AWF Allied Work Force Group Limited

Allied Work Force Group Ltd

Annual General meeting (shareholders meeting)
Auckland Wednesday 18 July, 2007 at Allied Workforce Airport branch

1. Chairman's Address

Given this is our second AGM (after the first one to be held in a rather innovative location of the Britomart Transport Centre) - it is nice to hold the meeting at one of our branches so you can see our operations directly. As we have said to you before, Allied branches tend to be an incredible hive of activity up until 7am and then later in the afternoon as the crew return.

So this seemed an ideal time - given the team are out working to hold a shareholders meeting on our premises.

Just a reminder we currently have 29 branches having opened Kapiti, Queenstown, Hawera during the year.

Since year end we have brought Quin Workforce to Auckland - they are now established and operating from Anzac Avenue in the city. This is an important strategic move, very much part of supporting National account development.

It is my pleasure to introduce my fellow directors.
Simon Hull
Greg Webster
Ted Van Arkel
I would also like to introduce Mr Dave Sutherland, Chief Financial Officer and I want to say again as I said last year - Dave has done a wonderful job in what has been a pretty challenging year. I note in the first year I commented on Dave's wonderful job in the complex amalgamation of a number of small businesses - this year he has had the unwinding of a 60% acquisition and all of the disappointment that went with that - so Dave, thank you for the work that you do and continue to do for the Group.

Last year I commented this was a good story. A story of a business built on very hard work; a business with great management depth and accountability at all levels; a good business in a sector largely unknown but with huge growth potential and a business trading in a sector that we needed to lift awareness of.

Now I think for good reasons and other, we lifted the awareness alright and it certainly was a year of challenges.

We learnt about growth growing pains; we learnt about the dramatic effect of bad weather as the business grew and we learnt that the rural sector in which we took a controlling stake of what we thought was an aggressive and highly motivated rural labour employer with enormous growth potential and it turned out to be all of that, but inside it were practices and procedures which were not in accord with the ethics of Allied Work Force and so we exited accordingly - at a cost? Yes! But cleanly and completely which is in the interest of all shareholders.

That is all behind us now and in fact as we commented in the Annual Report we finished the year very strongly and that momentum has continued.

We are still learning about cost management of a business of so much greater size in a winter with weather extremes but at this stage we are on track to meet our objectives.

You might have noted that we comment in the Annual Report that we had a very good second six months. In fact it is probably fair if I say it was a year of three halves. The two halves around the Allied Work Force business that I will comment on, and the CLS overlay which affected both halves but which resulted in a successful exit and untangling of all of that.

You will have noted that in the Annual Report we commented that the EBITDA for the second six months of 06/07 was at a level of over 50% above that for the first six months and that strong second six months performance is the benchmark that we have set ourselves for the ongoing growth. We are seeking growth and as we have separately commented, the objective is to get above our very successful Prospectus year.

Also in the Annual Report you will notice that the client base is growing by over 20 new clients per week electing to use Allied Work Force services.

After a frenetic year of activity, we can now say that our current client base is over 8,000 with over 5,500 of those in the category of regular users but strategically important for the business we are seeing a greater use on a National basis of Accounts. So we will pick up an account somewhere in the country and gradually we will find that that client will use us in other parts of the country - that is the value of the extensive branch network and of course bringing Quin Work Force, a very successful Wellington subsidiary to Auckland is part of that under the Quin umbrella.

Managing Director and company founder Simon Hull will provide a comprehensive update on the Group including comments on current year performance.

It is my pleasure to invite Simon Hull the Managing Director of the Group to address you on behalf of the board and management on the year that we had and as part of that to update you with current year performance.

2. Managing Director's Address

Good morning Ladies and Gentlemen, Shareholders and our hard working Team. I know there are quite a few of you who fall into a number of these categories.

Thanks for coming along and continuing to show your interest in our company. I'd also like to take this opportunity to quickly thank our management team of 100 or more around the country who get the right person to the right place at the right time - making this company what it is.

Firstly a few quick comments on the venue we have chosen - we saw this as an opportunity to both save a few dollars and illustrate some of the other facets of our business.

This is one of our training areas for staff development. As against our Penrose training area which trains some 1000 odd staff annually for Health and Safety prior to working for Allied Work Force, in this area we offer a pre- carpentry and other development courses to motivated staff. These courses deliver not only a good training in the basic skills required for working on construction sites or general labouring work, its credits allow them to go on to full Apprenticeships on completion if desired. And we do have had a number of our crew have move onto these.

As expected, we find that crew involved in the courses, due to their rounded skills and particularly good motivation, are exceptionally popular with clients. Often they are retained longer and frequently specifically requested back for assignments. We can only see this type of training and development continuing and growing in the future.

On to the year that was - one that's had its disappointments.

Late last year we became aware that CLS was being investigated for inappropriate operational procedures. In fact, we later discovered the investigation had started prior to AWF becoming involved with CLS.

We immediately instigated an internal investigation. Eventually this revealed covert activities by one or more of CLS's Operational Directors. The findings convinced us that they had neither the desire nor the intention to operate along stated company procedural lines, and in fact they may be contravening New Zealand laws.

Subsequently last month these Directors faced 28 charges of breaches of New Zealand immigration and employment law. As this is now sub-judice, I cannot comment further other than to say we are still convinced that our actions - to discontinue our association with CLS and its directors with urgency - was the right one.

We have obviously questioned the integrity of the due diligence process employed in the purchase of CLS. But, the process was sound and confirmed the aspects of the business as it was presented to us.

In addition to the considerable direct losses incurred by AWF Group as a result of the liquidation of CLS, the Group was also left with a potential liability for Spring Creek Holiday Park. CLS had purchased the Park to house the significant numbers of workers it was supplying to the Marlborough area. AWF Group was a guarantor of the loan.

We faced two prospects. Either the liquidators of CLS allowing a mortgagee sale of Spring Creek and AWF being liable for any shortfall, or AWF having to take it over, with the ongoing running costs and potential for considerable shortfall in the liquidation of an asset which had no further use to the Group. I offered a solution to stop AWF Group incurring any further losses.

I offered to purchase the Park at its original purchase price. This would avoid the forced sale situation and transfer the ongoing liability for costs from the company.

So ended the significant negative effect of CLS on AWF Group with all its costs: financial, time and to reputation, in what was a difficult year.

But as Ross indicated, the year also had a number of positives. We have successfully opened a number of new branches. Revenue grew by 16.3% with 11.2% same shop growth enjoyed, and we had a strong second half.

This is a traditional pattern of the business. The seasonality of sales and the bringing in of resource in the first half for the second halves spring/summer revenue growth, meaning that the rewards are returned far more strongly in the second half. For the current year we are committed to exceeding our achievements of the first year listed and putting last years result behind us.

The company continues to trade well, with the diversity of work our 4000 odd crew undertakes each day continuing to expand, as does the geographic breadth of our supply around the reaches of our country.

Our unerring focus on supplying quality solutions to the many employment challenges New Zealand industry faces, and with employment of staff becoming ever more complicated, industry continues to find growing attraction in being able to have the recruitment, compliance and staff relations managed by specialists.

We are New Zealand's blue collar employment specialists.

Thank you.

Ross B Keenan
Chairman

Chairman's report

Dear Shareholders,

On behalf of the Board and management, I am pleased to report a strong finish to the financial year ended 31st March 2007 and note that strong momentum has continued into the 07/08 financial year. Whilst the net profit for the year of $1.71m is significantly down on the previous year at $3.04m, shareholders will have noted that it was a year of many challenges and the Board considers in the circumstances that the result achieved is a credit to the organisation and its leadership.

Some key factors around the result for the year are as follows:

• A first half year characterised by difficult trading conditions from a heavy investment in growth opportunities and very significant cost increases around operating costs and ACC levies - all of which led to the announcement of a 39% decrease in profit compared with the previous year.

• The expensive consequences of our ill-fated investment in Contract Labour Services and its subsequent Liquidation leading to significant cost write-off for Allied in the year ended 31st March 07. The costs totalled $850K and are fully accounted for in the year end results. Directors are confident there are no further liabilities or expenses associated with the CLS experience.

We considered our The excellent platform that was established in the first year since listing was shaken briefly but is now back on a very solid footing with management focus clearly on preserving margins, managing costs and delivering improved operating performance as we move ahead. entry into the rural sector was for the right reasons and through the right vehicle and although we have reviewed our Due Diligence process extensively, are satisfied that the nature of the irregularities contained within Contract Labour Services could not have been known by us and were not disclosed to our Executive Directors.

• The core AWF business finished the year extremely strongly and it is notable that EBITDA for the second six months was at a level over 50% above that of the first six months to September 06. The strong second six months performance was characterised by broadening our revenue base across new clients plus more national agreements, and resulted in year end comparisons with the 31 March 06 year (bearing in mind minus 39% for the first six months), at a level of $2.563m (14% below the previous year). So the recovery of the bottom line position in the second six months was quite impressive.

• Sales growth has continued into the current financial year and with revenue being earned across a broader revenue base, expectations for the 07/08 year are that our net position will be at a level above the initial Prospectus year. We will update shareholders on this position at our AGM to be held at the Auckland Airport branch on 18th July. Given the strong cash position of the Group; excellent recovery in the second six months and the continuation of sustained growth, directors felt confident that a dividend of 3 cents per share be declared making a total of 5.5 cents for the year fully imputed.

Directors consider that although the financial results are below those of the previous year, given the very difficult first six months and the disappointing experience in the rural labour sector, nevertheless the Company recovered strongly and we move into the 07/08 year with confidence. The excellent platform that was established in the first year since listing was shaken briefly but is now back on a very solid footing with management focus clearly on preserving margins, managing costs and delivering improved operating performance as we move ahead.

On behalf of the Board and shareholders may I commend management for their commitment through the year and in managing some very difficult situations with clarity and confidence.

On behalf of the Board.

Ross B Keenan

Chairman