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  1. #721
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    Default Bad Debt Provisions: FY2018 Perspective

    Quote Originally Posted by Snoopy View Post

    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%

    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
    Quote Originally Posted by winner69 View Post
    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
    Last edited by Snoopy; 07-06-2021 at 12:30 PM.
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  2. #722
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    Default Buffett Test 2: +ve eps trend over 5 years (one setback allowed) FY2018 Perspective

    Quote Originally Posted by Snoopy View Post
    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
    Last edited by Snoopy; 06-08-2018 at 09:42 AM.
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  3. #723
    Speedy Az winner69's Avatar
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    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
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  4. #724
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    Quote Originally Posted by winner69 View Post
    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
    Last edited by Snoopy; 07-06-2021 at 12:33 PM.
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  5. #725
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    Default Buffett Test 3: Return on Equity >15% for 5yrs (one setback O.K.) FY2018 Perspective

    Quote Originally Posted by Snoopy View Post
    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
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  6. #726
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    Default Buffett Test 4: Ability to raise margins (above inflation) FY2018 Perspective.

    Quote Originally Posted by Snoopy View Post
    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
    Last edited by Snoopy; 05-06-2021 at 09:26 AM.
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  7. #727
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    Default Buffett Test 1: Scale in Chosen market (a top three player) FY2018 perspective

    Quote Originally Posted by Snoopy View Post
    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
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  8. #728
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    Default Buffett Test Summary FY2018 Perspective Round Up

    Quote Originally Posted by Snoopy View Post
    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
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  9. #729
    Speedy Az winner69's Avatar
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    Quote Originally Posted by Snoopy View Post
    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.
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  10. #730
    percy
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    Quote Originally Posted by Snoopy View Post
    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.

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