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

[Snoopy]

A few years ago they talked about getting into healthcare sector..ie nursing and care
That would be a good growth sector for an ageing population like nz…

It was a bit more than talk. They did get into healthcare by purchasing a company called 'Panacea Healthcare Limited' in 2010
https://www.nzx.com/companies/AWF/announcements/200868
Talked up by then MD Simon Hull no less. But two years later it was all over.

https://www.nzx.com/announcements/225338
"AWF Chairman Ross Keenan states that the Group has over recent times reviewed its progress in the Health sector and has decided that its resources can be better utilized in sectors more aligned with the existing AWF operations. Mr. Keenan commented"

This was before my time on the share register, so I don't recall what caused the backflip. But it might suggest that competing in the health sector against established players like like Healthcare of New Zealand Ltd is not as easy as keyboard strategists might suggest?

SNOOPY

[Snoopy]

Snoops …your incompetence theory interesting viewpoint and aligns with my thinking why I’d want a 12% expected v your 8.5%

I say 12% because of the recent declining cash lows and dividends which along with the current issues impacting the business I’d want a decent risk margin and 8.5% doesn’t reflect that.

I see execution risk as key here …..especially if you say the current team is not as competent as in the past lol

Interesting times eh …might look back in a years times with a $1.75 share price and say well that was a lost opportunity

Winner, that comment of yours that I have highlighted in bold. You have absolutely nailed it. Execution, execution, execution. And if they fail, the result could be (drum roll) execution, (in a job retaining sense this time). If things go well we might get back to $1.75, although I would be looking at a time-frame of two years to get there, not one. Nevertheless that would still be a fantastic return on today's sharemarket price of 67c (+12% today).

Still, I think until the full year result is announced at the end of next month AGL remains a gamble. We know the result will be bad. But how many are seeing what I see: A $15.6m loss, - including goodwill write downs, and no dividend, maybe even a cash issue? I think results day will be 'hammer time'. So if you are nervous, this uptrend might be something to sell into. Myself, unless this uptrend goes wild (above 85c), I intend to sit tight and 'see what happens'. Positive and negative outlooks are finely balanced.

SNOOPY

[Snoopy]

The days of good divies are long gone now for a while in my opinion

Sadly I agree with you here

In last few years…
We had a construction boom
We had a labour govt employing any consultant they could find…boom boom
We had a technology boom

Just like FBU…they can’t make consistent repeatable earnings.

Its a dog

Let's not get too hazy eyed. AWF embraced construction with gusto but it backfired on them. Plenty of work was done. But when the employers go broke, they don't pay their bills. Accordant have learned their lesson about supplying labour to the construction industry.

On your second point, Jackson Stone did get their pound of flesh from the NZ government. The problem was with the borders closed, AWF couldn't source their usual brigade of temp workers for seasonal harvesting. You can;'t really give AWF dog status for that. Madison lost the census contract (or rather didn't gain it, as it was a one off), which would have had a big effect on their 'project' revenue.

The Seek job website award for a 'large agency' in 2023 went to a tech recruiter called 'Potentia'. In February 2024 Potentia announced they were merging with 'Crew Technology' to form 'Aotearoa’s largest locally-owned tech recruitment business with 50+ people.' That will give Accordant's 'AbsoluteIT' some food for thought. I fear 'AbsoluteIT' have had their separate id, subsumed into Madison, and they are no longer the automatic point of call if you want candidates for a 'tech job'.

So events happen, things come and things go. I think you would have to be completely insensitive to the difficulties of the job market since Covid-19 arrived to call Accordant 'a dog' for operational reasons. Personally the problem I see with Accordant is their debt levels. How they handle that will determine the level of woofling at the next AGM.

SNOOPY

[nztx]

But all's not lost with AGL .. the more indepth research appearing here keeping the thread towards the top seems to make a few eager punters even more determined to grab their fill and inflate things up further pegs on NZX in the process

What's not to like about that ?

Writing off intangibles might be seen as a non cash measure

The balloon hasn't gone up just yet on the nature of the collateral damage .. based on past performances
the unwashed who manage to scratch together a small pile of these still may be believing 3 pennies
might be going rate to be tossed out ahead

It maybe only won't happen until after the fat lady has finished singing and the piano player has put the lid down after the final number for the next expected porformance

[Snoopy]

Writing off intangibles might be seen as a non cash measure

Writing off intangibles is[ a non cash measure. No doubt about it. But what punters - and I use that word deliberately - must keep in mind is that goodwill is only written off when there is no way the implied growth targets that this goodwill represents will be met. At EOFY2023, (AR2023 p56), revenue growth for all of the white collar business units was assumed to be 2.5% ad infinitum (up from the 1.5% expectation of the previous year). In order to maintain that level of goodwill on the books when sales decrease, that growth assumption would have to be ramped up yet again at EOFY2024.

At some point the auditors would step in and say to the board:
"Folks we admire your optimism. But your forecast of getting an ever increasing revenue cheque needs a reality check."

I should add that just because a company suffers a drop in sales, that does not automatically mean the goodwill on the books gets written down. If businesses are purchased at sensible multiples, then the 'meanderings of the operating market' more often than not, will not affect goodwill. Writing down goodwill is the last thing a board wants to do, because it amounts to them saying: "We screwed up."

So Jason announcing that Madison goodwill will need to be written down at EOFY2024 is a major admission of failure (although not his failure as he wasn't with the company when Madison was acquired.) Jason did not announce that AbsoluteIT will be getting a goodwill haircut as well. But I am speculating that Jason will do this as he is a relatively new CEO, and he will want to 'clear the decks' so he is not judged in the future by the past mistakes of others.

Writing off goodwill, is another way of saying: "Things will never get back to 'normal'. "

The balloon hasn't gone up just yet on the nature of the collateral damage .. based on past performances
the unwashed who manage to scratch together a small pile of these still may be believing 3 pennies
might be going rate to be tossed out ahead

This is where assuming past dividends will continue as future dividends can get investors into trouble. Over the years, Accordant has paid out all of their net profit as dividends. A board my look through a 'down patch' and keep dividends steady, in expectation of a profit recovery. But the earnings progression from AGL since Covid-19 arrived has been more akin to a ski slope, culminating I believe in what will be an operational loss for this year. Despite that, 6cps in dividends has been paid in the last twelve months. It is all very well thinking the board will find another 3 cents down the back of the couch. But have you seen the couch? The back cushions have already been sold off to pay for that last divvy, and the board are now sitting precariously on their bums, wondering if they will -in future- be perched on the wooden frame if that is all that is left next year.

It maybe only won't happen until after the fat lady has finished singing and the piano player has put the lid down after the final number for the next expected poorformance

I had to scramble to my business dictionary, as happens when I encounter a new bit of lingo that I have not seen before. And here is the wanton definition:

"poorformance" a subset of 'performance', used when you know the performance has been or will be 'less than satisfactory'.

After the 'poorformance' to be announced at the end of May, I am not counting on any more shekels coming my way soon, and nor should any other shareholder.

SNOOPY

discl: frustrated Accordant shareholder

[Nor]

I suffered for many years as a Fairfax shareholder through many write downs but still came out a bit ahead in the NEC merger. So write downs don't scare me. Bankruptcy does.