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23/09/17
19:06
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Originally posted by SteveSage
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Madtrader
I would agree that there are a number of issues all coming together that is impacting cashflow:
- reduced PDL purchases, which impact collections down the track....multi year issue
- more conservative approach on PDL collection recognition, as well as improved quality on PDLs both point to reduced income from larger PDL balances
- increased contribution from services (lower margin compared to PDLs)
As you suggested, I suspect we may see further constraints on cashflow (and ~50-60% payout in dividends does not help), but long term it will mean better quality book and less dependency on balance sheet. If we are looking at 3-5 years, then there may be huge runway with this business if financial stress increases with increased interest rates.
So still 12-18 mths turnaround needed I believe (although with 18-19c EPS projected, you have to wonder where the share price is not going to start improving beforehand if they can deliver on this)
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Reduced PDL purchase makes a lot of sense if you look at how many people were let go over the last 12 months. Less people means less ability to do anything with that PDL.
But less people also makes a company more agile, so I'd hope to see some performance out of the new engine.