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

[winner69]

Snoops post had this -

1/ The first point to note is the large $7m impairment charge, unique in HY2021, which is a non-cash item. However, I personally would not class a change in impairment as an 'operating item'. So while creating an impairment does affect cashflow, I am surprised that it changes 'operating cashflow'.

I might have misread / misunderstood what you have said and you may have covered elsewhere but the $7m impairment is not part of Operating Cash Flow calculation (one way or the other). It does not affect cash flow. Remember you are looking at reconciliation of profit to cash flow and is just one of the reconciling items (like depreciation).

Forgive me if I did misunderstand you.

I

[Snoopy]

Snoops post had this -

1/ The first point to note is the large $7m impairment charge, unique in HY2021, which is a non-cash item. However, I personally would not class a change in impairment as an 'operating item'. So while creating an impairment does affect cashflow, I am surprised that it changes 'operating cashflow'.

I might have misread / misunderstood what you have said and you may have covered elsewhere but the $7m impairment is not part of Operating Cash Flow calculation (one way or the other). It does not affect cash flow. Remember you are looking at reconciliation of profit to cash flow and is just one of the reconciling items (like depreciation).

Forgive me if I did misunderstand you.

Thanks for this Winner. You are quite correct. I had my 'operating cashflow goggles' so firmly attached that I failed to take them off when looking at the "Reconciliation of Net Profit After Tax to Cashflows from Operating Activities." The $7m impairment charge is part of reconciling net profit against operating activities, but it is not part of the operating activities themselves. As Homer Simpson would say, I have had a "D'oh" moment.

I am wondering if Accordant have had a similar brain fade though? The last line on their "Reconciliation of Net Profit After Tax to cashflows from Operating Activities" says "Cashflows from Operating Activities" (AR2021 C5). As part of that last line total they have subtracted amount of $1.285m a devaluation of the contingent payment to JacksonStone founders that was previously ring fenced as a future expense. I would say this cash consideration is just part of the purchase agreement with JacksonStone, and nothing to do with how the Accordant business operates on a day to day basis. However the 'earn out payment' does depend on operational performance. So maybe there is just too much Homer Simpson in my DNA to allow me to see things clearly like an accountant would?

SNOOPY

[nztx]

Div dates hit the NZX Div Board on AGL's filing today:

XD 18 Nov ; Pay date 1 Dec

[Snoopy]

Just looking at published AGL accounts for 30 Sep 2020 HY & 31 Mar 2021 FY - Snoops
looks like you're on to it there

Sep 20 HY Cashflow includes includes no Inflow from Govt subsidies (unless buried)

Mar 21 FY however includes $33.3 m Subsidies inflow

The bit in bold is the key nztx. If you look at HYR2022, which refers to HY2021 as the prior comparative period, you will see that the presentation of the HY2021 cashflow figures has changed.

	HY2021 (from HYR2021)	HY2021 (from HYR2022)
Payments to Suppliers & Employees	($109.445m)	($141.768m)
Net Receipts from Government Grants	$0.0m	$33.323m
Total	($109.445m)	($109.445m)

In the original presentation of the HY2021 , the Governments Grants had been netted off against wages. In the referred presentation (from HYR2022) the government grant effect was separated out.

This presentation policy had the effect of burying the cashflow from the government, in a non-transparent way, when the HY2021 report was published. IOW there certainly was cash inflow from the government over HY2021, even though a cursory examination of the cashflow statement (without reading the notes in HYR2021 on p16) would not have uncovered any such payments.

SNOOPY

[Snoopy]

To answer the pivotal question first: EBITDA was more than maintained for FY2021

Financial Year	2017	2018	2019	2020	2021
EBITDA (Snoopy produced *) {B}	$12.751m	$11.751m	$7.679m	$8.795m	$14.230m
Finance Cost {C}	$1.193m	$1.297m	$1.380m	$1.502m	$0.723m
Interest Coverage {B}/{C} (target >3)	10.7	9.0	5.6	5.9	19.7
Net Bank Debt {D}	$32.383m	$29.731m	$26.643m	$29.822m	$13.205m
Leverage ratio {D}/{B} (target <3)	2.5	2.5	3.5	3.4	0.93

Notes

1/ Historically (up to and including FY2019), I have calculated EBITDA from the income statement using the formula: EBITDA = NPBT + I + DA.

2/Following the introduction of IFRS16, which had the effect of turning what were 'rent expenses' into a 'right of use asset depreciation' with an associated 'interest on lease liabilities', I have had to adjust the 'annual interest change' and 'annual depreciation charge' to remove this effect.

FY2020: EBITDA = NPBT + I + DA = $3.897m+($2.084m-$0.582m)+($6.194m-$2.798m) = $8.795m (with I=$1.502m)

FY2021: EBITDA = NPBT + I + DA = $10.929m+($1.228m-$0.505m)+($5.286m-$2.702m) = $14.230m (with I=$0.723m)

Not paying dividends for a year has brought the banking covenants well and truly under control. Yet more important than this was the $33.323m received in wage subsidies during the year (AR2021 p19). Without that subsidy from the government, those banking covenants would have been busted.

Without full disclosure being available (because disclosure of certain details of the half year financial position do not match that of the full year), I have managed to cobble together the half year position of Accordant, so that I can keep an eye on those banking covenants. Specifically there is no break down of the depreciation and amortisation charges in the half year results. So I am using the depreciation and amortisation charges for FY2021 as a proxy for the combination of 2HY2021 and HY2022. I have called this 'cobbled together year of halves', year 2021.5.

Financial Year	2017	2018	2019	2020	2021	2021.5
EBITDA (Snoopy produced) {B}	$12.751m	$11.751m	$7.679m	$8.795m	$14.230m	$8.843m
Finance Cost {C}	$1.193m	$1.297m	$1.380m	$1.502m	$0.723m	$0.546m
Interest Coverage {B}/{C} (target >3)	10.7	9.0	5.6	5.9	19.7	16.2
Net Bank Debt {D}	$32.383m	$29.731m	$26.643m	$29.822m	$13.205m	$13.011m
Leverage ratio {D}/{B} (target <3)	2.5	2.5	3.5	3.4	0.93	1.5

Notes

1/ Historically (up to and including FY2019), I have calculated EBITDA from the income statement using the formula: EBITDA = NPBT + I + DA.

2/ Following the introduction of IFRS16, which had the effect of turning what were 'rent expenses' into a 'right of use asset depreciation' with an associated 'interest on lease liabilities', I have had to adjust the 'annual interest change' and 'annual depreciation charge' to remove this effect.

FY2020: EBITDA = NPBT + I + DA = $3.897m+($2.084m-$0.582m)+($6.194m-$2.798m) = $8.795m (with I=$1.502m)

FY2021: EBITDA = NPBT + I + DA = $10.929m+($1.228m-$0.505m)+($5.286m-$2.702m) = $14.230m (with I=$0.723m)

FY2021.5:

EBITDA = NPBT + I + DA
= [$2.607m + ($10.929m - $7.817m) + ([$0.549m-$0.218m]+[($1.228m-$0.505m)-($0.777m-$0.269m)]) + $2.578m] = $8.843m (with I=$0.546m)



--------------------------

It is no surprise that with interest rates so low, that the interest rate cover covenant is so easily met. It is pleasing that the debt ratio coverage is back to manageable levels too. And this is after $2.865m in dividend payments were made over HY2022. Hopefully with Simon Bennett now retired as CEO, "our Bennster" will now be able to spend more time working out a better taste in shirts, rather than looking out for that debt building acquisition at Accordant. The new CEO, Jason Cherrington (HYR2022 p3) looks to have a more sensible taste in shirts, although I am not sure having the two top buttons undone is the go? Maybe that second button has fallen off, and a visit by "our Jase" to his mother to sew it back on would fix this fashion faux pas?

Our Jase has already put the boot into AbsoluteIT (p5 HYR2022), which is the very part of the business he has the skill set to fix . Kicking them when they are down will of course make our Jase look extra good when he rescues AbsoluteIT from the applicant talent drought. You can tell from this that "our Jase" has what it takes to be "Jase on the case" as we March through FY2022. With my fears from last year of a cash issue needed to shore up the capital position of the company now averted, let's hope those 'ghosts of leaders past' that are now stacking the board give the new broom 'Jase', 'some space'.

SNOOPY

discl: Now contented holder once again (haven't changed my holding, just the 'contented' bit is new)

[nztx]

The bit in bold id the key nztx. If you look at HYR2022, which refers to HY2021 as the prior comparative period, you will see that the presentation of the HY2021 cashflow figures has changed.

	HY2021 (from HYR2021)	HY2021 (from HYR2022)
Payments to Suppliers & Employees	($109.445m)	($141.768m)
Net Receipts from Government Grants	$0.0m	$33.323m
Total	($109.445m)	($109.445m)

In the original presentation of the HY2021 , the Governments Grants had been netted off against wages. In the referred presentation (from HRY2022) the government grant effect was separated out.

This presentation policy had the effect of burying the cashflow from the government, in a non-transparent way, when the HY2021 report was published. IOW there certainly was cash inflow from the government over HY2021, even though a cursory examination of the cashflow statement (without reading the notes in HYR2021 on p16) would not have uncovered any such payments.

SNOOPY

to be frank Snoops, as an in & out, I'd far rather subsidies were netted off against the expense (rather than considered
some sort of mysterious income) with just a note disclosing - but I'm not going to cover that again

Discl: Happy AGL minor holder watching the ride

[Snoopy]

Going to take a darn long time to trawl up a cool 1 mill shares at the rate they're coming
over the NZX line of late ..

might have to throw some more bucks at the job, if they want to avoid still being sitting trying to achieve it
this time 4 years down the track ..

http://nzx-prod-s7fsd7f98s.s3-websit...215/343655.pdf

The share buyback of one million shares appears to have halted with the 517,289 shares offered purchased up until 8th July 2021. 8th July was some six weeks on from the 27th May profit announcement. It is likely that represents a trading window where insiders are allowed to buy shares in an equally informed market

http://nzx-prod-s7fsd7f98s.s3-websit...289/349907.pdf

What I have found surprising is that since the October 27th HY2022 profit announcement, there have been no more buybacks as the new buyback window remains open. There are a couple of explanations I can think of to explain this

1/ The new management line up does not appear as competent as the board thought, So less share options will be required when it comes time for the long term options hand out.
2/ The shares, currently trading with a $1.91 offer price, are now too expensive and the board has decided to wait for the share price to go down again before they dive in.

Neither explanation seems particularly palatable.

SNOOPY

[Snoopy]

From Simon Bennett's AGM 2021 address:

"AWF income dropped by over 50%, notwithstanding large numbers of workers being placed with Countdown. The business took up the initial 2-week wage subsidy to pay over 1000 workers, however, has not qualified for subsequent subsidy extensions."

The Bennster:

"AWF recovered well last year, with significant client demand, however could not meet this demand due to declining candidate availability. Blue collar temp work is becoming increasingly difficult with the closed borders, resulting in lack of both migrant workers and working holiday travellers. AWF is adapting to this change in market but not as quickly as in the white collar businesses, and is significantly affected by level 4 restrictions."

My worst fears confirmed :-(

The problem with this picture is that over FY2021, the segmented result shows AWF contributing more than twice the EBIT contribution compared to all the other divisions combined. While AWF remains constrained (notice I did not use the phrase 'in trouble'), it will be a big ask for the whole group's profit to recover to pre-Covid-19 levels.

I think border bubbles with the islands are going to be crucial in determining the fortunes of AGL over the second half.

AWF divisional earnings can be found on p33 of AR2021 (Note A1 Segment Revenue and Results).
Actual Trade & Receivables Writedown can be found on p55 of AR2021 (Note C6: Provision for Impairment).

	2017	2018	2019	2020	2021
AWF EBIT {A}	$8.726m	$4,858m	$1.260m	$1.692m	$10.782m
Actual Trade & Receivables Writedowns {B}	($0.163m)	($0.815m)	($1.034m)	($0.123m)	($0.205m)
Assuming no redeployment of Overseas Workers (creating a saving) {C}			$1.500m (1)
AWF EBIT - Writedowns {A}-{B}+{C}	$8.889m	$5.673m	$3.794m	$1.569m	$10.577m

Notes

(1) From 29th May 2019 market update: Regulatory issues impeded AWF from redeploying migrant workers on guaranteed wages to cities and regions where they were needed, at a direct cost of $1.5 million, plus lost opportunity margin.

From IR2021 p5,

"AWF has had a fall in permanent fee revenue and and its temporary business suffered considerably during the Level 4 lockdown. At our current recovery rate, we expect AWF to return to normal trading in its temp business by the end of the financial year."

From AR2021 p7

"With the permanent recruitment market most significantly impacted in 2020, the first to see growth was our AWF blue collar labour hire channel."

From AR2021 p19

"AWF Revenue was down $19.7m (20.2%) on the prior year."

The above comments are incongruous with the record numerical result. So what is going on? My conclusion is that the wage subsidies have been booked as normalized revenues which have no associated operating costs. This greatly boosted AWF EBIT.

Following the last AWF crisis relating the the construction sector, the 29th May 2019 wrap up press release said

"Bennett said AWF had reduced its cost base, and was now geared to return 4% to 6% EBITDA on turnover approaching $120 million."

Turnover at AWF over FY2021 was $77.762m, suggesting EBITDA of $3.1m to $4.7m. Take off $1.7m in Depreciation and Amortisation (refer my post 904) off those EBITDA estimates and I get a forecast EBIT of $1.4 to $3.0m.

Granted all of this is before Covid-19 and any longer term restructuring measures taken as a result. But there is still a major disconnect between the forecast restructured AWF EBIT from FY2019 of '$4.6m to $7.0m' (using FY2019 as a base year for earnings) verses the actual FY2021 EBIT of $10.577m. My conclusion is that EBIT for AWF over FY2021 has been grossly distorted by subsidies and a 'reality check' will loom over the HY2022 results. I will be listening with interest for any 'progress reports' at the upcoming AGM to see if my speculation is confirmed.

AWF divisional earnings can be found on p33 of AR2021 (Note A1 Segment Revenue and Results). Equivalent HY2022 information may be found in HYR2022 p15.

This table includes FY2021.5, a composite year composed of 2HY2021 and HY2022. Actual Trade & Receivables Writedown can be found on p55 of AR2021 (Note C6: Provision for Impairment). There is no such equivalent information in the half yearly report HY2022. So I have used the equivalent information from FY2021 again, as my best estimate of the trade and receivables write-down for my constructed composite year.

	2018	2019	2020	2021	2021.5
AWF Revenue	$129.868m	$115.859m	$97.448m	$77.762m	$83.298m
AWF EBIT {A}	$4,858m	$1.260m	$1.692m	$10.782m	$1.326m
Actual Trade & Receivables Writedowns {B}	($0.815m)	($1.034m)	($0.123m)	($0.205m)	($0.205m)
Assuming no redeployment of Overseas Workers (creating a saving) {C}		$1.500m (1)
AWF EBIT - Writedowns {A}-{B}+{C}	$5.673m	$3.794m	$1.569m	$10.577m	$1.121m

Notes

(1) From 29th May 2019 market update: Regulatory issues impeded AWF from redeploying migrant workers on guaranteed wages to cities and regions where they were needed, at a direct cost of $1.5 million, plus .lost opportunity margin.

--------------------

From HYR2021 p5:
"AWF has had a fall in permanent fee revenue and its temporary business suffered considerably during the Level 4 lockdown. At our current recovery rate, we expect AWF to return to normal trading in its temp business by the end of the financial year."

Snoopy comment: We should be there by now. 'Normal trading' in an IR2021 sense looks like around $100m in revenue, and we are -still- some 20% below that. I am hoping that some of the particularly poor EBIT result is because of redundancy payments (see quote below).

From HYR2022 p5:
"A Level 4 lockdown is especially hard on the civil and construction sectors that AWF services, and we were forced to stand down a significant portion of our workforce."

From AR2021 p19
"AWF Revenue was down $19.7m (20.2%) on the prior year."

Snoopy comment: And it is still down 20%. I do not expect underlying profits to be down this much though, for as we have heard before some of those building industry temp contracts are marginally profitable.

Following the last AWF crisis relating the the construction sector, the 29th May 2019 wrap up press release said
"Bennett said AWF had reduced its cost base, and was now geared to return 4% to 6% EBITDA on turnover approaching $120 million."

Using a D&A figure (see Segmented Analysis, AR2021 p34, HYR2022 p17) of: $0.955m + ($1.964m-$0.952m) =$ 1.967m,

=> Underlying EBIT = ((0.04 to 0.06) x $83.298m) - $1.967m) = $1.365m to $3.031m

I think there is evidence here that EBIT for the AWF unit of Accordant has likely bottomed out. Yet AWF does have quite a branch network to maintain. That means cutting costs to the bone at the trough of the business cycle is not easy, and may mean minimal profitability for the AWF business unit for some time.

SNOOPY

[Snoopy]

The 'White Collar' earnings of Accordant is an umbrella term that covers the combined earnings of Madison, AbsoluteIT and JacksonStone. "White collar" divisional earnings can be found on p33 of AR2021 (Note A1 Segment Revenue and Results). Equivalent HY2022 information may be found in HYR2022 p15.

This table includes FY2021.5, a composite year composed of 2HY2021 and HY2022. Actual 'Trade & Receivables Writedown' can be found on p55 of AR2021 (Note C6: Provision for Impairment). There is no such equivalent information in the half yearly report HY2022. So I have used the equivalent information from FY2021 again, as my best estimate of the trade and receivables write-down for my constructed composite year. I have chosen to assign all of the write downs to the blue collar division of Accordant. That may be a slight simplification. But my general reading of the Annual Reports would suggest that this is where the substantial write down risk is. This is why the 'Trade & Receivables Writedown' figures for 'White Collar' in the table below is a row of zeroes.

	2018	2019	2020	2021	2021.5
White Collar Revenue	$149.455m	$151.946m	$166.079m	$127.720m	$126.709m
White Collar EBIT {A}	$5.563m	$5.957m	$7.156m	$4.235m	$7.864m
Actual Trade & Receivables Writedowns {B}	$0m	$0m	$0m	$0m	$0m
White Collar EBIT - Writedowns {A}-{B}	$5.563m	$5.957m	$7.156m	$4.235m	$7.864m

Notes

1/ The above table is not strictly an 'apples with apples' comparison. JacksonStone, the executive search and recruitment organisation, was only acquired in FY2020. JacksonStone's first full year under the Accordant umbrella was FY2021.
2/ I have previously estimated the revenue from JacksonStone over FY2021 was $33.325m (my post 911).
3/ EBIT for JacksonStone over FY2021.5 is estimated as follows.
3a/ NPAT for JacksonStone = $2.405m (AR2020 p69)
3b/ Proportion of revenues due to JacksonStone: $33.325m / ($95.544m+$110.447m) = 15.87%.
3c/ Share of Interest bill = 0.1587 x ($0.451m+ $0.549m) = $0.159m
3d/ EBIT= $2.405m/0.72 +$0.159m = $3.499m

I have devised a narrative based around a series of published report quotes, and how they weave together into three sub stories to explain how the dynamics of the White Collar business is changing.

--------------------

A 'White Collar Peak' at EOFY2019 has descended to a new normal

Here are seven quotes to give some historical context as the white collar business developed over FY2018 and FY2019, and beyond.

From AR2018 p3
"The completion of the purchase of Absolute IT during the year certainly validated the decision to acquire this well-led diverse white collar business, and the strong team at Absolute delivered a result that was above our expectations."

From AR2018 p3
"It has been a great pleasure to be able to report the success of Madison in delivering at all levels to the Census project for Statistics New Zealand. By year end, Madison was back up to its own growth targets."

From AR2019 p3
"Absolute IT had a stunning year both in terms of profitability and new clients won. Over the year our senior leaders have continued to grow and develop the business for growth."

From AR2019 p3,
"Madison traded well but did not achieve all the growth that we expected. However, the effect of the completion of our large Managed Service project contract (the census) has to be factored into this comment."

From AR2019 p4,
"We grew the core (Madison) business but did not fully ‘fill the earnings gap’ created following the end of the project."

From AR2021 p10
"The New Zealand labour market currently has significant shortages in ICT (affects AbsoluteIT), construction and healthcare. We believe that, even with open borders, we cannot expect immigration settings to allow for the same volume of migrants to supplement our workforce, as they have done prior to COVID-19. Maximising workforce participation, and growing the available workforce, is crucial for our country to fill the demand for workers."

From HYR2021 p5
"The large drop in permanent fee revenue in Madison has reduced the size of the business and we do not expect the business to recover fully this financial year. We predict it may well take a further 18 months. This recovery will likely be through the temp channel, rather than permanent recruitment."

Snoopy note: I interpret the above seven quotes as the White Collar business (Madison/AbsoluteIT only as it was up until EOFY2019) being at respectable revenue levels by EOFY2018 and EOFY2019. 'Respectable' (around $150m) in this context translates to an EBIT of $5.597m (achieved over FY2019). Nevertheless despite the headline figures since, it is clear that revenue from the combined Madison/AbsoluteIT business units has since plummeted. By EOFY2021.5, revenue was down to around 2/3 of what it was before Covid-19 hit. Profits in EBIT terms are down around 40% for Madison/AbsoluteIT too. It is only the strong performance of JacksonStone that is giving the White Collar combined business unit comparative respectability over the FY2021.5 period, compared with those earlier years.

--------------------

Working Harder for the Same Reward

From AR2018 p11
"In the last five years, job hunting and talent acquisition has changed considerably, leading to increased (Madison) delivery costs.

From AR2020 p3
"In Madison and AbsoluteIT, in addition to the increase in boutique agencies, the growing trend, by clients, to establish in-house recruitment teams contributed substantially to the businesses’ reduced performance."

Snoopy translation: The staff inside Madison are not losing their competence. There are more people looking after recruitment in the market generally in other firms. And a more thorough 'vetting of job applicants' is now required, that has lead to increased business running costs.

-----------------------

Pandemic Response

AR2021 p7
"The opportunity was taken to reduce overhead costs in a very aggressive manner, which lead (by year end) to overhead expenses being at around 15% lower than previous year equivalents."
"Margins are improving as care is taken to ensure sustainable growth before fixed costs are added."

HYR2022 p5 referring to the August 2021 lockdown
"We had a seamless move to working from home for our internal employees across all our businesses, and strong continued demand for our services." "Our strength across the white collar market served us very well and within this sector we did not miss a beat."

HYR2020 p6
"With the migrant channels closed and a general lack of candidates availability due to New Zealand's ongoing low unemployment rate, our clients continue to offer permanent opportunities to our workers, and we are current;y seeing growth in the permanent market."

Snoopy comment: Permanent placements are generally more lucrative for Accordant

-----------------------

If year 2021.5 is representative of the new reality of the Accordant White Collar Division, then a calculation of EBITDA/ revenues is of interest.

EBIT = $7.864m

Proportion of 'White Collar' assets = $63.062m / ($63.062m + $25.778m) = 71.0%
Hence proportion of depreciation and amortisation = 0.710 x ($2.573m+$2.668m) = $3.721m

=> EBITDA = $7.864m + $3.721m = $11.585m

Revenue for the period was $126.709m

=> EBITDA margin = $11.585m / $126.709m = 9.1%

That figure is well in excess of the go to margin at the blue collar AWF business unit.

Following the last AWF crisis relating the the construction sector, the 29th May 2019 wrap up press release said
"Bennett said AWF had reduced its cost base, and was now geared to return 4% to 6% EBITDA on turnover approaching $120 million."

However the EBITDA margin is pumped up by the amortisation of goodwill from acquisitions, to the tune of $1.366m over FY2021. Take that out and we get an adjusted underlying EBITDA margin of:

= ($11.585m-$1.366m) / $126.709m = 8.1%

That is still better than what might be realistically achieved by the blue collar placement unit. While I expect a a bounce from the all time low of AWF EBITDA, I do expect most of the sustainable growth going forwards to occur in the 'White Collar' collection of Madison, AbsoluteIT and JacksonStone.

SNOOPY

[Snoopy]

161 / (16.2)(0.72) = 13.8%

Is that the best prospective dividend yield on the market today? I think it might be, if you could actually buy a decent parcel of shares at $1.61. I managed to top up my holding at that price. But despite only being after a parcel of shares that was -back in the old days (pre Sharsies)- regarded as a minimally sized economic parcel, it took me a month to acquire the said shares!

I am no longer using an annual dividend of 16.2cps as my 'base case' for dividend yield.

This hasn't been a great share for me. Despite owning Accordant, or whatever its ancestor was back then, since 2015 - when I bought my first tranche - I am still underwater by 20% in capital terms (my average share purchase price is now $2.04).

Interest Coverage EBIT/I = $9.7m/$0.707m = 13.7 times. So even if my earnings forecasts are a little out, I don't think the banks will be worried

Computer software amortisation over FY2021 was $0.228m, and deprecation expense was $2.702m. This means underlying EBITDA can be calculated as:

$9.7m + $0.228m + $2.702m = EBITDA of $12.7m

Net debt at balance date was: $15.000m - $1.795m = $13.205m

This gives an 'Net Debt' / EBITDA ratio of $13.205m/ $12.7m = 1.04

The fact that these two debt covenants are at conservative levels is what gave me the confidence to top up my investment in Accordant. If my earnings outlook for FY2022 proves horribly wrong, then Accordant can try again in FY2023 without fear of the banks closing in, and I don't need to sell out (which for liquidity reasons I can't do even if I wanted to!)

	eps	dps (imputed)
FY2018	15.8	8.2 + 8.0
FY2019	6.2	8.2 + 8.0
FY2020	9.4	8.2 + 8.0
FY2021	18.1	0.0 + 0.0
FY2022	?	8.2 + 6.5
Total	?	63.3
5 year Average		12.7

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

= (12.7c / 0.72) / 0.08 = $2.20

I see the share price was bid up as high as $1.99 for the half year results announcement, but then closed on its low at $1.92 with a big gap down to the next buyer at $1.75. Nice December divie for Christmas, although it was at a lower level compared to pre-Covid years, dropping from 8c to 6.5c. Maybe the market expected more? I didn't, but am happy to keep holding.

I have been quietly working, building up my holding in a small way. My investment case is now based on a lower forecast annual dividend (12.7cps), largely as a result of cashflow retreating towards NPAT levels. My most recent parcel was bought at $1.80, a 20% discount to my fair value assessment. So happy with that, despite my very modest purchase order having to sit in the system for a couple of weeks before it was hit! The problem is AGL is so lightly traded, by the time the market gets down to your target price, someone will jump in quickly to trump your prospective bid. My tactic has been to put my bid in the market below the immediate trading range, wait for the buyers ahead of me to drop out. There I remain in the queue, ready to be hit by the 'sell at any cost' holders. Anyway, it all seems to be working, even if it does test the patience of my broker, or more correctly my brokers bot! My average holding price is now $2.03 so still underwater, but not by much. I am comfortable snorkeling a small distance below the break even surface.

The debt covenants being under control are the important backstop to my confidence.

SNOOPY