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

[Snoopy]

And on top of this we have the $13.223m of Madison goodwill and $7.836m in AbsoluteIT goodwill that will need trimming. Double ouch!

Jason Cherrington CEO speaking at the AGM on 21st August 2023:
"Following on from a solid reporting of the first six months of FY2023, we experienced a much faster than anticipated softening and market environment, most prominently felt in the final quarter of the year (January-March 2023). And in some parts of the business, that challenge eventuated by year end on a less than optimal return on the cost deployed."

On Madison:
"As a general recruiter specialising in more entry level roles, and support service areas of the market, Madison felt the biggest impact in the second half of the year - and is somewhat of a good barometer for what is happening generally, within the marketplace. Whilst Madison's project delivery exceeded expectations in the first half of FY2023, it was the core business that felt the level of confidence drop during the pre-Christmas GDP contraction that we saw across the market. With an increased lens on costs for many, administrative and support roles were affected the most, with businesses 'making do' rather than back filling roles. Development in technology will to some degree have lead to a noticeable drop in hiring intentions amongst administrative and support staff, but, as such, Madison have continued to shift their focus to more roles that are future proofed. Despite the borders opening fully, NZ's white collar temp market has not picked up to pre-Covid levels, especially in the private sector. And while immigration and statistics point to an increase in working holiday applications, we still haven't seen the impacts with the temporary labour market pool that is usually visible by now. The thesis for all this is that people coming to this country probably delayed two or three years, probably came with more money, probably weren't eager to get straight back into the labour market and enjoy what New Zealand can offer first. So we do expect to see some of those numbers come back through, potentially post election, but for now we stay close to that. Broadening our client activity remains a key focus, with key activity around the specialist channels of accounting, business transformation based on where the market currently is, and marketing communication supported by new hires that we have brought into the business to lead these areas, with effective experience and proven historic delivery results."

On the first four months of FY2024:
"Within our Madison and AbsoluteIT business, we continue to see the challenges around skill shortage and business confidence."

Barely a month later in the FY2024 Interim Report dated 30th September 2023:

On Madison:
"Many private sector businesses either pared back growth strategies or froze hiring altogether. Support and administration roles saw the biggest impact with many businesses cutting back costs in this space and choosing to recruit internally at least initially, rather than via an agency. The government sector also slowed for Madison with reduced spend on contractors and an increased lens on cost in the lead up to the general election."

Announcement to the market on 4th March 2024:

On Madison:
"Madison have experienced the same decline in government contracting (permanent placements down 15% against prior year to date), the more widespread slowdown in temporary and permanent entry level and support roles has driven a 20% drop in revenues and we therefore expect to review the carrying goodwill value for the business unit as of 31st March 2024."

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If you have a revenue decline of 20%, and the difference between 'cost to do business' and revenue of less than 5% under more normal operating conditions (see post 1059), this is getting serious. I love Jason's euphemism of 'a less than optimal return on the cost deployed." Outside of 'corporate speak' we call that 'a loss'.
If overall placements are 'only' down 15% on a revenue decline of 20%, that means the underlying core temping positions must be down nearer 25%. AR2023 p56 shows the Madison goodwill was predicated on 2.5% of sales growth. An actual sales 'growth' of -20% is not tenable with that modelled figure. No wonder Madison goodwill is due for a severe haircut. Of the $13.223m of Madison goodwill on the books at EOFY2023, I wonder how much will be left at EOFY2024?

Could it could be that automation has permanently reduced what was the core market for Madison?
What are these alternate roles that are 'future proofed' that Madison talks about?
Could it be that Madison's 'temp' pool will be permanently down, due to tourism not returning to its pre-Covid highs?
We have been told before that when times are good, businesses gravitate to having their own in house recruitment teams. But now we are told that when times are bad, businesses are doing the same thing? Perhaps as Accordant shareholders, we should be hoping for more business customers in that 'squeezed middle' space?

SNOOPY