2024 Interim Report

As I reflect on the last six months' trading environment, we are in a period that has most likely seen New Zealand's current economic recession bottom out. The unemployment rate for the June 2024 quarter was 4.6% against 3.6% the prior year, and people receiving Jobseeker Support was up 12.8% at the end of September 2024 when compared to September 2023. The data shows a record number of people, nearly 400,000, are now on some form of benefit*.

*Source: MSD Benefit Fact Sheets Snapshot September 2024

For the first time since March 2021, consumer price inflation has now fallen back within the Reserve Bank of New Zealand's target range of 1% and 3% over the medium term, to an annual 2.2% increase

in the September 2024 quarter. Current and predicted OCR cuts signal how tough the economic climate really has been. The necessity for monetary policy to correct inflation has clearly had a significant effect on both the labour market and general growth. Current monetary policy easing now looks likely to stimulate the converse as business sentiment and investment, alongside increased consumer spending, become key as we enter the summer months.

As a seasoned staffing business, we are accustomed to riding the ebbs and flows of economic cycles as part and parcel of our industry. The fact that there is reduced demand during an economic downturn is not anything new. The difference with this cycle though is how protracted it has been across both permanent and temporary recruitment. Economic impacts usually result in a swing from permanent hiring towards temporary and contingent hiring, however that swing has not yet come. The external factors have been particularly protracted over the last 18 months, and we have not seen such subdued demand across government and private sectors concurrently for many years, if at all.

It is against this challenging backdrop that we unsurprisingly report our H1 Group Revenue down 21% against the prior year, most notably in our white-collar segment and driven, in part, off the back of the Government sector's own austerity measures as noted at our Annual General Meeting earlier this year.

While each business has been navigating the challenges of H1, they have also been looking further ahead and reorganising in a way that will ensure they have the capability and capacity to match the pace of future lifting demand.

Our continual focus on cost management has seen a significant decrease in overall operating expenditure compared to this time last

year, with net cash from operating activities remaining positive at $1.3m. We expect to see further operating expenditure reductions as we manage through the second half of the year, without compromising our well-regarded delivery capability across all brands.

Revenue for generalist recruiter Madison has held so far this year. Temporary staffing revenue saw an increase of 8% against the same trading period last year, where our volume/projects team has fared well due to their ability to scale up staffing on a just in time basis across a number of client projects. However, with the continual government reduction in spending and the lack of business confidence manifesting into right-sizing activity across the market, alongside limited

market movement due to retention of key talent and job-hunting inertia, revenue from permanent staffing services was under half of that in the same period last financial year.

To complement our executive recruitment businesses, the strategic focus for Madison has been on building bench strength in mid-senior specialist and senior managerial recruitment. We expect this specific investment to lift the average permanent placement fee in the coming 12 months. We have also strategically invested to build a health channel using our existing infrastructure and personnel, a greenfield operation tailored to meet the specific needs of the health industry.

For specialist IT recruiter Absolute IT, the year started off the back of considerable change, a necessary transition in response to declining demand for tech talent after an incredibly heated job market in the year following the emergence of Covid-19. The recalibration to current demand whilst positioning to capitalise from remaining pent-up demand continued in the first quarter of the year and our delivery team has been appropriately sized to manage costs against that slower pace of hiring requirements.

We expect to cautiously rebuild delivery team numbers as demand sufficiently returns whilst ensuring the underperformance of the business noted previously is also not repeated during more favourable market conditions.

With a lot of media attention on the public sector's cost reduction measures, it is unsurprising that JacksonStone & Partners revenue has been heavily impacted, most significantly in contracting revenue. The delivery team has been moderately reduced accordingly.

A strong and experienced core team remains busy with revenues outside of central government constraint such as local government, infrastructure and other NGO demand. We have held sufficient capacity to manage what is likely a slow return of usual demand overall in the public sector and a more significant return of private sector demand.

Executive Search firm Hobson Leavy, whilst experiencing a slowdown in the first quarter, have seen a return to demand at levels that are encouraging for the second half of the year. What is also encouraging is the spread of executive level demand across many differing industries.

This growing pipeline has necessitated the addition of another Partner into the business, and we are pleased to have made the appointment through our own internal talent development program.

AWF's clients based in the regions have this year managed their headwinds through dropping their staffing levels to a greater degree compared to last year's headcounts. Nationally, the number of field employees on assignment for AWF decreased compared

to H1 FY24 and revenues saw a 5.1% decline, whilst still producing a better return than prior year.

However, with some of the weather dependent work naturally ramping up at this time, and highly anticipated infrastructure projects expected to see government funding finally released, placement numbers are trending upwards for the second half of the year.

Whilst some competitors continue to face difficulties with managing a large migrant workforce in this market, AWF's exposure continues to be limited, with careful matching of anticipated demand to skillsets required.

In preparation for the rising demand, AWF has been proactively addressing skill shortages through training outcomes. We have inhouse accredited NZQA traffic management trainers and ConstructSafe certification - a national standard of Health and Safety for the Construction industry. This enables us to prepare our own field employees as well as those of our clients on a timely basis and is a unique vantage point to mobilise quickly. At present AWF is tracking with four times as many people achieving a qualification through this training programme compared to prior year.

Our social employment initiative The Work Collective, as part of the blue-collar segment also experienced a decline in numbers on assignment. Job seekers are facing challenging times, and it is even more

difficult for those who already encounter barriers to employment. The Work Collective is focusing on specific projects where volume employment may be secured through partnering with sponsor or support organisations.

Looking ahead to H2, the shape of our team has changed, with the Group's overall FTE reduced by 15% compared to the same trading period last year, and overall operating expenses have dropped in line with current demand. While cost management is necessary and ongoing, it is not our primary strategy. Rather than a "survive till '25" mentality, our various teams' iterative changes in tack to respond to market conditions - whether

by sector or by region - is absolutely a 'trade through and come out the other side stronger' ethos.

We are proactively directing our resources, choosing where to hire and where to trim down, and where to remain bold and invest. We will ensure our core capability is not impacted to the point of creating long term setbacks as demand lifts.

While some competitors are considerably shrinking and even exiting the challenging market conditions, Accordant remains domiciled and committed to supporting New Zealand's staffing needs. Though business and consumer confidence will rise, we will likely see rising unemployment for a few more months concurrently.

Our scale across metropolitan and regional New Zealand, and our spread across sectors, role types and hiring levels, remains a strength. Alongside permanent hiring, offering flexibility and cost effectiveness through temporary staffing and contractors uniquely positions us to seize growth in demand from wherever it occurs. This will have a rising tide compounding effect returning the Group to those sustainable earning levels we remain determined to achieve.

The Board have resolved not to pay a dividend with a focus on return to profitability, modest investment and reduction in debt where possible. We also continue to enjoy close alignment and strong support from our banking partners.

Our people continue to operate in what

has been an acutely uncertain market. I have said it before and it is worth repeating - their adaptability, resilience and commitment is commendable.

The next six months will be telling as our country looks to catch more wind in its sails and the trajectory of economic recovery is better known.

Our local presence, national reach and our breadth of service ranging from traditional to highly customised solutions, still positions us as the key partner of choice.

Jason Cherrington,

CEO