When you look at the net financing cost in the income statement and compare to the pcp, finacing cost has actually increased, notwithstanding the huge decrease in interest rates. Take a look a note 8 in the accounts and to me it looks like CUS have entered into an interest rate swap agreeing to pay a fixed rate. This presumably was done last year when at this time last year the RBA in australia was still talking up rate increases, so maybe a decision was made to fix a rate in the hope that such rate would be lower that rates available in the future because interest rates were going to be going up. Unfortunately the opposite has happended. Im no expert on this by any means (actually could have it all wrong) so would appreciate peoples comments, basically to me it seems that CUS is not benefiting from any of the falls in interest rates as they have hedged there interest cost earlier and thereby locked in a high (relative to todays rates) fixed rate. Is that to say that the expense item “net change in fair value of derivates” (which is 5,152,000 for the half year) is the expense being incurred in having interest rates fixed at a higher rate as opposed to the lower rates that are potentially available? I wonder how long they are locked into on the fixed rate for? If there debt could be refinanced on todays rates I am assuming that would substantially help the NPAT line.....
CUS Price at posting:
$1.32 Sentiment: LT Buy Disclosure: Held
