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

[Snoopy]

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 FY2023 as a proxy for the combination of 2HY2023 and HY2024. I have called this 'cobbled together year of halves', year 2023.5.

Financial Year	2023.5
EBITDA (Snoopy produced) {B} (2)	$6.038m
Finance Cost {C}	$2.124m
Interest Coverage {B}/{C} (target >3)	2.84
Net Bank Debt {D}	$21.140m
Leverage ratio {D}/{B} (target <3)	3.50

Notes

1/ 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.

2/ EDITDA for FY2023.5:

EBITDA = NPBT + I + DA
= [$1.629m + ($3.077m - $2.977m) + ([$1.370m-$0.130m]+[($1.683m-$0.318m)-($0.651m-$0.170m)]) + $2.185m] = $6.038m (with I=$2.124m)

Bank Interest charge, I = ([$1.370m-$0.130m]+[($1.683m-$0.318m)-($0.651m-$0.170m)]) = $1.240m+$0.884m = $2.124m

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By my calculations this is a 'double fail' on the banking covenants at the HY2024 balance date - albeit not by much. I don't know exactly how the banks adjust these numbers around the edges. So it could be that with one or two small tweaks the covenants sneak through. But, looking out to the FY2024 results, we have to remember that net profit for FY2024 will be materially lower than last years full year result of $2m. To further exasperate things the interest bill will not be dropping as another $1.086m of dividend payments (likely borrowed money) has gone out of the accounts since this half year balance date.

What will Accordant's bankers, ASB Bank, do about this? Demand a cash issue to fix things? Or will they give AGL some extra time to sort things out? I think the next dividend is a goner on these numbers. We might have to wait for the full year results announcement date in mid-April to see what tweaks the financial engineering spanners need to make?

SNOOPY