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New Zealand – AWF Group struggles in difficult market

14 November 2013

New Zealand-based blue collar temporary staffing provider AWF Group (AWF: NZ) reported revenue for the six months to the end of September 2013 of NZD 62.5 million (USD 51.4 million), an increase of +0.9% compared with NZD 61.9 million (USD 51 million) last year.

The company reported a fall of -20% in gross profit from NZD 3.5 million (USD 2.9 million) during the first half of 2012 to NZD 2.8 million (USD 2.3 million) in 2013. Net profit for the six month period dropped by -56.9% to NZD 1.9 million (USD 1.6 million) from NZD 4.4 million (USD 3.6 million) last year.

AWF Group had previously advised that it expected a reduction in earnings for the six month period compared with a year ago. The board noted that whilst turnover lifted marginally, EBITDA fell as projected business growth did not correspond with expansion of skilled resources.

According to the company’s financial statement, in 2012 the Group recognised the likelihood of strong growth in both the Auckland and Christchurch markets over 2013 and onwards. In anticipation of this growth, the staff levels in these key regions were expanded. Whilst Auckland largely lived up to this expectation, for the second year running the Group did not witness development growth in Christchurch. More significantly though, AWF’s business outside of the Metropolitan areas showed weakness due to declines in production activity and climatic conditions.

Ross Keenan, Chairman of the Board, commented: “Competition in the temporary recruitment industry is challenging and pressure on margins has increased. AWF chose during the period not to chase these margins down and lost two key clients as a result. This further exacerbated the growth slide.”

In October, AWF Group announced its intention to acquire Madison Recruitment Ltd and that this would be considered by shareholders at a special meeting on the 18 November 2013.

“Trading conditions have remained challenging throughout October and into November although seasonal improvement is evident. Whilst the Group is not expecting to recover lost ground from the first half and in fact may see a little more slippage compared to the same period in 2012, it is confident that aggressive cost management and development of recently added new business will see a return to growth in 2014,” Mr Keenan added.

In trading today, the company’s share price fell by -1% to NZD 3.00 (USD 2.47), an increase of 29.3% compared with a year ago. Based on its share price, the company has a current market value of NZD 77.4 million (USD 63.7 million).   

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