Another 12 months of 0 capital appreciation, page-18

Hi hosh,

I’m waving the white flag on this one and admitting to being clueless! I’ve requested that my previous post be removed as I don’t think it was a good summary of the situation in retrospect.

Unlike other lenders, regulated interest rate caps have prevented Cash Converters from passing on interest rate hikes to customers meaning shareholders have taken the full hit on this.

Furthermore, the regulatory change with regards to SACC forced the business to pivot into new markets and products, which seems to be progressing well, but this is a now a more capital-intensive business. New loans are larger, higher cost and lower return than the loans they are replacing.

These factors combined have had a material impact on the cash generating ability of the business. The table below shows actual cash generated this half ($4.8m) was not even sufficient to cover the dividend payment ($6.3m).

I’m not sure anything has really changed and more astute investors will have seen this coming but I’m just seeing things differently after this report. I’ve been wrong so far on this one so take anything I say with a pinch of salt. The business is most likely on the right track, we're most likely closer to the end of the rate hiking cycle than the beginning, the NTA is solid and there's always the 12.5% fully franked dividend in the interim, but I think it will be a hard slog.