A lack of growth in the regions has hurt the performance of listed employment agency Allied Work Force, its chief executive says.
"Our expectations for 2014 were high, perhaps too high," Allied Work Force (AWF) CEO Mike Huddleston told shareholders at the company's Annual General Meeting in Auckland this morning.
While the business in Auckland had grown, predominantly on the back of construction and infrastructure development, the Christchurch market had not developed as expected for the second year in succession. Wellington and the regional centres showed no growth in either revenue or margin, Huddleston said.
Wellington had not been a particularly strong base for AWF in recent years, Huddleston said.
"Downsizing of government and a migration of businesses northwards has slowed any development in the city and manufacturing opportunities are few and far between."
However, earthquake strengthening work, a strengthening construction market and a number of large infrastructure projects just commencing were improving the outlook in the capital.
Development in Christchurch has been disappointing, Huddleston said.
"Early in the year we had waited for (and waited for) Christchurch to kick in, in a big way," he said. But expectations had proven overly optimistic about the speed of development growth, although the team remains very positive about the city.
And filling jobs remains a problem. Huddleston said AWF faced the same challenges as every other contractor in Christchurch, a shortage of skilled and semi-skilled staff.
"The difference of course is that our job is to find these people for those other contractors."
The company had responded in Christchurch by recruiting overseas, bringing in staff from the UK, Samoa and the Philippines, he said.
"We are continually widening the scope. If it wasn't for the backpacker workforce though, it is fair to say that Christchurch would be in dire straits."
Outside of the metropolitan areas, business activity has suffered as infrastructure development funding has been directed to the cities since the Christchurch earthquakes, he said.
AWF chairman Ross Keenan said group turnover was on track to increase to about $200 million for the year to March 30, 2015, compared with $149m this year.
While profit had fallen by 43 per cent to $3.95m this year, it could be "well over" $5m in the 2015 year, he said.
Keenan said AWF's acquisition of 'white-collar' employment agency Madison last November had been a large commitment but it had transformed the group into a full spectrum recruitment services provider.
However in the process of acquiring Madison, AWF's debt position had shifted from "virtually an ungeared balance sheet'' to ''a position of significant debt," Keenan said.
While this was "quite manageable under current trading conditions," Keenan said the board believed that a debt reduction programme in the current financial year would be appropriate.
Keenan said the company would take advice on how and when this would be achieved, but AWF would consider issuing new equity, either by way of a rights issue or a placement, or both.
Keenan said a "steady lift" on the 14 cents total dividend paid for 2014 was "achievable" in the year ahead, in line with a forecast made last November.