TGA 0.00% $1.17 thorn group limited

Impairment of Goodwill is the best of a range of things that...

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    Impairment of Goodwill is the best of a range of things that could have justified the trading halt. In essence it is what I call accounting time-shifting – accommodating expenses now that were incurred in the past that could have been accommodated in the future. Writing down an intangible like Goodwill reduces NPAT, but it does not change the cashflow. No tax expense is allowed, which is sad. Impairing Goodwill is an obvious candidate for clearing the decks in FY18 to make FY19 and beyond look good – a topic I and others have mentioned in earlier posts – e.g.. my post #27628119 of 03/10/17, which reads in part:

    The H1 closed on 30/09/2017. At best the results are likely to be ordinary, and probably made to look worse by generous provisioning, and taking up expenses wherever possible. Management has no self-interest in making FY18 look good, because that can be blamed on an earlier management team.

    If the finance guys had not done the spadework in advance, this could explain the Interim Results Announcement delay – impairments have to be justified via a formal valuation, and the auditors would have to give the impairment their imprimatur.

    Goodwill stood at $20.658m at 1/04/2017 (Consumer Leasing $15.604m, and Trade & Debtor Finance $5.054m). Most of the $5.054 sprung from the acquisition of the invoice financing business, part of which was jettisoned in a refocus-on-quality exercise. The Goodwill in Consumer Leasing has been around for years, perhaps since the company floated. What will be impaired in FY18 remains to be seen – the back-office gnomes will pick a number that seems right for their purposes, and retrofit a basis for that sum. It is a nifty way to reduce DPS while sticking to the 50% payout ratio.
    Last edited by Pioupiou: 22/11/17
 
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