APM Workcare's annual NZ earnings shrink

APM Workcare's New Zealand business reported a 19 percent drop in annual profit in 2017 as the Australian employment and rehab services provider's local unit added staff to meet new contracts.

Net profit fell to $1.4 million in the 12 months ended June 30 from $1.8 million a year earlier as gross margins shrank to 16.6 percent from 21.5 percent with a bigger spend on subcontractors, accounts for the local holding company show. Revenue climbed 26 percent to $30.7 million in the year, with APM New Zealand holding 12 contracts with the Ministry for Social Development to deliver employment services such as work preparation and placements, and a national contract with Accident Compensation Corp to provide vocational rehabilitation.

While APM NZ almost halved salaries and wages to $3.6 million, subcontractors fees jumped 64 percent to $19.8 million to meet the increased workload.

"APM's NZ business is aligning with our strategic plan to invest in future growth and further embed ourselves in the NZ market," general manager of corporate affairs Adrian Bradley said in an emailed statement. "The past financial year has demonstrated we are on track as we entered into new contracts and business lines, which resulted in additional staffing. We always expected this would impact slightly our results in the short term."

Perth-based APM started operating in New Zealand in 2012 and generated annual revenue of $8.3 million a year later in its first full year. The company attracted attention earlier this year when it was named as the operator of the country's first social bond - a funding mechanism where a third party takes on the risk of providing a service with the government offering incentives when certain benchmarks are met.

APM has been tasked with supporting people with moderate mental health issues back into the workforce. The five-year pilot is restricted to the Auckland suburbs of Manukau, Manurewa, Clendon, Papakura, Pukekohe and Waiuku, and seeks to place up to 1,700 people in work and support them to keep the job.

"Since the beginning of the year, APM has enjoyed the opportunity to work in a collaborative partnership with the NZ Government and community groups to deliver outcomes and find sustainable jobs for people under the social bond," Bradley said.

The New Zealand unit took on the riskier tranche of the $1.5 million social bond, investing $300,000 to get a 13 percent annual return on the base case placement rate of 43 percent, while philanthropic fund Wilberforce Foundation, Johnson & Johnson subsidiary Janssen-Cilag, and property developer Adrian Burr's Prospect Investment Management invested in the other tranche.

APM Workcare changed hands in late July with Quadrant Private Equity taking a 60 percent stake in the group, and earlier this month Ernst Young Perth managing partner Michael Anghie was appointed chief executive of the firm from March next year.

(BusinessDesk)