AGL - Accordant Group. was previously AWF Madison, Allied...

[stoploss]

Well positioned .... and another name change !!!

28 May 2015

AWF Group (AWF) has delivered a significant lift in earnings for the year

ended 31 March 2015 in line with guidance provided.

Revenue rose 33% to $197.5 million and net profit lifted 37% to $5.4 million.

Underlying earnings after tax - which, in the opinion of the Board, more

clearly reflect the operating performance of the business - lifted 45% to

$6.8 million (25.8 cents per share)

As a consequence of the strong earnings achieved the company has declared a

final dividend of 8 cents per share (up 5% on last year) payable on July 1 to

shareholders registered as at 24 June. Directors noted that total dividend

for the year at 15.2 cents (fully imputed) represents an 8.6% increase

overall, and that this steady lift in dividend was consistent with earlier

indications given.

[Snoopy]

Looking the goods

Hi All,

I have looked at AWF Limited before. But it always looked a bit expensive to my superficial analysis. I was also concerned about liquidity and how I might have to bid up the share price just to get a modest stake.

However, during the rights issue period I got a call from my broker. A shareholder with a decent stake wanted to sell up and move to Australia. Was I interested in picking up a decent sized parcel of shares? A back of the envelope calculation and I was in. I have been a bit distracted with other life matters since. So I haven't had a chance to have a closer look at AWF until now. I hope you fellow (and potential shareholders) will find my AWF 'snoopshot' treatment interesting!

SNOOPY

[Snoopy]

I hope you fellow (and potential shareholders) will find my AWF 'snoopshot' treatment interesting!

The Annual Report for FY2014 says that: (AWF Limited) is New Zealand's largest recruitment company. This is a position achieved through 27 years of growth from modest beginnings.

The company mission statement is:
"To be the leading provider of quality recruitment and staffing solutions to NZ business."

Measured by their own standard, AWF have already fulfilled their vision as they are 'number 1' already. The scale requirement for the business is therefore satisfied.

Conclusion: Pass Test

SNOOPY

[minimoke]

Snoopy. Buying into a down trending stock - thats brave.

I must have a closer look at the numbers but a quick glance at sales I didn't think they looked too flash.

1/2 year September = $98.6m in sales. Full year should at least be double so they have manged to tread water in second half.

Also need to account for maddison revenue. In 2013 that was around $50m. Not sure what it is now but worth looking at.

First glance rosy picture seems to be helped by maddison acquisition rather than actual growth in sales.

[minimoke]

Test one. A top three player.
Conclusion: Pass Test

SNOOPY

interesting test snoopy. It's the only player listed on the local market. So comparative numbers hard to come by.

And we don't have a definition of your "top" or awf's "largest".

But credit it where it's due: awf is big so in your context and back of an envelope analysis I'd probably give it a pass on this test as well

[Biscuit]

Snoopy. Buying into a down trending stock - thats brave.

I must have a closer look at the numbers but a quick glance at sales I didn't think they looked too flash.

1/2 year September = $98.6m in sales. Full year should at least be double so they have manged to tread water in second half.

Also need to account for maddison revenue. In 2013 that was around $50m. Not sure what it is now but worth looking at.

First glance rosy picture seems to be helped by maddison acquisition rather than actual growth in sales.

Looks like much of the extra revenue this year was swallowed up by increased employee benefits. Maybe those Madison White Collar employees are more expensive commodities to trade.

[Snoopy]

I hope you fellow (and potential shareholders) will find my AWF 'snoopshot' treatment interesting!

For this exercise I have removed the group's foray into the healthcare sector. I am referring here to the groups purchase of Panacea Healthcare on 04-10-2010, the additional purchase of Nursing NZ on 19th March 2012 and the subsequent sale of the lot on 31-08-2012.

Earnings figures calculated are adjusted net profit after tax.

2010: $2.002m/26.125m= 7.7cps
2011: ($3.212m - $0.003m +0.7x($0.465m) )/26.125m = 13.5cps
2012: ($2.877m +0.72x($0.167m+$1.100m) )/26.125m = 14.5cps
2013: $4.952m/25.805m = 19.2cps
2014: ($3.952m+0.72x(0.095m+0.257m) )/25.804m = 16.3cps
2015(*): $5.416m/ 32.463m =16.7cps

Notes:

1/ Panacea Healthcare NPAT (an non continuing business stream) removed from results for FY2011, not included in FY2012 and FY2013.
2/ Business acquisition costs removed from FY2011, FY2012 and FY2014.
3/ Goodwill impairment removed from FY2012.
4/ Due diligence cost removed from FY2014
(*) FY2015 results based on abbreviated results released. When full result becomes available it may require adjustment.

There was one dip in the underlying earnings trend following FY2013, but apart from that the eps path is steadily upwards.

Conclusion: Pass test

[Snoopy]

Snoopy. Buying into a down trending stock - thats brave.

The eps trend is solidly upwards. Not that this in itself is sufficient reason to buy in. But it is sufficient reason to look a little deeper.

I must have a closer look at the numbers but a quick glance at sales I didn't think they looked too flash.

1/2 year September = $98.6m in sales. Full year should at least be double so they have managed to tread water in second half.

Also need to account for Madison revenue. In 2013 that was around $50m. Not sure what it is now but worth looking at.

First glance rosy picture seems to be helped by Madison acquisition rather than actual growth in sales.

I am not too worried myself about what has happened in the last half year. I intend to hold my AWF shares for many years.

The eps trend is still improving despite all of the extra shares issued in the recent rights issue. I have not looked at whether the previous business or the Madison acquisition has contributed to this growth. IMO it is unfair to judge that until Madison is bedded down. But everything is all one happy family now. So to some extent trying to discern what part of the business is doing the growing is less important than finding out if the overall business is still growing, which it is.

SNOOPY

[Snoopy]

I hope you fellow (and potential shareholders) will find my AWF 'snoopshot' treatment interesting!

ROE= (Net Profit)/(EOFY Shareholders Funds)


2010: $2.002m /$18.588m= 10.8%
2011: $3.535m /$19.913m = 17.7%
2012: $3.789m /$19.201m = 19.7%
2013: $4.952m /$21.607m = 22.3%
2014: $4.205m /$20.763m = 20.3%
2015(*): $5.416m/$35.931m =15.1%

The big improvement from FY2010 has been sustained. A significant drop in the FY2015 is because of the newly enlarged equity base. But even with this, AWF is earning well above its cost of capital.

Conclusion: Pass test

SNOOPY

[Snoopy]

I hope you fellow (and potential shareholders) will find my AWF 'snoopshot' treatment interesting!

Margin = Net Profit/Sales

2010: $2.002m /$70.329m = 2.85%
2011: $3.535m /($95.800m - $7.000m) = 3.98%
2012: $3.789m /($119.264m-$14.349m)= 3.61%
2013: $4.952m /($138.852m - $8.375m)= 3.79%
2014: $4.205m /$148.691m = 2.83%
2015(*): $5.416m/$197.5m = 2.74%

Note: For FY2011, FY2012 and FY2013 I have removed the healthcare unit profit and the associated turnover.

Margins were certainly raised above inflation between the base year FY2010 in comparison with the next subsequent three years. The last two years have seen a decline back to FY2010 margin levels. Is this because Madison is inherently 'lower margin'? AWF have already shown they are prepared to deal with below par margin businesses. That is why they sold their healthcare assets. So I am prepared to back AWF management and let them work some margin magic going forwards, as they have done before.

Conclusion: Pass Test

SNOOPY