H1 results due 19 Nov, page-10

Hi Donksy

I found it difficult to understand the Cash Flow Statement – the descriptions are too vague for me, and cash flow statements are not my thing. As you can see below, whatever assumptions I make to explain one point, gets contradicted by other assumptions I make to explain another matter.

If the finance-lease assets of Consumer Leasing Division are not shown, it may be because at year end, for TGA these assets no longer exist - they would be replaced by debtors (finance lease lessees). If that is true, and if TEF substantially operates using finance leases, then why is TEF's purchases shown? Also, what does the word "settlement" imply? Maybe they are not purchases. In note 26 of FY2014, one can see:

…..................................................................... 2014 …....... 2013
Transfer of rental assets to financial leases .. $36,759K ... $26,328K
Thorn Equipment Finance settlements ….......$32,325K ... $33,161K

Because goods under finance lease are sold, the amount purchased should equal COGS for finance leases. Hopwever, the amount for COGS, $38,583K, is much lower than $36,759K + $32,325K.

Off the top of my head I thought that TGA would need to spend about $70M a year on stock to keep things at a steady state. Most of the depreciation per annum, plus COGS, should roughly equate to what should be purchases in a go-nowhere setting. For now, units like Thorn Financial Services and NCML are too small to have much impact.

…....................................................................2014 …......... 2013
Finance lease cost of sales ….................. ($38,583K) … ($26,118K)
Depreciation and amortisation expense ... ($36,213K) … ($32,259K)

For FY2014 these summed to $74.8M, and for FY2013 they summed to $58.4M in. This suggests purchases of about $70M in a no-growth setting, maybe a bit less.

Sorry for adding to the confusion.