AWF, blue collar workforce specialist, buys Madison for up to $36M; shares climb

Wednesday 2nd October 2013

AWF Group shares rose to the highest in more than two months after New Zealand's largest provider of temporary staff agreed to buy Madison Group for as much as $36 million to add recruitment of professionals to its core business of recruiting labourers.

Shares in AWF jumped as much as 9.2 percent to $3.20 and recently traded up 2.4 percent at $3. Madison had sales of more than $56 million in the year ended March 31, compared with AWF's revenues of $131 million.

AWF wants to bolster earnings by diversifying its business away from its core base of "blue collar" workers into the "white collar" recruitment and contracting sector where Madison is the market leader. AWF expects earnings per share for the combined underlying business to lift by more than 50 percent after a complete financial year in 2015, allowing steady growth in dividends, it said today.

"This company has had a good level of measured growth over a period of time, they have continued to focus on strong New Zealand brand businesses to add to their portfolio - it's encouraging," said Nigel Scott, a director at Craigs Investment Partners. "This is a solid existing business which will obviously immediately add to their portfolio. The market is rewarding them for a good growth strategy."

AWF, which listed on the share market in 2005 in an initial public offering of $1.50 a share, has been broadening its business away from providing blue-collar labourers into higher-skilled staff and developing into sectors where it is either not present or not strong.

Earnings before interest, tax, depreciation and amortisation in AWF's core business fell by 15 percent to 20 percent in the six months ended Sept. 30 on a small increase in sales as key areas of forecast growth such as the rebuilding of earthquake damaged Christchurch haven't yet eventuated, the company said today.

In contrast, Madison is experiencing strong revenue and earnings growth in the current financial year, AWF said, without providing details.

"AWF Group had established a very strong market position in the largely blue collar sectors but as indicated by the current flat performance expected for the first six months this year, a broader sector involvement is required to achieve sustainable growth," managing director Simon Hull said in the statement.

AWF has agreed to pay $30 million at the completion of the acquisition with an additional $6 million to be paid should earnings exceed certain thresholds by late November 2014.

AWF has agreed the required debt facilities with its bankers. It currently has no debt.

(BusinessDesk)

BusinessDesk.co.nz

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