AGL - Accordant Group. was previously AWF Madison, Allied...

[Snoopy]

Net Margin Error: Modelled vs Derived

+2.38%

-11.5%

-5.44%

+5.23%

I need to answer the obvious question. If I know what the 'net margin error' is, why don't I just fix it? Two reasons:

1/ AWF does not provide 'net profit' figures for divisions. I have derived divisional net profit figures by assigning unallocated costs in proportion to divisional revenues. If this assumption is not entirely accurate (and it probably isn't) then the divisional 'revenues minus expenses' sums will also be inaccurate.

2/ I have assumed that all business units pay tax at 28 cents in the dollar. But this assumes that all expenses are tax deductible, and that might not be true. If I calculate that less tax is paid that is really due, then my calculated after tax profit will be higher than reality.

There is insufficient disclosure in the annual results to quantify the error effects of 1/ and 2/. Except to say that if I:

a/ add up my divisional NPAT for each division AND
b/ if that sum does not equal the NPAT company declared total

THEN there is definitely an error in the assumptions I have made. But exactly where that error is can't be pinpointed. So IMO it is best to accept the divisional results 'as calculated', while bearing in mind that the significance of the figures calculated are suspect by the percentage of the error quoted that was introduced when I did my own calculations.

SNOOPY

[minimoke]

........ We have already been asked to jointly present to one of the country’s major businesses."

<snip>....

So even close to four years ago the game was to catch more business, but there would be no merged company cost savings to create more profit? It looks like Huddleston's prediction came true. More business has been generated but net profit margins have declined.

SNOOPY

The problem worth this "major business" is that it is a sale generator but loss creator.

Its vrry simple. Customer, with their large business ecpects servusr at very low margin. So instantly you can expect margin loss. Next, customer expects rolls royce service - so service costs go up. All the while focus is on this big customer and you loose sight of all the other existing customers (so loose them) and you fail to secure new high margin business.

[winner69]

I take it this is not good news

https://www.nzx.com/files/attachments/265947.pdf

[percy]

I take it this is not good news

https://www.nzx.com/files/attachments/265947.pdf

Definitely not good news.
I was a bit lucky selling the last of mine on Tuesday at $2.56.

[winner69]

Definitely not good news.
I was a bit lucky selling the last of mine on Tuesday at $2.56.

Not lucky percy - just impeccable timing

[minimoke]

Definitely not good news.
I was a bit lucky selling the last of mine on Tuesday at $2.56.

But no surprise. While they keep their eye on the high volume /low margin business they take there eye off the rest of their business

[Hectorplains]

What margin are they achieving in the core business?

[winner69]

Suppose this is not the best of news .....seems to be an never ending story of things that aren't working in their favour

Extract:
As a consequence of the above, profit, as at 31 March 2018, is expected to be behind that of the prior year. However, Cash Flow remains strong, and the operational plans to improve financial performance, implemented during the year, are having the desired effect, albeit at a rate slower than anticipated.

http://nzx-prod-s7fsd7f98s.s3-websit...921/275470.pdf

[minimoke]

Suppose this is not the best of news .....seems to be an never ending story of things that aren't working in their favour

Extract:
As a consequence of the above, profit, as at 31 March 2018, is expected to be behind that of the prior year. However, Cash Flow remains strong, and the operational plans to improve financial performance, implemented during the year, are having the desired effect, albeit at a rate slower than anticipated.

http://nzx-prod-s7fsd7f98s.s3-websit...921/275470.pdf

And there was me thinking construction and civil were booming industries. I'm not sure what legislative compliance costs they are referring to - cant think of too many recent changes. Followers of this stock need to follow the Triangular Employment relations bill going through parliament, as well as minimum wage

[Snoopy]

	eps	dps (imputed)
2013	19.7	14.4
2014	16.2	15.6
2015	16.8	14.8
2016	16.0	15.2
2017	19.6	16.0
Total	88.3	76.0
5 year Average		15.2

For a leading market player in a nevertheless fragmented service profession I would accept a 7.5% gross dividend yield.

Implied Acceptable Share Price = (Gross Dividend) / (Acceptable Yield)

= (15.2c / 0.72) / 0.075 = $2.81

With no sales in the market today as I write this, but a bid price of $2.75 and an offer price $2.85, in these days of highly prized dividends I think AWF is trading where it should.

	eps	dps (imputed)
2014	16.2	15.6
2015	16.8	14.8
2016	16.0	15.2
2017	19.6	16.0
2018	21.6 (*)	16.2
Total	90.2	77.8
5 year Average		15.6

(*) Based on projected FY2018 NPAT earnings for the year of $7m.

For a leading market player in a nevertheless fragmented service profession I would accept a 7.5% gross dividend yield. However, with the vulnerability to weather permissible building projects as evidenced in the first half, I am pushing out my acceptable gross dividend yield to 8%

Implied Acceptable Share Price = (Gross Dividend) / (Acceptable Yield)

= (15.6c / 0.72) / 0.08 = $2.70

Last sale on the market was $1.80. Using this valuation model, I think AWF Madison is now trading at a 33% discount to fair value.

SNOOPY

discl: holder