29/05/2019 16:35  
REL: 1635 HRS AWF Madison Group Limited  
29 May 2019  
One-offs and refocus affect revenue, earnings at AWF Madison  
AWF Madison Group [NZX:AWF] today announces lower revenue and earnings for  
the March 2019 financial year as a result of a refocus in our blue collar  
division, AWF, and non-recurring factors. The level of Dividend is maintained  
as a result of continuing strong cash flow and confidence in the year ahead.  
o Revenue down 4.1% to $267 million  
o NPAT down to $2.0 million  
o Acquisition of JacksonStone & Partners complements and extends our presence  
in permanent and contracting recruitment  
o Final dividend steady at 8.2 cents per share  
Lower Group revenue of $267.8 million was driven largely by AWF. A highly  
successful year at Absolute IT helped lift the revenue contribution from our  
white collar sector to just under 57% of Group revenue, from 51% in FY18.  
At AWF, revenue fell by 10.8% to $115.8 million as the division continued to  
shift focus from high cost-to-serve customers in favour of higher-margin  
As identified in the Interim result announcement, there have been a number of  
one-off or non-recurring factors that affected AWF's profit contribution,  
which decreased from $4.8 million to $1.3 million.  
o A number of customers in the construction sector were placed in  
receivership or liquidation, impacting earnings and resulting in bad debt  
write offs of $1.1 million.  
o Regulatory issues impeded AWF from redeploying migrant workers on  
guaranteed wages to cities and regions where they were needed, at a direct  
cost of $1.5 million, plus lost opportunity margin.  
AWF Madison CEO Simon Bennett said the Group was still committed to the AWF  
offer, but needed to address the division's focus, as announced during the  
"We've made good progress re-evaluating business that was consuming large  
amounts of resource for very little return.  
"AWF has many long-standing customers who we value highly. We've been  
redeploying resource to better service them, and we're now better positioned  
to look for, and win, similar customers.  
"At a Group level, we see our ability to source both blue collar and white  
collar workers for our customers as a unique competitive strength."  
Failures and losses in the construction sector were unprecedented in AWF's  
history. Bennett said that these had affected AWF in two separate ways, with  
a number of customers unable to pay money owed to AWF, and in addition,  
company liquidations around the country having left some AWF migrant workers  
"Regulatory barriers prevented us from redeploying them where they were  
needed," Bennett said. "We took the decision to continue to retain and pay  
them, and we are engaging with officials to see how we can avoid these  
roadblocks in the future."  
Madison's revenue and earnings contributions were lower than in FY18, which  
had included a large one-off Managed Service contract.  
Secured in March 2018, Madison's new Contingent Workforce Managed Service has  
successfully completed its first year of a four-year contract. Madison will  
keep seeking opportunities for these innovative contracts, which are  
attracting considerable customer interest.  
Absolute IT continued its strong financial performance in its second  
full-year contribution since acquisition in late 2016.  
The IT recruitment market remained buoyant throughout the year, allowing  
Absolute IT to increase revenue, gross profit and EBITDA.  
During the year, the Group repaid $3 million of bank debt. At balance date  
term debt stood at $33 million.  
A fully imputed Dividend of 8.2 cents per share will be paid on 9 July 2019  
to shareholders on the register at 24 June 2019. The Dividend Reinvestment  
plan will continue to apply.  
AWF Madison has committed to a new initiative, The Work Collective, which is  
dedicated to improving social outcomes through employment. The purpose is to  
support people who, for various reasons, experience work to be unattainable  
and may also find the employment process inaccessible.  
Bennett said a number of the Group's customers have committed to support this  
initiative by offering work opportunities.  
"We've been looking for some time for a way we can leverage our expertise,  
networks and resources to help those who want to work, but face barriers to  
employment." Bennett said.  
The Work Collective will function as a social enterprise whose primary  
purpose is to grow employment opportunities for marginalised people. The  
majority of profits will be reinvested into support services for these  
JacksonStone & Partners Limited acquisition announcement (see below):  
o Earnings accretive  
o Purchase Price payable in tranches, subject to achievement of performance  
o Acquisition funding from existing debt facilities  
The outlook for FY20 is positive.  
Madison and Absolute IT are performing strongly, underwritten by continued  
high levels of economic activity and JacksonStone will contribute positively  
to 10 months of the current year.  
While further failures among AWF's construction industry customers cannot be  
ruled out, as a result of applying stricter credit terms, AWF now has a  
higher-quality customer book, with no large concentration of exposure.  
Bennett said AWF had reduced its cost base, and was now geared to return 4%  
to 6% EBITDA on turnover approaching $120 million.  
Simon Bennett  
For the Board:  
Chief Executive  
Ross Keenan, Chairman 021 685 655  
For further information contact Simon Bennett:  
09 917 1010  
JacksonStone & Partners Limited  
JacksonStone was established in 2011. The business has a very experienced  
team of directors, consultants and support staff. The business has gone from  
strength to strength and now has 30 staff. The consultants have an average of  
15 years industry experience which is well beyond the average of our existing  
AWF Madison businesses. Its reputation for quality service delivery is  
JacksonStone has successfully recruited CEO and C-suite roles for large  
numbers of central and local government organisations along with high profile  
corporate and not-for-profit clients. The breadth of service includes  
executive search, recruitment and top-level contracting assignments.  
o Turnover for year ending 31 March 19 in excess of $32 million  
o Normalised EBITDA for year ending 31 March 19 in excess of $3.0 million  
o Growing contribution from ongoing search and recruitment revenue above 30%  
of gross margin  
The transaction is structured with an initial payment of $6.7 million on  
closing and an estimated $3.8 million payable in three instalments over the  
next couple of years, subject to JacksonStone achieving defined performance  
targets. This aligns the vendors with AWF Madison's goals over the coming  
years and provides an incentive for the vendors to continue to drive  
There are great synergies with our other businesses and we are excited at the  
prospects for a broader offer amongst our white collar businesses.  
End CA:00335227 For:AWF Type:FLLYR Time:2019-05-29 16:35:33  

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