshub.co.nz/home/money/2018/05/illegal-migrant-worker-contracts-tip-of-the-iceberg.html) According to the Minister AWF is under MBIE inspection - wouldn't that be worth a market update?

[BlackPeter]

Just watched the morning news. (http://www.newshub.co.nz/home/money/2018/05/illegal-migrant-worker-contracts-tip-of-the-iceberg.html) According to the Minister AWF is under MBIE inspection - wouldn't that be worth a market update?

Njet - remember CBL? Market updates are in case of government investigations only required after it is too late for investors to undertake any action ... we don't really want to upset investors, do we?

winner would probably say "No need to worry ..." :p

[minimoke]

Yes, I do recall that sad state of affairs now

Things haven't changed muchThey say they didn't know what there managers were doing back then. If the alleged illegal contract is true then they dont know what there mangers are doing today. I hear on the news tonight there is a possibility one employment agreement went to the Immigration department and another version went to the employee. That would not surprise me in the least.

[winner69]

They say they didn't know what there managers were doing back then. If the alleged illegal contract is true then they dont know what there mangers are doing today. I hear on the news tonight there is a possibility one employment agreement went to the Immigration department and another version went to the employee. That would not surprise me in the least.

That's really dodgy sounding ......hmmm

[minimoke]

There is of course the possibility that Immigration didnt read the employment agreement. Possible. Of the two options I'd err slightly in favour of Immigration.

No matter what AWF, is not going to come out of this unscathed.

We already know they have been non-compliant with some legal stuff - thats why they spent so much money becoming compliant. I suspect they probably didnt do a full job on this so expect more costs here. Their Annual Report should be pretty transparent on this issue.

It is safe to assume (given the Immigration dept exposure) that every Minister will be asking their departments if they use labour hire agencies and if so what they do to ensure workers are not being exploited. The obvious fallout is AWF wont be on any govt department tender lists.

We also know most large organisation supply processes ask the question "have you ever been investigated by a government department and been prosecuted or received an improvement notice". AWF are going to have difficulty answering that.

Safe to assume no large corporate chief executive wants to be called to a Select Committee (like BP) and asked why do you use labour hire agencies that exploit labour. We can probably extend the same to City and Regional councils, hospital boards etc.

Madison will be working hard to disengage from the links they have to AWF. How they succeed only time will tell. But think it is fair to say they wont find it easy.

[minimoke]

And just wondering if the AWF manager is the same person who left a dunedin construction company in liquidation owing near $600,000

[Snoopy]

Snoops will see some good in that article I reckon


"AWF pre-emptive in having construction workers available in a market crying out for labour."

That could equally well have been the headline.



Jeez putting 24 adult males in a four bedroom house doesn’t seem good practice.


It was another company that did that Winner, according to the article. But AWF have nevertheless 'taken action' over this. Accommodation solved!

SNOOPY

[Snoopy]

Well. I've just had a chat to the tea lady here is what she says.
- they had a contract which is why they bought the workers in. But lost the contract.
- 16 workers at $20 an hour for 30 hours a week for 3 months is $115200 off the bottom line. She didn't know how many hours had to be billed to make up this lost NP ( I was pretty impressed with her math , a trick she she learnt hocking gingernuts off with the coffee. She reckoned she would need a supermarket full of Griffins to make up the loss)
- the recruitment agents spend all day playing solitaire rather than finding work for these people
- saw a dictionary open on a desk and the words "pastoral care" were underlined


16 x $20/hr x (30 x 9) hr = $86,400.

Reduction in profit because of this expense based on 30% (seems typical for AWF) tax. $86,400 x 0.7 = $64,480

Does the tea lady need to stick to selling gingernuts?

I can't verify whether anything the tea lady relays is true. But assuming it is, this doesn't seem a big price to pay to have ready labour on hand. Presumably AWF didn't expect to lose the contract, but sometimes these things happen. There is obviously plenty of construction work out there, so you couldn't say it was foolish to bring these workers over.

It may not be the job of these particular AWF 'placement workers' to negotiate big contracts with the bigger construction companies. Don't workers at Xero spend their down time racing down a child's slide? Playing solitaire does sound more of an appropriate recreational task as it is still all to do with placement of people (albeit Kings, Queens and Jacks) ;-P.

And the fact that a dictionary is open at the definition of pastoral care shows real empathy for their contract employees!



- the illegal anti-union clause isn't the only illegal non compliant thing they do.
- A union car was spotted out the front with baseball bats in the boot. Apparently workers are worth more than $20 an hour
- The boss's secretary was busy booking a flight for the boss to go to wellington and an uber had been booked for parliament offices
- a newsman had a fat notebook with lots of yellow stickies poking out of it

Then she had to go because a BMW turned up with apparently leagle beagles in it and she has to given them their trim Lattes.


So Simon Bennett is front footing the problem? What is wrong with that?

SNOOPY

[Te Whetu]

16 x $20/hr x (30 x 9) hr = $86,400.

Reduction in profit because of this expense based on 30% (seems typical for AWF) tax. $86,400 x 0.7 = $64,480

Snoopy, shouldn't it be:

16 x $20/hr x 30 hr/week x 4.3 week/month x 3 months = $123,840 (pre-tax)

Your calculation is for only 9 weeks, which means only three weeks per month.

I assume the tea lady based her calculation on four weeks per month.

[minimoke]

I assume the tea lady based her calculation on four weeks per month.Shes a tea lady not a mathematician. Ask her what a decimal point is and she thinks its a rock outcrop along a shoreline. But she did say the bean counters were after a strong brew and were muttering something about holiday pay mutter mutter ACC mutter

[winner69]

Allied need to conveniently conceptualize backward-compatible metrics to make investors more confident they on the right track

[Snoopy]

Snoopy, shouldn't it be:

16 x $20/hr x 30 hr/week x 4.3 week/month x 3 months = $123,840 (pre-tax)

Your calculation is for only 9 weeks, which means only three weeks per month.

I assume the tea lady based her calculation on four weeks per month.

And just to finish the exercise based on a 30% tax rate:

$123,840 x 0.7 = $86,688 (money off net profit).

Of course these are the bare wage figures without any allowance for holiday pay. Also AWF may have incurred some significant expense bringing the workers to New Zealand, and may have done all the legal paperwork for them. And that last bit may have incurred extra liabilities as yet uncosted ;-P. Add in all that and our tea lady's estimate of $115,200 might not be too far off the mark.

Sigh! Good to hear from you again star man and as usual with your contributions you are right.

Ah well, back to my new job:

"Cup of tea anyone, gingernuts?"

SNOOPY

[Snoopy]

Allied need to conveniently conceptualize backward-compatible metrics to make investors more confident they on the right track


It is hard to know how well AWF is doing when there aren't any other NZX listed yardsticks. But someone by the name of 'Sebastian Eder' has had a go.

https://simplywall.st/stocks/nz/commercial-services/nzx-awf/awf-madison-group-shares/news/should-you-be-concerned-with-awf-madison-group-limiteds-nzeawf-6-51-earnings-drop/

"When AWF Madison Group Limited (NZSE:AWF) announced its most recent earnings (30 September 2017), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how AWF Madison Group performed requires a benchmark rather than trying to assess a standalone number at one point in time."

"Inspecting growth from a sector-level, the NZ professional services industry has been growing, albeit, at a muted single-digit rate of 8.99% over the previous twelve months, and a substantial 10.29% over the past half a decade. This shows that any uplift the industry is deriving benefit from, AWF Madison Group has not been able to gain as much as its average peer."

So AWF is a below average industry performer. Does it matter? I suspect not, as over a longer time, earnings are still increasing even though earnings over the last 12 documented months available reporting are down. But I wonder where Seb got his industry data from?

SNOOPY

[Brain]

Simply Wall Steet’s DCF valuation is $8.06.

[winner69]

It is hard to know how well AWF is doing when there aren't any other NZX listed yardsticks. But someone by the name of 'Sebastian Eder' has had a go.

https://simplywall.st/stocks/nz/commercial-services/nzx-awf/awf-madison-group-shares/news/should-you-be-concerned-with-awf-madison-group-limiteds-nzeawf-6-51-earnings-drop/

"When AWF Madison Group Limited (NZSE:AWF) announced its most recent earnings (30 September 2017), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how AWF Madison Group performed requires a benchmark rather than trying to assess a standalone number at one point in time."

"Inspecting growth from a sector-level, the NZ professional services industry has been growing, albeit, at a muted single-digit rate of 8.99% over the previous twelve months, and a substantial 10.29% over the past half a decade. This shows that any uplift the industry is deriving benefit from, AWF Madison Group has not been able to gain as much as its average peer."

So AWF is a below average industry performer. Does it matter? I suspect not, as over a longer time, earnings are still increasing even though earnings over the last 12 documented months available reporting are down. But I wonder where Seb got his industry data from?

SNOOPY

If AWF not keeping pace with industry growth that’s pretty bad seeing all of the growth has come from acquisitions.

[Snoopy]

It is hard to know how well AWF is doing when there aren't any other NZX listed yardsticks. But someone by the name of 'Sebastian Eder' has had a go.

AWF is a below average industry performer. Does it matter? I suspect not, as over a longer time, earnings are still increasing even though earnings over the last 12 documented months available reporting are down. But I wonder where Seb got his industry data from?



If AWF not keeping pace with industry growth that’s pretty bad seeing all of the growth has come from acquisitions.

I suspect that 'growth' must be measured from the modern equivalent of counting up the job ads in the newspaper and looking at the company that placed that ad to get an idea of 'market share'. If so then this industry data must be a pretty rough measure.

With such a fragmented industry and only one company listed, I can't see how you would compile a list of 'revenues', let alone 'profits', from a whole pile of private companies that didn't have to disclose that information to the investing public. I don't think that even companies who do their own recruitment and are listed ever admit how much they spend on recruitment.

SNOOPY

[minimoke]

Fallout starts. Manager has resigned. You don't do that if everything is hunkydory

[minimoke]

And just wondering if the AWF manager is the same person who left a dunedin construction company in liquidation owing near $600,000I may have had that wrong (its been known to happen occasionally). Seems he is teh Reed who got done for fraud after didling Ashburton Council for $168,000.

Time to ask AWF how good their reference checking processes are - or do they have no trouble hiring dodgy people.

[winner69]

I may have had that wrong (its been known to happen occasionally). Seems he is teh Reed who got done for fraud after didling Ashburton Council for $168,000.

Time to ask AWF how good their reference checking processes are - or do they have no trouble hiring dodgy people.

Seems to have taken up a high position (promoted?) in Auckland

[minimoke]

I may have had that wrong (its been known to happen occasionally). Seems he is teh Reed who got done for fraud after didling Ashburton Council for $168,000.

Time to ask AWF how good their reference checking processes are - or do they have no trouble hiring dodgy people.Well, waddyaknow. I was right. It was the same guy.

So now we have AWF knowingly hire a fraudster and a person with such a lack of commercial accumen that he send a company into receivership.

So Snoopy how do your numbers look.

Heres a few more. Take total number of clients as at yesterday (= revenue) Less number of clients today who do not want to be associated with a company allegedly exploiting labour and creating false and illegal employment agreements and facing Personal Grievances for who knows what

Lets see. You can delete all central government organisations off Madison and Absolute IT list.You can delete any listed company off Madison, Absolute and AWF lists. Same probably applies to al local and regional councils.

Now take your mid size companies. If they have any sense AWF will be working really hard (Solitaire now only allowed for 6 hours a day) to retain their business. That means reduced margins.

And that leaves the bottom dwellers who may be only a step or two away from receivership.

I give AWF a valuation of about 10% of current value which makes it a strong SELL.

[winner69]

This guy has Snoop’s interest at heart ...Snoop’s should be proud of him. From the Allied website

Meet the team

Kurt Reed

Division Manager

Kurt has moved up from Christchurch to lead the Auckland Construction and Technical Division after 6 years managing our Christchurch Trades office through the post-earthquake rebuild.

He is the fire and drive in the office - a busy and boisterous personality, but he’s always got time for our businesses greatest asset – its people.

You can often find him on the phone, out with clients or in meeting working hard to further the division and the best interests of all parties.

[winner69]

Allied need to update their website ...that guy is a goner

http://www.newshub.co.nz/home/new-zealand/2018/05/labour-hire-firm-employee-resigns-after-migrant-worker-investigation.html

Labour hire firm employee resigns after migrant worker investigation

[minimoke]

This guy has Snoop’s interest at heart ...Snoop’s should be proud of him. From the Allied website

Meet the team

Kurt Reed

Division Manager

Kurt has moved up from Christchurch to lead the Auckland Construction and Technical Division after 6 years managing our Christchurch Trades office through the post-earthquake rebuild.

He is the fire and drive in the office - a busy and boisterous personality, but he’s always got time for our businesses greatest asset – its people.

You can often find him on the phone, out with clients or in meeting working hard to further the division and the best interests of all parties.No mention there that he used to be a solicitor - you would think he would know what a contract was. And what it meant to create two versions of one

[winner69]

No mention there that he used to be a solicitor - you would think he would know what a contract was. And what it meant to create two versions of one

He was in charge in Christchurch when that guy ran up that huge 1.6 million bad debt

Did have experience in builders running up debts so must have thought all ok

[Snoopy]

This guy has Snoop’s interest at heart ...Snoop’s should be proud of him. From the Allied website

Meet the team

Kurt Reed

Division Manager

Kurt has moved up from Christchurch to lead the Auckland Construction and Technical Division after 6 years managing our Christchurch Trades office through the post-earthquake rebuild.

He is the fire and drive in the office - a busy and boisterous personality,

If he is the one responsible for the Christchurch $1.6m bad debt, then I see it is positive that Kurt Reed is not there any more. The biographical note is prescient. Kurt's 'fire' and 'drive' saw him 'fired' and 'driven out'.

SNOOPY

[Snoopy]

Well, waddyaknow. I was right. It was the same guy.

So now we have AWF knowingly hire a fraudster and a person with such a lack of commercial accumen that he send a company into receivership.

So Snoopy how do your numbers look.

Heres a few more. Take total number of clients as at yesterday (= revenue) Less number of clients today who do not want to be associated with a company allegedly exploiting labour and creating false and illegal employment agreements and facing Personal Grievances for who knows what

Lets see. You can delete all central government organisations off Madison and Absolute IT list.You can delete any listed company off Madison, Absolute and AWF lists. Same probably applies to all local and regional councils.

Now take your mid size companies. If they have any sense AWF will be working really hard (Solitaire now only allowed for 6 hours a day) to retain their business. That means reduced margins.

And that leaves the bottom dwellers who may be only a step or two away from receivership.

I give AWF a valuation of about 10% of current value which makes it a strong SELL.

Minimoke, the AWF business unit has has 124 staff over 30 offices. Just because a senior manager is proven to be a bad egg and dismissed does not herald the end of the company. What is important is how CEO Simon Bennett handles the situation from here.

You will also know that AbsoluteIT in particular has no links with the rest of AWF apart from being under the same ownership umbrella. Madison was meant to provide the one stop shop, when combined with AWF, for corporates looking for blue collar and white collar workers as a package. I don't think it has ever worked that way in any meaningful sense though, That means I don't see much downside from this for Madison. Management has shown good foresight in retaining the three brands as separate entities.

From the newshub article:

"Immigration New Zealand is investigating AWF."

"The union representing the workers says the company should be stripped of its ability to recruit overseas workers. "

" "We are not satisfied with that resignation. I believe the Government must ensure that AWF will actually lose its employer accreditation," said Dennis Maga, First Union General Secretary "

As a worst case, if the employer accreditation is lost, the company still use an outsourced agency to do this. Minimoke, your domino effect scenario of all business with all companies and council business around the country being lost is hyperbole.

SNOOPY

[winner69]

Me and Snoops have different view of AWF

Snoops has been ainvestor in AWF for years and made heaps from them. Snoops can only see the good continuing.

Me became interested in AWF because it looks cheap as. However me found more worrying things (declining margins, high debt, market position not as good as before, rotten corporate culture etc etc) than good things (increasing revenues and not much else).

So Snoops happy as and no doubt will remain ‘invested’ and me can’t find any compelling reason to take a punt (so far)

Been intriguing yet .....will be interesting to see how they cope with this reputational damage. Probably shut up and hope it goes away I suppose

[minimoke]

Minimoke, the AWF business unit has has 124 staff over 30 offices. Just because a senior manager is proven to be a bad egg and dismissed does not herald the end of the company.

While, on the ground a personal relationship is important between the AWF Manager and Customer, the reality is that the relationship is between AWF Ltd and, say the govt department or large corporate.

Heres a test. Wander down the road to the next big company you see. Ask the hiring manager "do you want your company associated with a labour hire company that (allegedly) exploits workers?". Chances are I reckon that person will say "hell no".

This isnt an issue of a manger gone rogue. This is cultural and endemic with AWF. Someone hired him. Someone took him to Auckland. Someone sent him offshore. Someone knew those workers had arrived. Someone knew they weren't working. Someone knew they wernt being paid. Someone will have looked at that employment agreement. It wasn't all on the Manager. Look at his history - it reeks of a bad egg, a serial offender, a loser of money. You cant tell me that no-one in AWF didn't know. Which means they are hiding that knowledge. Which means they are hiding all sorts of other stuff.

Heres another test. There's a hundred labour hire companies out there. "Why would you use AWF". Remeber - you might love the brand, but you are actually contracting with the company.

And since you raise it. Lets look at Absolute IT. Go to their website (https://www.absoluteit.co.nz/) and what do you see?... Go on look hard. Heres a clue go to the bottom. an you will see "2000-2018 Absolute Recruitment Group. All rights reserved."

I have a natural wariness of websites that dont have clear company naming on them. So how about having a look at "Absolute Recruitment Group" and see what you come up with. I think that is sloppy. Does that fill me with confidence when hiring in the IT space. Nope.

[Snoopy]

My me and Snoops have different view of AWF

Snoops has been an investor in AWF for years and made heaps from them.


Bought my first AWF shares three years ago. Have added since which means my average holding time for all the shares I own is about two years. Average holding price $2.23, so down about 20% in capital terms. However, if I add back around 32c of tax paid dividends over the last two years I am down about 5% in overall terms. Not a great result for having my capital tied up. But not a disaster either.



Snoops can only see the good continuing.


No, just pointing out that a couple of problems that "seem to be associated" (good PR from AWF here, rolling all the perceived problems into a staff member who has resigned in disgrace) with one person here do not signal mass dissatisfaction with all other parts of the business, despite what some high profile unionists (and Minimoke) might claim.



Me became interested in AWF because it looks cheap as. However me found more worrying things (declining margins, high debt, market position not as good as before, rotten corporate culture etc etc) than good things (increasing revenues and not much else).

So Snoops happy as and no doubt will remain ‘invested’ and me can’t find any compelling reason to take a punt (so far)


It is the problems that cause the share price discount that creates the investment opportunity Winner. If you wait for the problems to be resolved, the share price discount also disappears. In my case I almost always invest in companies with problems that I believe the media has overstated.



Been intriguing yet .....will be interesting to see how they cope with this reputational damage. Probably shut up and hope it goes away I suppose


SNOOPY

[minimoke]

It is the problems that cause the share price discount that creates the investment opportunity Winner. If you wait for the problems to be resolved, the share price discount also disappears. In my case I almost always invest in companies with problems that I believe the media has overstated.

SNOOPYExploitation of workers is sure just a wee problem that can be overcome. Its not like AWF don't have a bit of practice with this issue.

[minimoke]

And here's another wee problem for them to resolve. https://www.awf.co.nz/job/inwards-goods-operator-slash-assembly-technician/ (totally random and forst on the search list)

Its a company that doesn't know what it is doing. Hope you are getting a good price

[winner69]

And here's another wee problem for them to resolve. https://www.awf.co.nz/job/inwards-goods-operator-slash-assembly-technician/ (totally random and forst on the search list)

Its a company that doesn't know what it is doing. Hope you are getting a good price

Wow ..........

[Snoopy]

While, on the ground a personal relationship is important between the AWF Manager and Customer, the reality is that the relationship is between AWF Ltd and, say the govt department or large corporate.

Here's a test. Wander down the road to the next big company you see. Ask the hiring manager "do you want your company associated with a labour hire company that (allegedly) exploits workers?". Chances are I reckon that person will say "hell no".


Ask any mall shopper whether they would approve of buying their clothing of such poor quality that the said garment will last just one season and once discarded go onto pollute the NZ environment with micro-plastics for hundreds of years. With the same garment made by slaves in 'deathtrap buildings' while exporting the associated manufacturing pollution to a country with no environmental controls. Of course any shopper approached would say 'no'.

Doesn't stop the mall hounds shopping for clothing tat in the malls though.....



This isn't an issue of a manger gone rogue. This is cultural and endemic with AWF. Someone hired him. Someone took him to Auckland. Someone sent him offshore. Someone knew those workers had arrived. Someone knew they weren't working. knew they weren't being paid.


I think this is wrong. The workers were being paid by AWF. It is just that with Auckland accommodation costs and only getting paid 30 hours paid per week, they were finding it hard to live on a limited income. This is common in Auckland and not unique to imported workers.



Someone will have looked at that employment agreement. It wasn't all on the Manager. Look at his history - it reeks of a bad egg, a serial offender, a loser of money. You cant tell me that no-one in AWF didn't know. Which means they are hiding that knowledge. Which means they are hiding all sorts of other stuff.


The old 'where there is smoke there must be fire' argument. Do you expect a convicted fraudster to go down to the quarry and break rocks for the rest of his life? Simon Bennett didn't hire Kurt Reed, but said he was aware of his background (source newshub artucle). You don't think a convicted fraudster should be given a second chance?



Heres another test. There's a hundred labour hire companies out there. "Why would you use AWF". Remember - you might love the brand, but you are actually contracting with the company.


Because they have done a good job for you in the past?



And since you raise it. Lets look at Absolute IT. Go to their website (https://www.absoluteit.co.nz/) and what do you see?... Go on look hard. Heres a clue go to the bottom. an you will see "2000-2018 Absolute Recruitment Group. All rights reserved."

I have a natural wariness of websites that dont have clear company naming on them. So how about having a look at "Absolute Recruitment Group" and see what you come up with. I think that is sloppy. Does that fill me with confidence when hiring in the IT space. Nope.

'Absolute Recruitment Group' is a different unconnected recruitment company?

SNOOPY

[minimoke]

Ask any mall shopper whether they would approve of buying their clothing of such poor quality that the said garment will last just one season and once discarded go onto pollute the NZ environment with micro-plastics for hundreds of years. With the same garment made by slaves in 'deathtrap buildings' while exporting the associated manufacturing pollution to a country with no environmental controls. Of course any shopper approached would say 'no'.

Doesn't stop the mall hounds shopping for clothing tat in the malls though.....
I understand your analogy - that's why I said "big company" not your standard riff raff company. And by big I mean government department (like Statistics), elected organizations (and subsidiaries) or listed companies.



I think this is wrong. The workers were being paid by AWF. According to the reporter workers had not been paid at all for the first month and are pursuing their options to claim back.




The old 'where there is smoke there must be fire' argument. Do you expect a convicted fraudster to go down to the quarry and break rocks for the rest of his life? Simon Bennett didn't hire Kurt Reed, but said he was aware of his background (source newshub artucle). You don't think a convicted fraudster should be given a second chance? Of course people should be given a second chance. Reed was and he left creditors high and dry when his company went bust.

And on that matter, if a fraudster is punished for 5 years I expect him to serve out his punishment - not escape 4 years in. And he wasn't just your average one off fraudster "“The Canterbury District Law Society found Reed's actions had taken place over a significant period of time and were serial in nature.” Of course Bennet didnt hire the guy. AWF did, using their best recruitment practices. Shame on Bennet if he was aware of Reeds background - he should have had more checks and balance in place.



'Absolute Recruitment Group' is a different unconnected recruitment company?

SNOOPY Keep looking

[minimoke]

Ask any mall shopper whether they would approve of buying their clothing of such poor quality that the said garment will last just one season and once discarded go onto pollute the NZ environment with micro-plastics for hundreds of years. With the same garment made by slaves in 'deathtrap buildings' while exporting the associated manufacturing pollution to a country with no environmental controls. Of course any shopper approached would say 'no'.

Doesn't stop the mall hounds shopping for clothing tat in the malls though.....

SNOOPYWhat do you reckon would happen if the mall rats got wind that a government agency was investigating buyers off illegal tat. Would they really want a knock on the door and be told to open up their wardrobe and cloth drawers? Who knows what might be found lurking under the bed. Obviously fine if you have nothing to hide - but your tasty hot dinner might get cold while the clothes are checked out. And what would the neighbours think!

[minimoke]

'Absolute Recruitment Group' is a different unconnected recruitment company?

SNOOPY
Absolute Recruitment Group is a company that is in liquidation. So more rhetorical questions
Why would you risk confusing your brand with a company tha tis in liquidation?
If you buy a company would you not buy its IP and Copyright
If you are an IT company why would you not have an up to date website.?

You think there is room for improvement and value as such. AWF bought Absolute IT nearly 2 years ago. And these changes (which ought to take 5 minutes) haven't been done.

Lets face it. AWF dont know what they are doing.

[Baa_Baa]

Absolute Recruitment Group is a company that is in liquidation. So more rhetorical questions
Why would you risk confusing your brand with a company tha tis in liquidation?

Ignorance. Better question is why did the liquidation happen and the new company emerge with a very similar name? And is it relevant now?


If you buy a company would you not buy its IP and Copyright They did buy it, didn't they? Do you know something others don't, like the sellers retained the IP and Copyright?



If you are an IT company why would you not have an up to date website.? They're not an IT company MM, they supply talent to the IT industry. I reckon they have a supplier who does their website and weren't told to update it.


You think there is room for improvement and value as such. AWF bought Absolute IT nearly 2 years ago. And these changes (which ought to take 5 minutes) haven't been done.

Refer above. you're right, the owners of AbsIT had no responsibility to do anything after they sold except stay in some lame duck substantive role until settlement and AWF didn't know what to do.


Lets face it. AWF dont know what they are doing.

Now you're talking, but AbsIT is not the vector diminishing shareholder value in AWF, it is a very substantial and successful recruitment agency in the IT space, maybe you could focus your energy into the parts of AWF that are substantially broken, AbsIT isn't.

[Brain]

For me it is simple because I am a very simple cat.

I do not invest in companies that employ total d**kheads and people who have been proven to be dishonest. If you want to give a guy a second chance give him a job digging ditches not a middle management job. I bailed out yesterday there are better opportunities elsewhere.

I find it totally incomprehensible that an employment contract be written with an anti union clause in it. I would expect better of a 15 year old. Clearly this company is totally out of control and the CEO needs to be held to account.

[minimoke]

Ignorance. Better question is why did the liquidation happen and the new company emerge with a very similar name? And is it relevant now?Absolute It Group is currently going through the liquidation process.


They did buy it, didn't they? Do you know something others don't, like the sellers retained the IP and Copyright?Who knows? AWF bough certain assets from Absolute IT group. Wether it included Absolute IT Group website I dont know. However it appears, according to the website that it belongs to Absolute IT Group and not AWF.



They're not an IT company MM, they supply talent to the IT industry. I reckon they have a supplier who does their website and weren't told to update it.Of course they aren't an IT company. But I just reckon if you operate in the IT space your presentation needs to look good from an IT perspective. Same as Awf - if you operate in the recruitment space your recruitment presentation needs to look good. It doesn't.




Refer above. you're right, the owners of AbsIT had no responsibility to do anything after they sold except stay in some lame duck substantive role until settlement and AWF didn't know what to do.The owners of Absolute IT Group have no responsibility to the Absolute IT Brand - that is AWF's responsibility. But if Absolute IT Group have copywrite assets, and they are about to liquidate then someone needs to know who owns the website that Absolute IT Brand are operating out of.




Now you're talking, but AbsIT is not the vector diminishing shareholder value in AWF, it is a very substantial and successful recruitment agency in the IT space, maybe you could focus your energy into the parts of AWF that are substantially broken, AbsIT isn't.Lets just wait until the Annual accounts are out to see how successful Absolute IT are. They sure had to bolster their success up to 1 Nov 2017. (That way Absolute IT Group owners get maximum value from sale) After that no one in Absolute IT is invested in the old company. Who knows what coming under the AWF umbrella will do to them. Would you want to be working for a parent that exploits workers?

[Snoopy]

Absolute Recruitment Group is a company that is in liquidation. So more rhetorical questions
Why would you risk confusing your brand with a company tha tis in liquidation?
If you buy a company would you not buy its IP and Copyright


Ok you have piqued my interest so i have been looking on the NZ Company's website. I have inspected the historical director record of AbsoluteIT and two names stand out:

Victoria Ellen Simon, a director from 29 Aug 2000 - 24 Mar 2003
Moran Eric Collard, a director from 29 Aug 2000 - 11 Oct 2007

Why are those names of interest? Because they were also former directors of the company that has been put into liquidation 'Absolute Recruitment Group'. Both vacated their directorships of that company on 27 September 2004.

So it looks to me like 'Absolute Recruitment Group' and 'AbsoluteIT' were started by the same directorship group. However 'Absolute Recruitment Group' were only put into liquidation in the last few months, on 29th January 2018. So it looks to me like this was a bookkeeping event to shut down a disused shell company. No-one has been left out of pocket by this liquidation.

The fact that 'Absolute Recruitment Group' and 'AbsoluteIT' had the same source would explain why their respective websites were built by the same team, using the same template. And someone who built the 'AbsoluteIT' page that you referenced Minimoke, left the 'Absolute Recruitment Group' name on the bottom of the page that they used as a template by mistake. That was sloppy. But it is hardly something that someone who is not intimately familiar with with 'AbsoluteIT' would even notice. Indeed when I saw it, I immediately thought that 'Absolute Recruitment Group' was merely a paper subsidiary of 'AbsoluteIT '.

This looks to me to be a simple clerical error. No-one got hurt. Nothing to get excited about.

SNOOPY

[Snoopy]

Absolute It Group is currently going through the liquidation process.


No it isn't.

https://app.companiesoffice.govt.nz/companies/app/ui/pages/companies/1056241?backurl=%2Fcompanies%2Fapp%2Fui%2Fpages%2F companies%2Fsearch%3Fq%3DAbsoluteIT%26entityTypes% 3DALL%26entityStatusGroups%3DALL%26incorpFrom%3D%2 6incorpTo%3D%26addressTypes%3DALL%26addressKeyword %3D%26start%3D0%26limit%3D15%26sf%3D%26sd%3D%26adv ancedPanel%3Dfalse%26mode%3Dstandard

Absolute IT (Auckland) Limited and Absolute IT (Waikato/BOP) are being liquidated.

Absolute IT, a separate company, remains as a 100% owned subsidiary of AWF Madison.


SNOOPY

[minimoke]

Snoopy
Following the money should lead to a conclusion that Absolute IT Group is simply winding up the shell or remains after the assets were transferred to AWF. Correct - nothing particular to see there.

What isn't certain is who actually owns the website template. The Absolute IT brand will be hoping it was an asset that was transferred to AWF. If it wasn't then they will be in the sh1te as they scramble to arrange a deal.

Lets assume it is just a clerical oversight (most likely) yes it is sloppy. Like slipping in a union clause and no one noticing. The devil is often in the detail. But more than sloppy it is obvious. I noticed. Surely someone in Absolute IT has noticed it. But they dont care or have enough pride to fix it. Its the lack of care/pride that is the problem, not the sloppiness.

[minimoke]

No it isn't.

https://app.companiesoffice.govt.nz/companies/app/ui/pages/companies/1056241?backurl=%2Fcompanies%2Fapp%2Fui%2Fpages%2F companies%2Fsearch%3Fq%3DAbsoluteIT%26entityTypes% 3DALL%26entityStatusGroups%3DALL%26incorpFrom%3D%2 6incorpTo%3D%26addressTypes%3DALL%26addressKeyword %3D%26start%3D0%26limit%3D15%26sf%3D%26sd%3D%26adv ancedPanel%3Dfalse%26mode%3Dstandard

Absolute IT (Auckland) Limited and Absolute IT (Waikato/BOP) are being liquidated.

Absolute IT, a separate company, remains as a 100% owned subsidiary of AWF Madison.


SNOOPY
This is where common names gets tricky. search on TG NO. 1 LIMITED (1056240)

[Snoopy]

This is where common names gets tricky. search on TG NO. 1 LIMITED (1056240)

----

Background

TG No. 1 Limited, (“the Company”) ceased trading as a recruitment agency specializing in IT appointments in 2016 following a sale of the business. The Company has no known creditors and is being placed in liquidation for the purpose of restructuring the shareholders’ affairs.

------

I presume 'TG' comes from the first initial of both Tina Ng, Grant Burley both founding directors of Absolute IT. I presume the company is being liquidated because it is no longer the holding company of 'AbsoluteIT', That shareholding has now been transferred to AWF Madison. I repeat that 'AbsoluteIT' is not being liquidated. I see nothing sinister in any of this. What point are you trying to make Minimoke?

SNOOPY

[minimoke]

----

I presume 'TG' comes from the first initial of both Tina Ng, Grant Burley both founding directors of Absolute IT. I presume the company is being liquidated because it is no longer the holding company of 'AbsoluteIT', That shareholding has now been transferred to AWF Madison. I repeat that 'AbsoluteIT' is not being liquidated. I see nothing sinister in any of this. What point are you trying to make Minimoke?

SNOOPY
- Absolute IT Group had certain assets
- It sold certain assets (not the shares) to AWF
- Absolute IT Group appear to be the copyright owner of AWF's Absolute IT brand website.
- This appearance may be true in fact, or a clerical oversight
- If a clerical oversight AWF have had 2 years to fix it. Absolute IT staff have had two years to show some pride and insist it be fixed.
- Absolute IT Group (now renamed TG1), the apparent copyright owner of the website, is being liquidated
- Snoopy likes to buy companies that have problems that can be fixed. How long does it take to fix what may be a basic clerical error.
- This is a distraction from the real issue - AWF is a parent of a company that is in the recruitment space, has shoddy recruitment processes, has shoddy management and is allegedly involved (again) in the illegal exploitation of workers
- this does not bode well for the parents siblings.

[Snoopy]

- Absolute IT Group had certain assets


Yes



- It sold certain assets (not the shares) to AWF


I will take your word for that.



- Absolute IT Group appear to be the copyright owner of AWF's Absolute IT brand website.


Sounds likely.



- This appearance may be true in fact, or a clerical oversight


Yes



- If a clerical oversight AWF have had 2 years to fix it. Absolute IT staff have had two years to show some pride and insist it be fixed.


You are assuming that AWF do not own the company AbsoluteIT. But if you look up the company records.

https://app.companiesoffice.govt.nz/companies/app/ui/pages/companies/1056241/shareholdings?backurl=%2Fcompanies%2Fapp%2Fui%2Fpa ges%2Fcompanies%2Fsearch%3Fq%3DAbsoluteIT%26entity Types%3DLTD%26entityTypes%3DUNLTD%26entityTypes%3D COOP%26entityTypes%3DASIC%26entityTypes%3DNON_ASIC %26entityStatusGroups%3DALL%26incorpFrom%3D%26inco rpTo%3D%26addressTypes%3DALL%26addressKeyword%3D%2 6start%3D0%26limit%3D15%26sf%3D%26sd%3D%26advanced Panel%3Dtrue%26mode%3Dadvanced

you will see that;

1/ AWF do own AbsoluteIT, and
2/ AbsoluteIT is not being liquidated.

So arguing over whether AWF acquired the assets of the company -AbsoluteIT- separate from the company or whether these assets are still owned by the company AbsoluteIT is moot, because AWF now own both.



- Absolute IT Group (now renamed TG1), the apparent copyright owner of the website, is being liquidated


I looked up the company TG1 Holdings Limited. It appears to have no connection whatsoever to any director past or present of AbsoluteIT. A complete red herring.



- Snoopy likes to buy companies that have problems that can be fixed. How long does it take to fix what may be a basic clerical error.


A clerical error of this kind is immaterial to the performance of the company IMO.



- This is a distraction from the real issue - AWF is a parent of a company that is in the recruitment space, has shoddy recruitment processes, has shoddy management and is allegedly involved (again) in the illegal exploitation of workers


No-one would argue that getting overseas workers to sign illegal contracts is a good thing. But the senior manager who did this has fallen on his sword has left the company. There may yet be further repercussions. But does this one event , which has been owned up to, completely poison the brand and everything that has been achieved over the last 30 years? I say no.



- this does not bode well for the parents siblings.


You assume full responsibility for everything done by your own brothers and/or sisters do you?

SNOOPY

[minimoke]

Y

You are assuming that AWF do not own the company AbsoluteIT. But if you look up the company records.

https://app.companiesoffice.govt.nz/companies/app/ui/pages/companies/1056241/shareholdings?backurl=%2Fcompanies%2Fapp%2Fui%2Fpa ges%2Fcompanies%2Fsearch%3Fq%3DAbsoluteIT%26entity Types%3DLTD%26entityTypes%3DUNLTD%26entityTypes%3D COOP%26entityTypes%3DASIC%26entityTypes%3DNON_ASIC %26entityStatusGroups%3DALL%26incorpFrom%3D%26inco rpTo%3D%26addressTypes%3DALL%26addressKeyword%3D%2 6start%3D0%26limit%3D15%26sf%3D%26sd%3D%26advanced Panel%3Dtrue%26mode%3Dadvanced

you will see that AWF do own AbsoluteIT, and AbsoluteIT is not being liquidated. So arguing over whether AWF acquired the assets of the company -AbsoluteIT- separate from the company or whether these assets are still owned by the company AbsoluteIT is moot, because AWF now own both.

I looked up the company TG1 Holdings Limited. It appears to have no connection whatsoever to any director past or present of AbsoluteIT. A complete red herring.

A clerical error of this kind is immaterial to the performance of the company IMO.

No-one would argue that getting overseas workers to sign illegal contracts is a good thing. But the senior manager who did this has fallen on his sword has left the company. There may yet be further repercussions. But does this one event , which has been owned up to, completely poison the brand and everything that has achieved over the last 30 years? I say no.


You assume full responsibility for everything done by your brothers and or sisters do you?

SNOOPYGot to admit to getting a bit bored!
But for the sake of clarity
- Absolute IT Group Limited (company Number 1056240) was founded in 2000
- Tina Ng (for example) is a director of Absolute It Group Ltd
- Absolute IT Group Ltd has changed its name to TG No 1 Ltd
- TG No 1 Ltd is in Liquidation
- in TG no Liquidators First report it clearly says ""TG No. 1 Limited, (“the Company”) ceased trading as a recruitment agency specializing in IT appointments in 2016 following a sale of the business".
- in 2016 AWF purchased the agreed assets of Absolute It Group (http://www.awfmadison.co.nz/awf-madison-buys-absolute-it)
- I have no idea if the agreed assets include the Absolute IT Group copyrighted website - the website suggests it didn't, though as we have established this may be a clerical error
- Tina Ng worked for Absolute IT Group - see below. Is a director of Absolute IT Group which is now renamed TG no 1

Thus its all related

Can't say I'm into shakespeare but you may recall the line "The sins of the father are to be laid upon the children"

Now I'm off for a snooze

[minimoke]

you will see that;

1/ AWF do own AbsoluteIT, and
2/ AbsoluteIT is not being liquidated.


SNOOPYThe company you are referring to there is Absolute IT Ltd. In Dec 2015 Absolute It Ltd was owned by Absolute IT Group (95 shares) and Tracy Lee Johnson (5 shares.)

Absolute IT Ltd is likely one of the agreed assets sold by Absolute It Group to AWF. AWF did not buy Absolute IT Group Ltd

AWF now appear to essentially own the Absolute IT brand. Its call on key clients and staff has now expired.

Still doesn't determine who owns the website!

[Snoopy]

Got to admit to getting a bit bored!
But for the sake of clarity

- Absolute IT Group Limited (company Number 1056240) was founded in 2000


That number 1056240 is connected to 'Absolute Recruitment Group' NOT 'Absolute IT Group'. I cannot find any reference to an 'Absolute IT Group' on the NZ company register. I don't think it exists or has ever existed.



- Absolute IT Group Ltd has changed its name to TG No 1 Ltd


No, it was 'Absolute Recruitment Group' that changed its name to TG No 1 Ltd on 02-11-2016.



- TG No 1 Ltd is in Liquidation
- in TG no Liquidators First report it clearly says ""TG No. 1 Limited, (“the Company”) ceased trading as a recruitment agency specializing in IT appointments in 2016 following a sale of the business".


Yes



- in 2016 AWF purchased the agreed assets of Absolute It Group (http://www.awfmadison.co.nz/awf-madison-buys-absolute-it)
- I have no idea if the agreed assets include the Absolute IT Group copyrighted website - the website suggests it didn't, though as we have established this may be a clerical error


That press release states that AbsoluteIT, founded in year 2000 was purchased. Now it is true that 'Absolute Recruitment Group' was founded in the year 2000. But so was 'Absolute I. T. Limited' (1056241). The press release suggests to me that the latter company was purchased by AWF Madison, not the former. And if you look up 'Absolute I. T. Limited' 1056241 you will see that AWF Madison is now indeed the sole shareholder of 'Absolute I. T. Limited' .

The 'AWF Madison' press release does not say the agreed assets were purchased separately from the company 'Absolute I. T. Limited'. If you purchase a company, you also purchase the assets that the company owns. If the assets were actually purchased outside of the company structure it doesn't matter, because either way AWF Madison now owns the assets.



Can't say I'm into shakespeare but you may recall the line "The sins of the father are to be laid upon the children"

Now I'm off for a snooze


Both Madison and AbsoluteIT have separate origins from the AWF division. I don't think you can say that any rotton business culture, if it exists, will permeate to the other two. Madison and AbsoluteIT are adopted step children.

SNOOPY

[minimoke]

That number 1056240 is connected to 'Absolute Recruitment Group' NOT 'Absolute IT Group'. I cannot find any reference to an 'Absolute IT Group' on the NZ company register. I don't think it exists or has ever existed.

Thats what I was saying back at #664 - sorry for the confusion with the IT bit. Thought it was making sense. Perhaps we should just rely on the audit statement in the Annual report "As disclosed in note G of the consolidated financial statements,the Group acquired the Absolute IT Group (consisting of fiveseparate entities) during the year for $14.7m."

I think it might have been better worded "As disclosed in note G of the consolidated financial statements, the Group acquired five separate IT entities of the Absolute Recruitment Group during the year for $14.7m."

Still doesnt resolve the question of who owns the website copyright

[winner69]

Looking back on segment reporting I hadn’t fully comprehended how much sales to industry (presumably Allied) had fallen as a result of the hard times in the construction sector.

F18 sales heading back to levels seen 4 to 5 years ago ...and margins falling as well.

Doesn’t look good

Bring back Kurt maybe the answer

[winner69]

Snoops -
It is the problems that cause the share price discount that creates the investment opportunity Winner. If you wait for the problems to be resolved, the share price discount also disappears. In my case I almost always invest in companies with problems that I believe the media has overstated.

Agree ..beat up companies are often good investments. That’s what piqued my interest.

I don’t think it’s been any media beatup that caused the share price to fall where it is today ....it’s the market reaction to ongoing disappointing AWF performance.

I can’t see the current issues being resolved quickly.... it all points to more pain.

Maybe the next crunch point is when we know how much less than $5.9m F18 earnings turn out to be.

One thing that boost profits a bit is when they make a favourable adjustment to what they have provided to cover the earn out payment re ITAbsolute if targets aren’t met

[Snoopy]

Agree ..beat up companies are often good investments. That’s what piqued my interest.

I don’t think it’s been any media beatup that caused the share price to fall where it is today ....it’s the market reaction to ongoing disappointing AWF performance.

I can’t see the current issues being resolved quickly.... it all points to more pain.


It is the construction industry that seems to be facing problems everywhere you look! Simon Bennett 'blamed the weather' for the patchy uptake of construction workers during the year.
I guess with climate change bedding in, Bennett will be within his rights to 'blame the weather' every year from now on, But the fact is, there is still an awful lot of construction activity going on. At some point the industry will have to get their cost structure right. The underlying business case for the 'AWF' sub unit remains in my view.



Maybe the next crunch point is when we know how much less than $5.9m F18 earnings turn out to be.

One thing that boost profits a bit is when they make a favourable adjustment to what they have provided to cover the earn out payment re ITAbsolute if targets aren’t met


I see looking at note G1 in AR2017, the net cash paid for AbsoluteIT, $9.903m excludes the $3.420m estimated earn out payment. Of course that $3.420m was an estimate based on the expected earn out performance at the last balance date. But in the March 1st trading update we were told

"The performance of AWF Madison’s other business, Absolute IT, continues to meet expectations."

This is despite the performance AWF and Madison business units being softer. This sounds like code for no change to the expected earn out payment for AbsoluteIT. If AbsoluteIT has a late financial year falter, that would mean all three divisions going soft. Not a good trade off for a saving in the earn out payment I would have thought! Could it be the earn out payment that is influencing the projected lower full year financial result forecast? I would have thought that any earn out payment would be capitalized expenditure in relation to the AbsoluteIT acquisition and would show up on the books as extra goodwill or something? IOW not an operating expense that would affect the upcoming profit figure. Happy to be corrected by a real accountant on this one.

SNOOPY

[winner69]

Snoops

If The forecast AbsoluteIT earn out payment of $3.420 has already been capitalised. There is also a liability of the same amount shown on the Balance Sheet

Generally adjustments/differences when settled are treated as an expense

The way you class SKC deferred license liability as debt should apply here ....maybe you should add this $3.4m to AWF debt

[Snoopy]

Snoops

If The forecast AbsoluteIT earn out payment of $3.420 has already been capitalised. There is also a liability of the same amount shown on the Balance Sheet


I am not sure if the earn out payment of $3.420m has been capitalised or not.

If I go to section B3 of AR2017, I can see $7.836m of new goodwill on the books, attributable to the Absolute IT Group.

If I then go to section G of AR2017, there is that $7.836m figure again in the 'Analysis of assets and liabilities acquired."



Net Assets$6.882m


plus Goodwill on Acquisition$7.836m


equals Cost of Acquisition$14.718m



The same $14.718m acquisition cost is broken down just below that in a different way:



Paid in Cash$11.298m


plus Earn Out Payment$3.420m


equals Cost of Acquisition$14.718m



So it looks to me as though the $3.420m earn out payment is already included in the cost of acquisition and has been used as a part of the calculation which determined what the AbsoluteIT goodwill on the books is. Does that mean the $3.420 earn out is already capitalised? It looks that way. But if this is so Winner, and you tell us there is also a liability of the same amount shown on the balance sheet, then where is it? Answer: Under Current Liabilities:

"AbsoluteIT Limited earn-out payment = $3.420m", listed at the bottom of 'Current Liabilities' in the balance sheet (p25 AR2017).




Generally adjustments/differences when settled are treated as an expense


If this $3.420m becomes a second half expense, that will put a big hole in the second half profit. But if it is the act of paying that $3.420m earn out fee that is the main thing that causes second half profit to plunge, is that a bad thing? All it means is that AbsoluteIT is doing really well, which is what we shareholders want, and the $3.420m extra expense is simply a 'one off' charge that reflects this. Suddenly I am a whole lot more relaxed about 2HY2018.



The way you class SKC deferred license liability as debt should apply here ....maybe you should add this $3.4m to AWF debt


I agree!

SNOOPY

[winner69]

Snoops - the $3.42m has been ‘capitalised’. Trust me

Also Snoops ....if it turns out the earn out payment is $3.42m and paid in H2 there will NO IMPACT ON PROFIT .....and that liability on the Balance Sheet will disappear (with a corresponding reduction in CASH)

We won’t bother discuss what might happen if the payment is heaps more or less ...I think they would have told us about that already if material.

[minimoke]

Isnt the 3.43 actually 4.2m - this is what was reported to market at purchase time. That is purchase price $15.3m, $11.1m payable on 1 Nov 2016 and up to $4.2m payable on / after results to 1 Nov 2017

[winner69]

Isnt the 3.43 actually 4.2m - this is what was reported to market at purchase time. That is purchase price $15.3m, $11.1m payable on 1 Nov 2016 and up to $4.2m payable on / after results to 1 Nov 2017

Correct ...but AWF calculated and then assumed they would only be paying $3.42m and not the ‘up to’ $4.2m and only ‘valued’ the acquisition at the lower figure.

Could still be up for $4.2m but I think they would have told us by now if the case.

[minimoke]

Correct ...but AWF calculated and then assumed they would only be paying $3.42m and not the ‘up to’ $4.2m and only ‘valued’ the acquisition at the lower figure.

Could still be up for $4.2m but I think they would have told us by now if the case.So we can conclude that as at Nov 2017 Absolute IT did not deliver on its revenue, expense and profit targets. With that motivator now off the table I would expect 2nd half results to worsen. I presume rather than the $3.42 coming off the bottom line cash it will be debt funded?

[winner69]

Good strong announcement with plenty of good words like transformation, opportunity, fantastic, growth etc etc

Pity about the profit being $5.0m being way way down on last year even though they had a full year of AbsoluteIT

Bit short of Snoops’s expectations of $7m but he’ll be satisfied with $5m

Cash flow kept the divie safe.

https://www.nzx.com/announcements/318613

[percy]

Good strong announcement with plenty of good words like transformation, opportunity, fantastic, growth etc etc

Pity about the profit

https://www.nzx.com/announcements/318613

Yes it certainly was a "pity about the profit."...................lol.
Loved the gloss.

[minimoke]

Might be worth trying to normalise it a bit by taking out the Census contract. 3,000 workers has to be worth a bit of revenue that wont be seen in 2018/19.

(nicely glossed over shabby internal recruitment practices, the use of illegal employment agreements and exploitation of migrant workers)

Not sur ewalkign away form bread and butter small employers is such a good idea. There's substantial future risk trying to chase the big contracts. (its only taken them 8 years to get some value from Fleur Broad)

[winner69]

Looks like AWF could be one of the stars of the NZX over the next 6 months

Not convinced about them yet so will leave it to the likes of Snoops to be the beneficiary of the market kindness

Remember the markets taketh away but sometimes giveth back ...as AWF heads to $2.80

[winner69]

AWF one of those frustrating companies that make you wait for the fine print.

[Snoopy]

Yes it certainly was a "pity about the profit."...................lol.
Loved the gloss.


Looks like AWF could be one of the stars of the NZX over the next 6 months
Not convinced about them yet so will leave it to the likes of Snoops to be the beneficiary of the market kindness

Remember the markets taketh away but sometimes giveth back ...as AWF heads to $2.80


You guys are just jealous. I do get these calls right sometimes you know. I got a 20cps share price boost on the day of the profit announcement. I guess one important reason for that was the introduction of a DRP to shore up the capital base. That means no cash issue will be required, despite all the doom and gloom on this forum pre-announcement regarding the debt position of the company.

The share price looks to have been playing the game of "sell the rumour" "buy the fact". As Percy said, not a great result. But perhaps a little better than what some punters on here expected.

SNOOPY

[minimoke]

You guys are just jealous. I do get these calls right sometimes you know. I got a 20cps share price boost on the day of the profit announcement. A boost to $1.96? A four week high - and still below 26 week high of $2.46 or 12 month high of $2.95. Dipping back down 5 cents so far today. So no I'm not jealous at all. (I could also be tempted to read the DRP as no spare cash or ability to borrow more)

[percy]

You guys are just jealous. I do get these calls right sometimes you know. I got a 20cps share price boost on the day of the profit announcement. I guess one important reason for that was the introduction of a DRP to shore up the capital base. That means no cash issue will be required, despite all the doom and gloom on this forum pre-announcement regarding the debt position of the company.

The share price looks to have been playing the game of "sell the rumour" "buy the fact". As Percy said, not a great result. But perhaps a little better than what some punters on here expected.

SNOOPY

Take care Snoopy,even Sammy The Seal gets the odd one right..!!..lol.
Still a lot of water to go under the AWF bridge before they are on track,so a bit early to say you got them right..
I still have doubts about their business model.
I do not see the point of buying a second rate company that has a lot of problems/issues ahead of them.
I will be adding MEL and SPK to my portfolio for dividends,when the money from the sale of my previous house comes through, on 15th June.
I had to sell my MEL to pay for our new house.

[Brain]

The success of this business is totally dependent on the ability of the staff.

They need to apply the following rules.

1/ No dickheads allowed

2/ never forget rule number 1

[winner69]

An interesting piece on capacity in the construction sector

Seems to be at odds with some of Allieds commentary

https://www.interest.co.nz/property/94071/rodney-dickens-says-higher-construction-demand-will-soon-attract-building-capacity-so

[peat]

...even Sammy The Seal gets the odd one right..!!.

remember that Octopus that predicted outcomes at the last World Cup!
I'm sure a monkey has written at least one good play


I had to sell my MEL to pay for our new house.

isnt it such a downside to owning shares that you cant live in them.
I hope you're enjoying your new house

[percy]

remember that Octopus that predicted outcomes at the last World Cup!
I'm sure a monkey has written at least one good play



isnt it such a downside to owning shares that you cant live in them.
I hope you're enjoying your new house

New house is great thanks Peat.
Old house should have been settled today.
Just hope MEL don't go much higher before I buy them back,and a few extra .
Even considering some AIR and SPK,as I think all three have the capacity to pay increasing divies..

ps Could not remember that Octopus's name.!

[winner69]

AWF Madison mentioned in respect of the current IRD woes

https://www.stuff.co.nz/business/industries/105107686/inland-revenue-contact-centre-workers-thought-contracts-were-a-joke

[Snoopy]

AWF Madison mentioned in respect of the current IRD woes

https://www.stuff.co.nz/business/industries/105107686/inland-revenue-contact-centre-workers-thought-contracts-were-a-joke

"Madison may be unable to give them written confirmation of their hours or pay - or details of where they would work or what they would do - even after they start an assignment, because those assignments may vary and be "short term"."

Welcome to the 21st Century IRD staff. IRD have too many workers, so reducing the employment conditions sounds an excellent 'market' way to get some to leave.

Ben Chipping, employee aged 27 "It is outrageous considering some people have mortgages that depend on their jobs, and children."

Well Ben, less ability to pay mortgages equals less demand for houses equals lower house prices. This is exactly the kind of thing that your generation asked for! As for the children, they can be rented out. There is many a rich family willing to pay a pittance for a young housekeeper. Good discipline for that upcoming generation too!

It all sounds like a white middle class crisis to me. It is an international world now. I bet all of those Madison employment contracts look gold plated compared to those who work in dangerous conditions deconstructing ships in Mumbai!

SNOOPY

[winner69]

"Madison may be unable to give them written confirmation of their hours or pay - or details of where they would work or what they would do - even after they start an assignment, because those assignments may vary and be "short term"."

Welcome to the 21st Century IRD staff. IRD have too many workers, so reducing the employment conditions sounds an excellent 'market' way to get some to leave.

Ben Chipping, employee aged 27 "It is outrageous considering some people have mortgages that depend on their jobs, and children."

Well Ben, less ability to pay mortgages equals less demand for houses equals lower house prices. This is exactly the kind of thing that your generation asked for! As for the children, they can be rented out. There is many a rich family willing to pay a pittance for a young housekeeper. Good discipline for that upcoming generation too!

It all sounds like a white middle class crisis to me. It is an international world now. I bet all of those Madison employment contracts look gold plated compared to those who work in dangerous conditions deconstructing ships in Mumbai!

SNOOPY

Love it when you get really angry Snoopy .....usually you post in a considered well thought out sedate way but jeez there appeared to be some emotion in this post.

Whatever if what was reported is the basis of a AWF Madison contract that contract is ****e .....and might put their pool of workers off dealing with them

[percy]

Big full moon.
Affects hounds.!

[winner69]

Big full moon.
Affects hounds.!

Hadn’t thought of that

[Stranger_Danger]

"Madison may be unable to give them written confirmation of their hours or pay - or details of where they would work or what they would do - even after they start an assignment, because those assignments may vary and be "short term"."

Welcome to the 21st Century IRD staff. IRD have too many workers, so reducing the employment conditions sounds an excellent 'market' way to get some to leave.

Ben Chipping, employee aged 27 "It is outrageous considering some people have mortgages that depend on their jobs, and children."

Well Ben, less ability to pay mortgages equals less demand for houses equals lower house prices. This is exactly the kind of thing that your generation asked for! As for the children, they can be rented out. There is many a rich family willing to pay a pittance for a young housekeeper. Good discipline for that upcoming generation too!

It all sounds like a white middle class crisis to me. It is an international world now. I bet all of those Madison employment contracts look gold plated compared to those who work in dangerous conditions deconstructing ships in Mumbai!

SNOOPY

Spoken like a true baby boomer lol.

[traineeinvestor]

New house is great thanks Peat.
Old house should have been settled today.
Just hope MEL don't go much higher before I buy them back,and a few extra .
Even considering some AIR and SPK,as I think all three have the capacity to pay increasing divies..

ps Could not remember that Octopus's name.!

Paul the Octopus is sadly no longer available for share picking contests.

[winner69]

Hey Snoops


Your never said anything about AWF profit figure .... was $5.1m a real surprise (v your forecast of ~$7m or had we conditioned you to a number like what was reported)


I see from the Balance Sheet that borrowings have increased as well in spite of that fantastic cash flow

[Snoopy]

Hey Snoops

Your never said anything about AWF profit figure .... was $5.1m a real surprise (v your forecast of ~$7m or had we conditioned you to a number like what was reported)


Did you notice that $5.048m net profit included a $170k contribution 'not paid' to the Absolute IT founders as an earn out payment? This is further explained under note F7

"During the year 31st March 2018, Absolute IT's earnings for the 52 weeks to 1 November 2017 were less than that which was estimated by the directors on acquisition date. Accordingly on 1 November 2017, the group settled the contingent consideration liability for $3.25m, with the balance of $0.170m being settled as a fair value gain through profit and loss."

IOW from an operational perspective this was a one off bonus. My calculation of the operational NPAT puts things back to under $5m!

$5.048m - 0.72 ($0.170m) = $4.926m.

Rather curiously Chairman Ross Keenan said in AR2018 p3

"Absolute IT delivered a result that was above our expectations."

So does that mean that after Absolute IT was acquired, the board lowered their expectations so that the division could deliver above the new expectations? It is hard to make sense of this stuff sometimes.

Yet it is all historical Winner. The profit was what it was and next year will be better. I liked this bit from AR2018 p7

"We are targetting double digit EBITDA growth through execution and improvement initiatives impacting cost and revenue to create sustainable value for our shareholders."

Over FY2018 EBITDA worked out at $11.549m. So Simon Bennett is telling us at least $12.704m (the smallest double digit rise of 10%) for FY2019. That is better that FY2015 and FY2016!

Of course there will be more shares by then as a result of the DRP. It looks like the number of shares got bumped up by:

$773k/ $1.90 = 407k

as a result of those 'great investors' (like Simon Hull and myself) fully participating half of their shares ( ;-P love the new meaning of 'full participation') to really shore up the capital base of this company. How does that relate to the number of shares on issue now?

407,000 / 32,555,000 = 1.25%

So not too much of a dilution. Maybe 2.5% for the year if we include a similar effect the upcoming interim dividend



I see from the Balance Sheet that borrowings have increased as well in spite of that fantastic cash flow


Perhaps you forgot to offset any bank loan increase with the increase in cash on hand at balance date?



Bank Loan Borrowings Cash on Hand Net Bank Debt


EOFY2017$33.500mless $1.225mequals $32.275m


EOFY2018$36,000mless $6.269mequals $29,731m



I also saw that the floating bank interest rate paid was down to 3.48% (AR2018 note C8) which struck me as astonishing low for a corporate. The previous year, FY2017, they were paying 4.74% (still pretty low)! Bank interest paid was $1.297m over FY2018. If bank interest rates returned to FY2017 levels then the interest bill would rise by 36% to $1,767m. That would wipe approximately $470k x 0.72 = $338m off NPAT

SNOOPY

P.S. Sorry to delay my reply, but wanted to keep things 'under the radar' while I acquired a few more shares - it took nearly a month on market to complete a smallish order! I didn't want other sharetraders - such as yourself - suddenly deciding to buy some from under my nose at bargain prices!

P.S.S. Average holding price now $2.20, so still under water!

[percy]

[QUOTE=Snoopy;723525]
"We are targetting double digit EBITDA growth through execution and improvement initiatives impacting cost and revenue to create sustainable value for our shareholders."

I can not remember AWF meeting target/projections for the past 5 years,or more.Just does not happen.
Different this time.?
Take care,they are at risk of becoming a serial underperformer..
The current share price is where it was 6 or 7 years ago.

[winner69]

Hope they haven’t been supplying labour to Ebert Construction

That Auckland Manager they sacked was pretty good Ar drumming up business up Auckland way

[minimoke]

Hope they haven’t been supplying labour to Ebert Construction

That Auckland Manager they sacked was pretty good Ar drumming up business up Auckland wayAnd I suspect may not have been great at managing margins or risk given his prior history.

[Snoopy]

Hope they haven’t been supplying labour to Ebert Construction

That Auckland Manager they sacked was pretty good Ar drumming up business up Auckland way

The share price took a hit at the end of the week and I wondered the same! However, it is all historical now. A 'non cash adjustment' as some would say?

SNOOPY

[percy]

Some of us may go so far as to say "ANOTHER" 'non cash adjustment'.

[winner69]

Apparently Naven Interiors who also went broke had about 20 contracted workers .....hope they didn’t use the market leaders to get staff

[winner69]

Talking of Allied bad debts are they still hoping to get paid that $1.4m unpaid bill from a few years ago?

That would be a bonus for them

[Brain]

Hope they haven’t been supplying labour to Ebert Construction

That Auckland Manager they sacked was pretty good Ar drumming up business up Auckland way
Really good that they sacked him as anybody writing illegal contracts is a total dickhead and should be sacked. My worries is that they took too long to discover that fact which really reflects badly on the CEO. I sold all my shares a while ago at a loss. You have to take your losses and admit your mistakes. Hopefully mistakes on companies like this are made up many times over on your successes with other companies.

[Snoopy]

Its one of the simplest businesses around. You simply hire out worker labour to hiring employers at a rate higher than your all up costs.

Two common reasons for business failure, aligned with cashflow:
- not enough worker labour to meet employer demand
- not enough employers demanding available working labour.


Warren Buffett is famous for not investing in businesses that he does not understand, no matter how trendy or good the outlook seems to be. One thing I like about AWF is that it is relatively simple, as minimoke has outlined above. However, I have read Simon Bennett's CEO report in AR2018 twice now, and I have to admit a new cloud of confusion has descended as a result to baffle me.

Bennett gives a backhanded serve to the new labour lead government. He mentions something about employing triangles. Then goes into a long diatribe on the latest buzz-phrase 'Managed Service'. Please feel free to correct me if I have this wrong.....

'Managed Service' is about managing a long term temporary workforce. (it is always worrying when I open a paragraph with a tautology). Put simply, AWF lends workers to an organization, then takes the worker back to redeploy elsewhere. However the place to which the worker was originally deployed is 'kept in the loop'. They are told where the worker has been sent to, what new training they are getting and how their skills are developing. The idea is that later that same worker can go back to where they were originally deployed, as an upskilled higher paid more desirable 'work unit'. And that previous employer deployments are kept salivating as they embrace the career development of their former charge.

"For the candidates or workers , it allows certainty for periods of work with the client and future opportunities as they cycle out of the assignment."

How does cycling in and out of an assignment create certainty for the worker again? And what does

"dashboarding and automation of the process for clients and candidates" mean? The worker allocation will be done by computers from now on?

Reading the CEO report for the third time has increased my confusion further! Back to Bennet's triangle reference, the only thing it does prove is that there are at least three sides to every story.

SNOOPY

[winner69]

Snoops - that's all good stuff, the stuff that gives them a competitive advantage = higher share holder returns

You need to trust Mr Bennet

[minimoke]

Warren Buffett is famous for not investing in businesses that he does not understand, no matter how trendy or good the outlook seems to be. One thing I like about AWF is that it is relatively simple, as minimoke has outlined above. However, I have read Simon Bennett's CEO report in AR2018 twice now, and I have to admit a new cloud of confusion has descended as a result to baffle me.

Bennett gives a backhanded serve to the new labour lead government. He mentions something about employing triangles. Then goes into a long diatribe on the latest buzz-phrase 'Managed Service'. Please feel free to correct me if I have this wrong.....

'Managed Service' is about managing a long term temporary workforce. (it is always worrying when I open a paragraph with a tautology). Put simply, AWF lends workers to an organization, then takes the worker back to redeploy elsewhere. However the place to which the worker was originally deployed is 'kept in the loop'. They are told where the worker has been sent to, what new training they are getting and how their skills are developing. The idea is that later that same worker can go back to where they were originally deployed, as an upskilled higher paid more desirable 'work unit'. And that previous employer deployments are kept salivating as they embrace the career development of their former charge.

"For the candidates or workers , it allows certainty for periods of work with the client and future opportunities as they cycle out of the assignment."

How does cycling in and out of an assignment create certainty for the worker again? And what does

"dashboarding and automation of the process for clients and candidates" mean? The worker allocation will be done by computers from now on?

Reading the CEO report for the third time has increased my confusion further! Back to Bennet's triangle reference, the only thing it does prove is that there are at least three sides to every story.

SNOOPYI'l have to read the report - its not high on my Must Read list though. The triangle bit is simple enough. There is even a bill in front of parliament to cover it: The Triangular Employment relations Bill (or something like that).

A big risk for AWF is new new Domestic Violence Act where a worker can claim 10 days paid leave if they have been affected (but nor necessarily a victim) of domestic violence. Add the other it 20 day annual leave (if there more than 12 months - other wise 8% of gross), 5 days sick and unlimited bereavement leave being an employer Is tough. Especially in Allied space.

Bennet also needs to get with th programme. Its no longer a "temporary" workforce. Its teh "On-hire' workforce. Big black mark against him there as Labour, Greens hate "temporary"

[minimoke]

Bennett gives a backhanded serve to the new labour lead government. He mentions something about employing triangles. Then goes into a long diatribe on the latest buzz-phrase 'Managed Service'. Please feel free to correct me if I have this wrong.....

'Managed Service' is about managing a long term temporary workforce. (it is always worrying when I open a paragraph with a tautology). Put simply, AWF lends workers to an organization, then takes the worker back to redeploy elsewhere. However the place to which the worker was originally deployed is 'kept in the loop'. They are told where the worker has been sent to, what new training they are getting and how their skills are developing. The idea is that later that same worker can go back to where they were originally deployed, as an upskilled higher paid more desirable 'work unit'. And that previous employer deployments are kept salivating as they embrace the career development of their former charge.

"For the candidates or workers , it allows certainty for periods of work with the client and future opportunities as they cycle out of the assignment."

OK, I've had a read of his report. I am left in the dark over this managed Service business. I have no idea what he is on about. I have no clue what a person on a "statement of work" is.

If I was him I wouldn't be shining a spotlight on his temporary workforce getting permanent work with the host employer. That is potentially illegal.

If he is talking about triangles then going down the "Candidate centricity" route make no sense. = hes ignoring the other points on the triangle.

"Digital roadmapping" and "dashboarding" are excellent words to help fill an Annual report.

I think what he might be saying or ought to be saying is: If we upskill lour contingent workforce we can get them into higher paying jobs and we get a higher margin on those jobs."

[Snoopy]

Note figures in italics in table below are estimates



Doubtful Debt Provisions {A} Current Trade and Other Receivables (before provisioning)less Other Receivables (Estimates comes from FY2016)equals Current Trade Receivables {B}]{A}/{B}


EOFY2014$0.377m$24.677m$3.637m$21.040m]1.79%


EOFY2015$0.342m$27.996m$3.637m$24.349m]1.40%


EOFY2016$0.589m$33.706m$3.637m$30.069m]1.96%A Volkswagen ID.3 electric car stands on an elevator platform inside one of the twin towers used as storage at the Autostadt promotional facility next to the Volkswagen factory


EOFY2017$0.897m$46.430m$5.332m$41.098m]2.18%



Notwithstanding that an EOFY2017 provision of $0.897m is just over 10% of FY2017 gross profit, in percentage terms I don't believe the 'bad debt provision' to 'total debt' ratio is a matter for concern. Hopefully the bad debt is now dealt with and we shareholders can move forward from here.

To some extent the 'Absolute IT' acquisition has got AWF out of jail. 'Absolute IT' is reflected in the end of year book position. So that means existing problems within AWF are diminished in relative terms by being part of a larger total. I am prepared to take a 'glass half full' approach to the bad debt position at this time. I won't be selling any of my AWF shares because of the bad debt issue.

SNOOPY


Talking of Allied bad debts are they still hoping to get paid that $1.4m unpaid bill from a few years ago?

That would be a bonus for them

In recent annual reports, the table figures are derived from section C7. Note figures in italics in table below are estimates



Doubtful Debt Provisions {A} Current Trade and Other Receivables (before provisioning)less Other Receivables (Estimates comes from FY2016)equals Current Trade Receivables {B}]{A}/{B}


EOFY2014$0.377m$24.677m$3.637m$21.040m]1.79%


EOFY2015$0.342m$27.996m$3.637m$24.349m]1.40%


EOFY2016$0.589m$33.706m$3.637m$30.069m]1.96%


EOFY2017$0.897m$46.430m$5.332m$41.098m]2.18%


EOFY2018$0.143m+ $0.160m(*)$42.133m$4.149m$37.984m]0.38%



(*) Doubtful debts for 'other receivables' as separated out in FY2018 results are not included in trade receivable doubtful debt calculation.

On the surface there seems to be a big percentage drop off in the doubtful debt provision, all due to management's resolve to keep a close eye on doubtful debts. I am not clear what the 'other' receivables are., and why there is a doubtful debt provision against those for the first time.

The $1.3m write off that Winner alludes to happened in the FY2016 year. It doesn't tally with making an appearance in the above table though. Did it come in a hurry after being swept under the carpet in double quick time so as not to tarnish the end of year table? I think all hope is lost for a return of any of that money.

SNOOPY

[Snoopy]

Just to show there is more than one way of doing things, I have slightly changed the way I am calculating underlying profit. I am now removing property plant and equipment sales profits/losses from all of my calculated profit figures.

2013: ($4.952m+$0.124m)/ 25.805m = 19.7cps
2014: ($3.952m-$0.025m+0.72x($0.095m+$0.257m) )/ 25.805m = 16.2cps
2015: ($5.416m+$0.031m)/ 32.463m = 16.8cps
2016: ($5.202m+$0.008m)/ 32.463m = 16.0cps
2017: ($5.867m-$0.050m+0.72x($0.262m+$0.442m) )/ 32.463m = 19.5cps

Notes:

1/ Due diligence cost for "Madison" removed from FY2014. "Madison Business" acquisition costs removed from FY2014.
2/ "Absolute IT" acquisition costs removed from FY2017. Legacy software write down removed from FY2017

Conclusion: Fail Test

Just to show there is more than one way of doing things, I have slightly changed the way I am calculating underlying profit. I am now removing property plant and equipment sales profits/losses from all of my calculated profit figures.

2014: ($3.952m-$0.025m+0.72x($0.095m+$0.257m) )/ 25.805m = 16.4cps
2015: ($5.416m+$0.031m)/ 32.463m = 16.7cps
2016: ($5.202m+$0.008m)/ 32.463m = 16.0cps
2017: ($5.867m-$0.050m+0.72x($0.262m+$0.443m) )/ 32.463m = 19.6cps
2018: ($5.048m+$0.2224m-0.72x($0.170m) )/ 32.555m = 15.8cps


Notes:

1/ Due diligence cost for "Madison" removed from FY2014. "Madison Business" acquisition costs removed from FY2014.
2/ "Absolute IT" acquisition costs removed from FY2017. Legacy software write down removed from FY2017.
3/ Refund from partiual failure of AbsoluteIT earn out provision removed from FY2018 result.

Conclusion: Fail Test

[winner69]

Snoops - that big bad debt. They said in F17 AR thatbthey hadn’t written it all off that believed that $800k was still recoverable (going from memory)

Looks like they may have bitten the bullet (or couldn’t convince the auditors otherwise) and expenses what the balance was in F18

[Snoopy]

Snoops - that big bad debt. They said in F17 AR thatbthey hadn’t written it all off that believed that $800k was still recoverable (going from memory)

Looks like they may have bitten the bullet (or couldn’t convince the auditors otherwise) and expenses what the balance was in F18

I just looked back in AR2016 Winner69 and you are right.

"One large overdue debtor owes the group $1.3mdue to significant growth in key infrastructure projects. The payment to the group is dependent on variation payments to the debtor being approved and paid by the head contractors in the projects. Due to the length of time this debt has been outstanding and the lack of certainty surroundinng teh variation invoices, teh Group has taken steps to ensure it receives the debt it is owed by appointing a liquidator. The group has also provided $0.3m against this debt in case the variations are not all approved by the head contractors."

So the provision was only $0.3m, and that is very close to the difference between the difference in doubtful debt provision between EOFY2016 and EOFY2015:

$0.589m - $0.342m = $0.247m

The debt provision remained large at EOFY2017 (actually gained another $300m) , then suddenly dropped to just $0.143m at EOFY2018. So it looks like the debt has been collected and the $300m provision (and maybe $300m more) written off. However since they made such a big deal of this 'one off debt' in the first place, isn't it curious that they have made no mention of it being tidied up?

SNOOPY

[Snoopy]

ROE= (Net Profit)/(EOFY Shareholders Funds)

2013: $5.076m / $21.607m = 23.5%
2014: $4.180m / $20.763m = 20.1%
2015: $5.447m/ $35.931m = 15.2%
2016: $5.210m/ $36.274m = 14.4%
2017: $6.324m/ $36.935m = 17.1%

Conclusion: Pass test



ROE= (Net Profit)/(EOFY Shareholders Funds)

2014: $4.180m / $20.763m = 20.1%
2015: $5.447m/ $35.931m = 15.2%
2016: $5.210m/ $36.274m = 14.4%
2017: $6.311m/ $36.935m = 17.1%
2018: $5.153m/ $36.859m = 13.9%


Conclusion: Fail test

SNOOPY

[Snoopy]

Net Profit Margin = Net Profit/Sales

2013: $5.076m /($138.852m - $8.375m)= 3.89%
2014: $4.180m /$148.691m = 2.81%
2015: $5.447m/$197.514m = 2.76%
2016: $5.210m/ $214.589m = 2.43%
2017: $6.324m/ $256.428m = 2.47%

Note: For FY2013 I have removed the since sold healthcare unit profit and the associated turnover.

One uptick in the data in FY2017 is so far a welcome blip rather than a trend.

Conclusion: Fail Test


Net Profit Margin = Net Profit/Sales

2014: $4.180m /$148.691m = 2.81%
2015: $5.447m/$197.514m = 2.76%
2016: $5.210m/ $214.589m = 2.43%
2017: $6.311m/ $256.428m = 2.46%
2018: $5.153m/ $279.303m = 1.84%

This is a picture the opposite of what we are looking for. A sorry story of a five year weakening of net profit margins with barely any respite!

Conclusion: Fail Test

SNOOPY

[Snoopy]

A lot has happened over the last couple of years. So time for an update.

AWF Madison is in the business of recruitment and provision of people. The company operates in both the white collar and blue collar market place. AWF are the largest recruiter and labour provider in New Zealand providing the full spectrum of temporary and permanent recruitment services to industry and commerce.

The prime mission of the AWF (formerly Allied Work Force) sub-brand, founded in 1988, is "the provision of blue collar temporary labour", both semi-skilled and skilled. Industry sectors covered include construction, infrastructure, manufacturing, food processing, timber processing and waste management. AWF have 30 branches nationwide with 124 staff who supply up to 3,500 people per day on deployment.

The Madison sub brand, founded in 1998, acquired by AWF in 2nd December 2013, both recruits outright (5,615 placements last year) and deploys on their own behalf (up to 1,100 people per day) white collar staff through 5 offices and 98 support staff.

Absolute IT, founded in 2000, acquired by AWF on 1st November 2016, is also a 'white collar' recruitment business, but is an Information and Communication Technology (ICT) recruitment specialist (complimentary to Madison). Absolute IT has 4 offices with a total of 48 support staff deploying around 450 people daily.

"Madison" and "Absolute IT" report as one operating segment.

The combined group is New Zealand's largest recruitment company in terms of placements and the only NZX listed company in this market sector.

Conclusion: Pass Test


AWF Madison still claims to be the largest placer of workers in NZ. The competitive advantage of the company is said to be size and the fact that it is locally owned. That means it can react rapidly to local market dynamics.

Conclusion: Pass Test

SNOOPY

[Snoopy]

Fast forward a couple of years and much has changed. What was a clean pass on all tests at EOFY2015, has now morphed into a couple of failed tests. The net profit margin in FY2016 did shrink again and the recovery in FY2017 is still below FY2015 levels.

Next we have the somewhat sorry 'earnings per share story'. Five years on from the first corporate move and two acquisitions ('Madison Recruitment' and 'Absolute IT') have joined the AWF family. So we now have a much bigger company in revenue terms. But what has happened to 'eps' over that time period?

2013: ($4.952m+$0.124m)/ 25.805m = 19.7cps
<snip>
2017: ($5.867m-$0.050m+0.72x($0.262m+$0.442m) )/ 32.463m = 19.5cps

That's right. 'Eps' has gone down! OK the latest acquisition of Absolute IT is still bedding in, and I do expect 'eps' will rise in FY2018. But right at this point, shareholders who have held for five years (I haven't) must be disappointed. Sadly this means the 'Buffett Growth ' model is currently not suitable for checking out the value of this share :-(. Time to bring out the alternative 'Capitalised Dividend Valuation Model', and see what sort of valuation figures I get!


Fast forward another year and all the numerical tests (Buffett 1,2 and 3) have failed. I don't think that Warren Buffett would go within a mile of this company! We hold in hope of better figures, but invest for now for the dividend payout only - provided the price is right of course!

SNOOPY

[winner69]

Fast forward another year and all the numerical tests (Buffett 1,2 and 3) have failed. I don't think that Warren Buffett would go within a mile of this company! We hold in hope of better figures, but invest for now for the dividend payout only - provided the price is right of course!

SNOOPY

So FAIL FAIL FAIL

Hope you raise your ‘expected return’ to allow for risk when you come up with a reasonable price to buy more.

[percy]

Fast forward another year and all the numerical tests (Buffett 1,2 and 3) have failed. I don't think that Warren Buffett would go within a mile of this company!

SNOOPY

Well done.It has been a long journey,but you got there in the end.

[Snoopy]

epsdps (imputed)


201416.215.6


201516.814.8


201616.015.2


201719.616.0


201821.6 (*)16.2


Total90.277.8


5 year Average15.6



(*) Based on projected FY2018 NPAT earnings for the year of $7m.

For a leading market player in a nevertheless fragmented service profession I would accept a 7.5% gross dividend yield. However, with the vulnerability to weather permissible building projects as evidenced in the first half, I am pushing out my acceptable gross dividend yield to 8%

Implied Acceptable Share Price = (Gross Dividend) / (Acceptable Yield)

= (15.6c / 0.72) / 0.08 = $2.70

Last sale on the market was $1.80. Using this valuation model, I think AWF Madison is now trading at a 33% discount to fair value.

SNOOPY

discl: holder

The DRP announced recently is new information.

I have decided to modify my valuation based on an expected 10% share dilution as a result of the new DRP operating over the next four years. Clearly if the same dividends are going to be spread over an increased number of shares (11/10), then the value of the shares will decline by the reciprical of that factor multiplied by my previous valuation.

Fair value is therefore: 10/11 x $2.70 = $2.45


So FAIL FAIL FAIL

Hope you raise your ‘expected return’ to allow for risk when you come up with a reasonable price to buy more.

I have lowered my expected return to $2.45. That is still a good premium to the last market price of $1.90. AWF may have failed the Buffett growth model tests, but for this dividend hound, I still see value. I have taken a couple of bites over the last few months, and will look to accumulate more in the future. Very few shares are worth buying on the NZX at the moment. But I am still keen on AWF. At $1.90 the forward PE is only 12, based on current depressed earnings, and maybe 10 on more normalised earnings. You don't need growth going forwards if no growth is already priced in, and the investment can be justified on dividend yield alone.

SNOOPY

[Snoopy]

Bank debt in the FY2017 results announcement is as follows:



Cash & Cash Equivalents: {A}$1.225m


Non Current Borrowings:$33.500m


less Current Borrowings:$0.0m


less Overdraft:$0.108m


equals Total Borrowings: {B}$33.608m


Total Net Borrowings: {B}{A}$32.383m



Net profit after tax: $6.324m

MDRT = $32.383m/ $6.324m = 5.1 years

Quite a large increase in leverage at AWF in the last couple of years. The acquisition of "Absolute IT" last November funded by bank debt would have something to do with that. However going from and MDRT of 3.4 at EOFY2015 to 5.1 today I would see as a move up, but still within, the medium debt spectrum. Not too much to worry about here, but the debt situation deserves monitoring.



Net Bank debt in the FY2018 results announcement is as follows:



FY2018


Cash & Cash Equivalents: {A}$6.269m


Non Current Borrowings:$36.000m


less Current Borrowings:$0.000m


less Overdraft:$0.000m


equals Total Borrowings: {B}$36.000m


Total Net Borrowings: {B} - {A}$29.731m


Net profit after tax {C} $5.153m


MDRT {B} - {A} / (C} 5.8 years




The net debt has gone down, but the ability to repay debt has gone down as well :-(. I do prefer this figure to be less than five years. But with the DRP, AWF have taken measures to reduce debt going forwards. The debt situation should continue top be monitored. But there is nothing here to make me tuurn off my investment tap based on this information.

SNOOPY

[minimoke]

AWF Madison still claims to be the largest placer of workers in NZ. The competitive advantage of the company is said to be size and the fact that it is locally owned. That means it can react rapidly to local market dynamics.

Conclusion: Pass Test

SNOOPY
"OneStaff is New Zealand's leading industrial recruitment agency. "Beyond Recruitment = "We’re the largest 100% Kiwi-owned multi-specialist recruitment agency in New Zealand."

Parker Bridge = "As New Zealand's leading full-service Commerical Accounting, Professional Services and Executive & Business Support recruitment partner,"

They cant all be top dog

[Snoopy]

"OneStaff is New Zealand's leading industrial recruitment agency. "Beyond Recruitment = "We’re the largest 100% Kiwi-owned multi-specialist recruitment agency in New Zealand."

Parker Bridge = "As New Zealand's leading full-service Commerical Accounting, Professional Services and Executive & Business Support recruitment partner,"

They cant all be top dog

They are top dog if you include all the white collar and blue collar placements combined.

SNOOPY

[Snoopy]

I finally found time to play the webcast of the AGM.

http://www.awfmadison.co.nz/video-awf-madison-annual-shareholders-meeting-july-2018

I somehow think it would be better if Keenan and Bennett would just publish the text of their speeches straight, rather than taking us through all the video banter. But I guess we wouldn't know that just retired director Ted van Arkel is now the proud owner of a personally named AWF high visibility vest without that! Also we learned that this is to be Ross Keenan's last year with the business.

Nevertheless as a shareholder a few useful things were clarified for me.



I have read Simon Bennett's CEO report in AR2018 twice now, and I have to admit a new cloud of confusion has descended as a result to baffle me.

Bennett gives a backhanded serve to the new labour lead government. He mentions something about employing triangles.


The 'Triangular Employment" proposed legislation will give contractors the same rights as employees. While being open to this as 'emerging legislation', I took Simon Bennett's tone of this change to be negative for AWF. However, later on answering a shareholder's a querstion about the 'LSG Sky Chefs' (suppliers of catering to airlines docking at Auckland Airport) court case, in which the temps were not supplied by AWF, Bennett's tone changed.

http://www.etu.nz/labour-hire-court-win-lsg-sky-chefs/

Bennett said AWF tendered for this contract, but were well beaten. Part of the problem is that the 'successful' agency was paid a lump sum and subsequently dished this straight out to their 'independent contractors' leaving it to the workers to pay their own tax. The IRD are never happy when they fail to get their slice! Bennett took the view that industry regulators were not at the top of their game, and that the suppliers of blue collar workers may require to be licenced in the future. This could play into the hands of the more responsible industry participants like AWF. He also said that the Skychef's case highlighted the need for health and safety and holiday's act compliance, both of these being a focus for AWF but not for some of their 'fringe' competitors.

Bennett said pricing Blue Collar work was difficult when there are few industry standards. He left the impression that Triangular Work agreements might actually end up playing into the hands of AWF, as the 'fringe competitors' failed to cope.



Then goes into a long diatribe on the latest buzz-phrase 'Managed Service'. Please feel free to correct me if I have this wrong.....

'Managed Service' is about managing a long term temporary workforce. (it is always worrying when I open a paragraph with a tautology). Put simply, AWF lends workers to an organization, then takes the worker back to redeploy elsewhere. However the place to which the worker was originally deployed is 'kept in the loop'. They are told where the worker has been sent to, what new training they are getting and how their skills are developing. The idea is that later that same worker can go back to where they were originally deployed, as an upskilled higher paid more desirable 'work unit'. And that previous employer deployments are kept salivating as they embrace the career development of their former charge.

"For the candidates or workers , it allows certainty for periods of work with the client and future opportunities as they cycle out of the assignment."

How does cycling in and out of an assignment create certainty for the worker again?


'Managed Service', as pioneered in scale on the census contract, required the contracting company (AWF Madison) to:

1/ Assess
2/ Deploy
3/ Manage and
4/ Pay

the contracted staff. This is a far cry from delivering staff to the door of the department of statistics and collecting a one time fee. AWF were also reponsible for the training and replacement of census employees. He also predicted that margins would rise once the customers realised just what they were paying for. NZ has only about half the 'contingent workforce', in terms of the percetage of such people employed, that Australia has. So 'managed service' could well be the 'growth engine' for Madison going forwards.

Bennett noted that the best market conditions for the AWF Madison group was not when the economy was doing best, as there was a fall off in demand for contingent labour in thes circumstances. The exception to this observation was in the IT space where 'Absolute IT' were going gangbusters irrespective of business confidence. 'Absolute IT' are currently no.1 in IT placement within NZ. Bennett notes that the business is changing. Artificial Intelligence, Technology, Machine Learning and the very nature of work could be seen as threats. But Bennett sees these changes as opportunities.

AWF are very pleased to have ASB as their new bankers, and plan to renew their banking facilities early.

Asked about future acquisitions, once the debt is paid down, Bennett suggested that something in the 'service space', perhaps bringing some of the compliance procedures 'in house' could be on the agenda, ahead of buying out an agency competitor. Asked about the threats from the software space (for example 'Linkedin' and 'Seek') Bennett said he saw the real value of AWF in the personal referrals, contacts and deep knowledge of the local market. These personal contact advantages, he did not think were under threat from generic algorithmic software tools.

SNOOPY

[minimoke]

The 'Triangular Employment" proposed legislation will give contractors the same rights as employees. While being open to this as 'emerging legislation', I took Simon Bennett's tone of this change to be negative for AWF. This is not emerging legislation . It has been around since the last Labour Govt with Darien Fenton

However, later on answering a shareholder's a question about the 'LSG Sky Chefs' (suppliers of catering to airlines docking at Auckland Airport) court case, in which the temps were not supplied by AWF, Bennett's tone changed.

...

Bennett said pricing Blue Collar work was difficult when there are few industry standards. He left the impression that Triangular Work agreements might actually end up playing into the hands of AWF, as the 'fringe competitors' failed to cope.[QUOTE=Snoopy;726847] Hopefully Bennet explained to you that the laws only apply to good employers who follow the laws. The Sky Chef arrangement was dodgy from the start and Labour Inspectors should have been all over this. Same as the Plastic company that also exploited these types of arrangements and made the owner megabucks on sale of the company.

Hopefully he explained to you the new law will put labour hire people (employees and "contractors) on the same footing as the main employers own employees. That pulls the rug out of the main competitive advantage labour hire companies have over employers running their own in-house pool of temps.


[QUOTE=Snoopy;726847]'Managed Service', as pioneered in scale on the census contract, Nothing "pioneering " in htis model. It may be that its just AWF's first shot at it. required the contracting company

He also predicted that margins would rise once the customers realised just what they were paying for. Seriously? AWF had not already sold the benifits of the solution and hte value of it already? Cripes.


NZ has only about half the 'contingent workforce', in terms of the percetage of such people employed, that Australia has. So 'managed service' could well be the 'growth engine' for Madison going forwards. Thats comparing apples with carrots

[Snoopy]

Hopefully Bennet explained to you that the laws only apply to good employers who follow the laws. The Sky Chef arrangement was dodgy from the start and Labour Inspectors should have been all over this. Same as the Plastic company that also exploited these types of arrangements and made the owner megabucks on sale of the company.


Well, LSG Sky Chefs got their comeuppance through the courts in the end. I am not sure at what point the inspectors should have pulled Sky Chefs up. But I think this very point of better governmental oversight was the 'positive' that Bennett saw for the reputable operators going forwards.

And if that plastics guy is the one I am thinking of - the one who sold his plastic storage box manufacturing business to the Americans - did he not include in that sales agreement, a number of job years guaranteed for his NZ employees, with the rentention of their existing wage rates and conditions? He sounded like a guy who really wanted to look after his ex-workers!



Hopefully he explained to you the new law will put labour hire people (employees and "contractors) on the same footing as the main employers own employees. That pulls the rug out of the main competitive advantage labour hire companies have over employers running their own in-house pool of temps.

Nothing "pioneering " in this model. It may be that its just AWF's first shot at it. required the contracting company


I guess it is hard to compete with a customer who has their own pool of temps. The reason that AWF exists is that most companies do not have their own pool of temps. Once a business gets large enough, I guess having your own pool of temps will always be the better option. This evolution sounds like 'par for the course' for any sufficiently growing client customer though.

Curiously both the Department of Statistics and Inland Revenue are both reasonably sized organizations. Yet both have now chosen to go with AWF 'Managed Service' for some parts of their operations, whereas before they did their own recruiting hiring and firing. This must be positive for AWF's 'Managed Service' offerings going forwards?



Seriously? AWF had not already sold the benifits of the solution and the value of it already? Cripes.


I don't think it was a question of AWF not selling the benefits of offering superior health and safety and making sure all the payments to contractors included the right holiday pay. I think it was a question of rival firms offering cheaper deals that did not take health and safety seriously enough, and ended up incorrectly calculating contracted staff entitlements to 'save money'. IOW Bennett thought that those who went for the 'cheaper option' have now learned their lesson and would come back to AWF.

SNOOPY

[minimoke]

One side of the triangle's view: https://www.stuff.co.nz/business/107163069/labourhire-workers-do-the-same-job-earn-less

[winner69]

Snoops .......do you think that one day things will go alright with Allied with having to report bad news

Looks like profits going backwards again

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/AWF/325389/288702.pdf


Could call these one offs and show normalised profits going gangbusters so no worries

[Snoopy]

Snoops .......do you think that one day things will go alright with Allied with having to report bad news

Looks like profits going backwards again

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/AWF/325389/288702.pdf


Could call these one offs and show normalised profits going gangbusters so no worries

So we quietly crept up to $1.89 in anticipation of the half year result. Then today we are back to $1.82, about where we have been bumping along post the last dividend payment. The profit forecast announcement was a bit ambiguous to me. I get the $800,000 provision against two building companies in Christchurch and one in Auckland going bad. Although I note with interest there has been no change in management announced as a result. No 'fall guy' this time! Next they say:

"The costs of repositioning our (temporary) workers and those not immediately deployed in the first six months was approximately $1.0m."

then they say

"We expect the impact on the AWF Madison group business will mean a half year profit will be $1.0m to $1.5m lower in the first half year."

$800,000 + $1,000,000 = $1,800,000

If all of those costs are tax deductible then I get a net profit effect of:

0.72 x $1,800,000m = $1,296,000m, say $1.3m

So why the vagueness of a projected $1.0m to $1.5m net profit reduction?

The half year ended on 30th September. So with 'books closed', it seems odd that AWF can't be a bit more precise with what is happening. Perhaps they are trying to diddle their full time temps out of holiday pay to appease shareholders, and are not quite sure if they can get away with it yet? I as a shareholder would abhor such behaviour. The $800,000 provision seems firm. But why is there a 50% 'unknown' concerning the half year net profit? Is there some other legal fiddle that AWF can do that will reduce or increase these losses to window dress the accounts?

Last years's interim net profit for six months was $3.418m. So we are looking at between $1.648m and $2.148m for HY2018? That is a fall in profit of between 37% and 52%! Ouch , and double ouch because HY2017 was down on HY2016 as well! Last years interim dps was 8cps. I am picking that with the DRP in place AWF will swallow the dead rat and keep the interim dividend steady. I only say that because of the positive outlook the company has, with the purchase of 'Select', an established permanent and temporary recruitment agency in Dunedin. They wouldn't be splashing out money on that without having a fairly clear idea that earnings for the full year will be back on track.

I had a quick look at the 'Select' website:

https://www.select.co.nz/

I see the long standing CEO (20 years in the job) Karen Bardwell passed away suddenly in December 2017. Looks like a one branch operation based in Dunedin. 13 staff have their own website profiles so quite a good sized operation. AWF Madison don't do white collar recruiting in Dunedin, so it looks like a good fit. I wonder how much AWF Madison paid for it?

SNOOPY

[winner69]

All out in the open now Snoops but you will have to wait until the full Interim to work out where the damage was done

At least $2.1m is a profit .....even though down from $3.4m pcp

No doubt H2 will be a boomer

You did seem a bit down on them in your post Snoops but you have to understand that they have always been a bit obtuse in their reporting.

Like the heading they put up Lower blue collar revenue offsets strong first half profit ....pretty meaningless but a nice way we had a really really bad half year

[winner69]

No wonder the share price is $1.73 ...though it’ll go up today as punters ‘buy’ the 8 cent divie

At least the directors have faith ...buying more to support the share price.

You need to help them out Snoops and buy some more

[minimoke]

Interesting they bought Select Dunedin. Not a very diverse looking team there. All chicks with an honorary bloke by the looks.

[winner69]

Interesting they bought Select Dunedin. Not a very diverse looking team there. All chicks with an honorary bloke by the looks.

Job Board sort of says they want more blue collars than white collars

Found the job for you mini ...pre-requisite is owning steel capped boots
https://www.select.co.nz/Job-Board/66971-Traffic-Contollers

These MTCs need more skills
https://www.select.co.nz/Job-Board/66871-Manual-Traffic-Controllers

[minimoke]

Job Board sort of says they want more blue collars than white collars

Found the job for you mini ...pre-requisite is owning steel capped boots
https://www.select.co.nz/Job-Board/66971-Traffic-Contollers

Once again you have to ask how competent AWF is. Another dodgy advert and they should know better. Its the employers job to provide safety boots and the ad is in direct contravention of the law. More illegal activity on AWF's part. If they don't get this right (along with the rest of the dodgy stuff they have been found out about) then what else is being hidden / done.

Its a good job though - getting to stand all day and wielding power on unsuspecting motorists.

[Stranger_Danger]

Interesting they bought Select Dunedin. Not a very diverse looking team there. All chicks with an honorary bloke by the looks.

That is plenty diverse. Diverse is all about limiting the number of white dudes.

[Marilyn Munroe]

Interesting they bought Select Dunedin. Not a very diverse looking team there. All chicks with an honorary bloke by the looks.

If you do a social science degree your choices are limited to either;

Social work, clearing up the chaos created by ferals who will not look after their kids. or

Personnel management and recruitment.

Boop boop de do
Marilyn

PS. I have an acquaintance who refers to recruiters as gibbering baboons. I think he is being too harsh. Seeing them as the modern equivalent of the Royal Navies press gangs is more accurate.

[minimoke]

If you do a social science degree your choices are limited to either;

Social work, clearing up the chaos created by ferals who will not look after their kids. or

Personnel management and recruitment.

Boop boop de do
Marilyn

PS. I have an acquaintance who refers to recruiters as gibbering baboons. I think he is being too harsh. Seeing them as the modern equivalent of the Royal Navies press gangs is more accurate.
I see one of them has a different degree. Shame he doesnt apply what he ought to have learnt.
"With a work history in Compliance, Health and Safety and Human Resources, Matt brings a valued and wide variety of skills to the Industrial team. Matt has a Bachelor of Science Degree in Economics and Statistics, Diploma of Humans Resources Management and is currently completing a Graduate Diploma in Occupational Health and Safety Management."

[Sideshow Bob]

Interesting they bought Select Dunedin. Not a very diverse looking team there. All chicks with an honorary bloke by the looks.

Very sad that Karen Bardwell (founder) passed away last year - a good lady.

[Snoopy]

No wonder the share price is $1.73 ...though it’ll go up today as punters ‘buy’ the 8 cent divie



It has done more than that. Share sales on Friday at $1.85, up 12c. A really robust performance in this shifty market. And the ex date isn't until November 19th



At least the directors have faith ...buying more to support the share price.

You need to help them out Snoops and buy some more


I am doing what the directors (or at least the 'shareholding directors' like Simon Hull) are doing Winner. I am taking up the maximum shares I can through the dividend reinvestment plan. As for buying more on market, I will keep my gunpowder dry a little longer. This 'controlled reduction' (?) to providing workers for construction projects could be a permanent hit to the AWF side of the business.

As Simon Bennett said in the Interim Report for FY2019:
"It is clear that there is opportunity in the construction sector and that, well-managed, the opportunity exists to deploy large numbers of migrant workers. We will be conservative in the degree to which we continue to participate for the foreseeable future."

If so that recovery I am always predicting could be to a lower level than I was thinking. I see that under the latest restricted share scheme, presumably to incentivise the employees, that the 2021 to 2014 'in the money' redemption price only needs to be above $1.90. Probably employees going to work and eating their lunch would achieve this. That isn't much of a 'growth vision' for senior management to grapple with.

SNOOPY