It is difficult to predict with conviction what may happen in...

It is difficult to predict with conviction what may happen in future, and I have not tried to do that recently. I suppose one could make assumptions concerning the issue mentioned below, and the cost of the class action, and come up with a range of performance metrics, but that is something that I am disinclined to do until the FY18 final reports have been published, and even then, the 1H2019 announcements would shed more light on how the downsized TGA performed.

I think the consumer leasing business will stabilise with about 100,000 customers, and it will be about as profitable per customer as it used to be, because TGA historically never charged much more than what it now charges, and the current charges are designed to fit within the recommendations made to Treasury, but which are yet to be enacted in law. There are ups and downs in TGA's shift to 4-year leases – that is, the lower interest rate applied would be compensated by lower administration costs and lower defaults (because the demographic would shift slightly to more responsible customers).

The commercial leasing should continue to expand, but not as fast as in earlier years, because the funds to grow the business will hold it back. External funding will decline as the banks become more cautious about lending to TGA, and internal funding has been damaged by the series of misadventures that TGA has had trying to reinvent itself.

The recent decline in consumer leasing was exaggerated by the shift to 4-year leases together with the change in revenue and profit recognition. The latter boosted revenue and NPAT in FY15 and FY16, by recognising the retail profit up front – the corollary of which was less revenue and NPAT later, and a noticeable downward glitch of renewals in the fourth year. Had TGA not changed its revenue and profit recognition, the pattern would have been smoother, because revenue and profit recognition would have been recognised when the payments came in. Also, the problems caused by the “initiatives” defocused the company, and belated amortisation delayed expenses until recently.