To ensure liquidity over the next twelve months, management has the ability to move resources between divisions. So despite this measure being of primary interest in sizing up financial companies, I believe it is more correct to study the TNR group as a whole. The current account information that I seek is in the FY2016 annual report, but it is scattered. Let's see what happens when I bring it all together again.
Financial Assets |
0-12 months |
Reference |
Cash & Cash Equivalents |
$13.810m |
AR2016 p26 |
Financial Receivables Contractural Maturity |
$75.735m |
AR2016 p46 |
Reverse Annuity Mortgages |
$1.366m |
AR2016 p48 Note 16 |
Total Current Resources |
$90.911m |
(addition) |
Financial Liabilities |
0-12 months |
Reference |
Current Liabilities |
$115.679m+$10.984m |
AR2016 p37 |
Total Current Liabilities |
$126.663m |
(addition) |
What we have here is an on paper 'theoretical' current shortfall of:
$126.663m - $90.911m = $35.752m
I say 'theoretical' because I have based this forecasted cashflow deficit on
contracted maturity of financial receivables and
historically negotiated repayment of bank borrowings. In fact many of these 'contracted receivables' can be rolled over, if a new car is bought on finance to replace the old one (for example). It is also true that the planned repayment of bank borrowings can be renegotiated and retimed. This means that the actual cash deficit will very likely much less than the $35.752m that I have predicted, if it exists at all.
However, if any of the shortfall remained, the difference could be:
1/ Much reduced if most/all of the TNRHA bonds, maturing on 30th September 2016, are rolled over into shares. This would be the equivalent of injecting up to $23.189m (AR2016 Note 24) of new cash into the company, while simultaneously reducing debt by the same amount.
2/ Selling $14.156m in stock from the Turners Fleet/Auction side of the business.
3/ Retaining half the expected earnings over the twelve month period 1st April 2016 to 31st March 2017. This is stated company policy, which based on the last six monthly period would see cash reserves boosted by: 0.5 x $8.162m x 2 = $8.162m.
4/ Increase borrowings from the banks, under variations to the current banking syndicate deal (amount undeclared and unknown, so I will leave this out of my analysis).
The test I am asking TNR to meet is a follows: Over the twelve months from balance date:-
[(Contracted Cash Inflow) + (Other cash Available)] > 1.1 x (Contracted Cash Outflow)
=> ($90.911m+$23.189m+$14.156m+$8.162m) > 1.1 x $126.663m
=> $136.418m > $139.329m (this is false)
The theoretical shortfall of $2.911m represents:
$2.911m/$167.598m = 1.74% of the end of year loan book balance
In summary, not a good result, but rather better than last year. The equation would have worked if it wasn't for the 10% margin required. So a 'fail' against a tough standard, but a close 'fail'.
SNOOPY