Read note 16 to gain a better understanding of ASG's debt...

Read note 16 to gain a better understanding of ASG's debt position.

$421 million of those current liabilities is bailment finance. Could I explain bailment finance to a 5 year old. Yes. I borrow money to buy the car from the automaker, then when I sell the car I pay the loan back. I need to sell the car as quick as possible to reduce my interest payments. The person giving me the loan is generally the automaker themselves. If I can't sell the car I return the car to the automaker and the loan is cleared.

Think of these interest payments on the bailment finance as working capital.

$222 million of the liabilities is tied up with the properties they have bought over the years and business acquisitions over time. They borrowed some amount of money to fund the purchase of the Gold Coast delearship. They have always disclosed they borrow money for properties with an 80% LVR.

Read Note 11. Their land and buildings are reported on their balance sheet 'at cost' less depreciation. It sits at $194 million. I would guess their land and buildings are worth more than this.

Look at the Cashflow Statement over the years to gain a better picture of how much free cash this business is spitting out. They produced $166 million of operating cashflow. This sum is after paying taxes and interest. Their net interest coverage from Cashflow is over 5 times. Very lowly geared in my opinion.

When you back out lease payments of $37 million from operating cashflow they're left over with $129 million to reinvest in the business, pay down debt, or pay dividends.

Interest payments will be higher moving forward. They have been open about this. I remember reading somewhere in their report paying 6-7% rates across their borrowings in FY2023. The year before it was 3-4%. maybe it's between 7-8% this half year - no big deal.

They have not raised further capital since listing on the ASX. There has been no share dilution at all. Stock based compensation for directors/employees is bought on market. These guys have demonstrated that they protect the share count. If they raise capital, it will be for a sizable acquisition, not in need to improve their balance sheet.

In summary, so long as Australians /Kiwis keep buying cars, ASG will be a cash cow.