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

[Snoopy]

But will things get better in FY2020?

"We have reduced our cost base, and geared the business to return 4% to 6% EBITDA on turnover approaching $120 million." (AR2019 p14)

This implies the business is now set up to be profitable at an EBITDA of $4.8m to $7.2m.

Cost Savings

There is no easy way I can see to figure out the quantum of the referred to cost savings. One cost we do know about that should be saved next year is the $1.5m that was paid to overseas workers who could not be redeployed when the contracts they were working on fell over. (from 29th May media release). Next I am going to assume that CEO Bennett was able to take out $200,000 in annual costs out of Auckland, and $100,000 each out of Wellington and Christchurch. This adds up to losing a couple of staff in Wellington and Christchurch and four in Auckland for a total saving of $400,000. The bigger centres are likely where most of the big building project failures happened. So I think it is reasonable to assume some right sizing of the business might be appropriate in those cities.

Interest Bill

The net interest rate paid on last years (FY2019) shrinking average net loan balance can be estimated as follows:

Interest Rate = $1.380m / 0.5x($29.731m + $26.643m) = 4.9%

If we assume the average loan balance will be $3m lower over FY2020, and interest rates remain unchanged, then we can expect the FY2020 interest bill to be:

0.049 x 0.5 x($26.643 + $23.643) = $1.232m

Depreciation and Amortization

The FY2018 figure was $3.445m. I propose to use that again.

Tax

The corporate tax rate in NZ is 28%. But AWF seem to always pay close to 30% because they have various non-tax deductible expenses, So I propose to use a tax rate of 30%

Now we have enough data to estimate an upper and lower bound NPAT figure for AWF for FY2020. So let's see what it all adds up to.

SNOOPY