Minimum Debt Repayment Period: EOFY2018
Quote:
Originally Posted by
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
AGM Address FY2018 comments
I finally found time to play the webcast of the AGM.
http://www.awfmadison.co.nz/video-aw...ting-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.
Quote:
Originally Posted by
Snoopy
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.
Quote:
Originally Posted by
Snoopy
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