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

[Snoopy]

	eps	dps (imputed)
FY2019	6.2	8.2 + 8.0
FY2020	9.4	8.2 + 8.0
FY2021	18.1	0.0 + 0.0
FY2022	10.4	8.2 + 6.5
FY2023	9.6	5.6 + 6.5
FY2024	?	3.0 + ?
Total	53.7	54.0
5 year Average		10.8

Note

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

=> (10.8c / 0.72) / 0.08 = $1.875

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Higher historical dividends roll off the historical calculation feed, to be replaced by today's lower dividends. This is why the capitalised dividend valuation of the company has reduced by 17.5c from six months ago. The closing price of $1.70 today is a chart resistance point. With a shortage of job applicants in AbsoluteIT and AWF, I don't see the shares going much higher until members of that 'Double A' team shows signs of life.

The shares closed today at $1.70 and even with the slashed final dividend, the share price is still flirting in that band of keeping Accordant in the 8% yield club (actual historical gross yield 7.8%).

The share price was largely sinking for six months to date, but recovered sharply just before results day . The support line kissed $1.50 a couple of times. But that looked like Shaz trading on near zero volume, so not really real.

Cashflow from operating activities ($4.715m, 13.7cps) exceeded adjusted profit ($3.297m, 9.6cps), even if it was only the cashflow that exceeded the dividend paid during the financial year twelve months totalling 12.1cps.

Long term debt has blown out from $15m at the half year to $23.5m today But $5.87m of that is the cash paid out for acquisition Hobson Leavy. Add in the $0.835m to sort out the ACC medical account balance and you have most of the explanation.

The little game of cashflows exceeding profits has been extended with the purchase of Hobson Leavy. This purchase has fed the 'historical customer relationships' intangible asset pot to the tune of $1.072m. Amortisation of this balance will produce future cashflow ahead of earnings to the tune of a few hundred thousand dollars a year at least.

AGL has in the past paid out 100% of their underlying earnings as dividends over time. So if dividends are to be restored or even increase above historical high levels, then so must earnings.

An ominous close to my equivalent report from six months ago. With the March 2024 profit downgrade, I would say there is no chance of earnings bouncing back to pre-Covid levels for the foreseeable future. But my capitalised dividend valuation technique relies entirely on figures, not feelings. So what do the (albeit historical) figures say?

	eps	dps (imputed)
FY2020	9.4	8.2 + 8.0
FY2021	18.1	0.0 + 0.0
FY2022	10.4	8.2 + 6.5
FY2023	9.6	5.6 + 6.5
FY2024	loss?	3.0 + 3.0
Total	47.5-?	49.0
5 year Average		9.8

Note

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

=> (9.8c / 0.72) / 0.08 = $1.70

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Higher historical dividends roll off the historical calculation feed, to be replaced by today's lower dividends. This is why the capitalised dividend valuation of the company has reduced by another 17.5c from six months ago. The closing price of just 58c on minuscule volume is uncharted territory for AGL shares since they listed. AGL have not yet admitted their banking covenants are going to be reported as 'broken'. But at a share price 58c, I believe that Mr Market has already made that judgement.

I don't like to speculate using this technique. But if the banks (actually ASB bank) were to decree 'no dividend payments over FY2025') to shore up that balance sheet, then the five year dividend sum would drop to 32.8cps, or an annual average of 6.56cps. Curiously this is not too far removed from the actual FY2024 dividend payment rate of 6.0cps.

=> (6.56c / 0.72) / 0.08 = $1.14

I think we have to forget the days when the share price was over $2 now. That is ancient history. But dependent on exactly what sort of straight jacket the ASB banks chooses to impose on Accordant, and we find that out at the end of May, there could be a good money making opportunity going forwards. But buying at 58c today I believe is a gamble, because IMO the threat of a heavily discounted capital raising, as an alternative to to shoring up the balance sheet, remains.

SNOOPY