SKE half yearly, page-99

My understanding is only that of an industry outsider, who has access to google searches and the financial statements.

The main part of SKE's business is labour hire. My understanding of the meaning of that is a firm comes to them and says we have a temporary situation (be it a project or a shortage of hands on deck) and Skilled uses their database and employment skills to match the right people to the job.

They could do this by finding casuals, but a source of advantage of a good labour hire business is to already have the right people on your books, and be able to finance their costs, until they are needed. This makes you more nimble to opportunity (when it is there!) than competitors who cannot do this, and is a big differentiator between a labour hire firm and an employment agency. It's also why they bang on about OH&S issues in every annual report - they have responsibility for their employees. You find people with skills and you keep them, because they are usually in demand. Realistically it is probably a mix between long-term employees and casuals, to what extent I'm not sure they ever publish it. But make no mistake there have been redundancy costs in the accounts in the past, and will be again, I might be over-estimating the risks, but I'm wary of it. The key for these businesses is not only variable cost management, but also maintaining high enough utilisation on their labour hire book. Smaller, under capitalised players, find it hard to finance this in sharp downturns, and they fall over.

For further reference, there was $46m of long-term employee benefits in the provisions section of the 2014 financial statements. One would assume that since long-term liabilities are in excess of 12 months that this would be long-service provisions etc. The cost of making someone redundant would probably be in excess of this, depending on the circumstances. Remember if the market turns quickly, their margins will already be under immense pressure, so any additional costs of cutting a section of their workforce book will be on top of this.

Just my view, would be more than happy to be told I was over-estimating the risks.