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Australia – Chandler MacLeod full year revenue and net profit down

14 August 2013

Chandler MacLeod (CMG: ASX), one of the largest recruitment firms in Australia, announced revenue for the full year ending 30 June 2013 of AUD 1.5 billion (USD 1.37 billion), a fall of -3% from AUD 1.55 billion (USD 1.41 billion) in 2012. Gross margin increased from 13.6% in 2012 to 13.8% in 2013. Net profit for the year fell to AUD 11.1 million (USD 10.1 million) from AUD 16.1 million (USD 14.7 million) last year, a drop of -31%. In May, Chandler MacLeod had predicted net profit after tax and before restructuring and acquisition costs to be in the range of AUD 17 million (USD 15.5 million) and AUD 19 million (USD 17.3 million).  

Cameron Judson, managing director of Chandler MacLeod, commented: “The continued deterioration of trading conditions in the second half resulted in a subdued performance in the core Staffing Services business. Despite this, our strategy to change our business mix delivered an improved group performance in the second half.”

“The Vivir (Rehabilitation Services for the elderly) and AHS (Hospitality) business were strong performers and they contributed to a very pleasing increase in our EBITDA margin in the second half. Our cost reduction programme has delivered significant savings in the year. There are further operating efficiencies through process re-engineering to be extracted from the business over time,” he continued.

The Staffing Services Business segment reported revenue of AUD 1.2 billion (USD 1.09 billion), a fall of -7.6% compared with revenue of AUD 1.3 billion (USD 1.2 billion) a year ago. Revenue was impacted by the run-off of contracts and a significant fall in contractor hours worked in the second half of the year, driven in part by the slowdown in the mining and mining services sectors. Restructuring the Staffing Services business and the cost reduction initiatives mitigated the impact of volume and margin pressure, enabling EBITDA margin to be largely maintained despite difficult trading conditions.

Revenue for the Manages Services business segment increased substantially from AUD 172.7 million (USD 157.5 million) last year to AUD 231.6 million (USD 211.2 million) this year, an increase of +34.1%. Increased revenue was partly attributable to the purchase of Vivar on 5 December 2012 and also the first full year revenue for AHS. Growth was offset by the reduced profit contribution from the Aviation business, due to the planned reduction of maintenance at Avalon and the run-off of another large contract.       

Specialist Products reported revenue of AUD 36.7 million (USD 33.5 million), a fall of -10% compared with revenue of AUD 40.8 million (USD 37.2 million) a year ago. The drop in revenue is attributed to weaker results from the Consulting business. Lower assessment activity and clients deferring learning and development assignments impacted business revenue during the second half of the year.

International business segment revenue fell -7.5% year-on-year, from AUD 80.5 million (USD 73.4 million) in 2012 to AUD 74.5 million (USD 67.9 million) this year. Permanent revenue held up well despite difficult trading conditions in most regions. Contracting revenue declined in Indonesia due to regulatory requirements on maximum contracting terms. Cost cutting measures offset the revenue drop particularly in New Zealand. The IT sector reported growth in Singapore and Hong Kong.

Commenting on the firm’s outlook, Mr Judson said: “Business confidence is still at quite a low level, and the mining sector is continuing to retreat from its highs. We expect the softness in the demand for Staffing Services to continue into 2014. Offsetting some of this market weakness is a healthy level of new business wins. The margin reductions incurred in 2013 have been largely matched by continued efficiency initiatives. As announced in May, further cost reduction initiatives are planned for 2014.”

“We cannot predict when business confidence will recover; however, interest rate reductions and a clearer political environment will no doubt play a part. As a result it is difficult to forecast future demand for many of our services with certainty. We do have the benefit of our cost reduction initiatives and we now have several businesses which do not fluctuate with changes in business conditions. Therefore we look forward to 2014 with cautious confidence, but in the knowledge that there are circumstances where market conditions could deteriorate further,” he added.

Many commentators do not expect that any improvements in the Australian staffing markets are likely until after the federal elections scheduled for 7 September.

in trading today, the company’s share price outperformed expectations growing by +3.23% to AUD 0.48 (USD 0.43), an increase of +21.45% compared with a year ago. Based on its current share price, the company has a market value of AUD 225.5 million (USD 205.6 million).

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