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Australia – Ashley Services H1 revenue hit by exit of labour hire contract, but sees lift in profitability

12 February 2019

Australian training and labour hire firm Ashley Services (ASH: ASX) reported revenue for the six-month period ended 30 December 2018 of AUD 148.1 million (USD 104.8 million), a decrease of 12.6% compared to the previous year.

(AUD millions) H1 2019 H1 2018 Change H1 2019 (USD millions)
Revenue 148.1 169.5 -12.6% 104.8
EBITDA 4.5 3.8 20.2% 3.1
Net Profit After Tax 2.7 2.2 24.6% 1.9

The prior period included AUD 30.6 million (USD 21.6 million) of revenue related to a single contract which the company exited at the end of the full year 2018. Excluding this prior period revenue, first half revenue for the group was up by AUD 9.3 million or 6.7%, with growth experienced across all divisions.

Net profit after tax for the period stood at AUD 2.7 million (USD 2.9 million) on the back of a strong performance from the Labour Hire division, an improving Training division and further reduction in corporate overheads.

The company operates two primary business streams: Labour Hire and Training. Revenue is broken down as follows:

(AUD millions) H1 2019 H1 2018 Change H1 2019 (USD millions)
Labour Hire 144.1 165.9 -13.1% 101.9
Training 4.0 3.5 14.2% 2.8

The Labour Hire division is made up of Action Workforce (blue-collar labour hire), Concept Engineering (technical labour hire) and Blackadder Recruitment (white-collar recruitment).

Labour Hire revenue was down 13.1% on the prior year, due to the absence of AUD 30.63 million from the exited contract. Excluding this contract, Labour Hire revenue was up 6.5% year on year with Action Workforce up by 5.2%, Concept Engineering was up by 14.4% with Blackadder Recruitment experiencing modest growth.

The group’s training division operates in three states: Victoria, Queensland and Western Australia. The Victorian business has been improving month after month and is delivering strong results. Western Australia also remains profitable while the Queensland operation continues to improve.

“We look forward to continued improving profitability from our Training division, as we continue to operate under a strong culture of compliance,” the group stated.

Ross Shrimpton, Managing Director, commented, “Our first half result represents a pleasing lift in profitability as we successfully navigated the exit of a large revenue, but marginally profitable contract in our Action Workforce business. It was also pleasing to see our Training division exhibit clear signs of improvement off the low base of a year earlier.”

“We remain on the lookout for acquisition opportunities and the lack of announcements in this regard is in no way any reflection of a lack of effort,” Shrimpton said. “We have evaluated a number, but as yet none have met our requirements. That said, we do see the sense in the appropriate, complementary acquisition for the Group and are continuing to explore opportunities.”

In trading today, Ashley Services Group shares closed at AUD 0.28 (USD 0.20), up 9.80% on the day and 9.68% below its 52-week high of AUD 0.31, set on 27 September 2018. Based on its current share price the company has a market value of AUD 36.71 million (USD 25.98 million).

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