The Cash Converters Ltd (ASX: CCV) share price is down 7% to 14 cents this morning after the company revealed its unaudited financial results for the full year ending June 30, 2019. Below is a summary of the results.
- Full year loss between $2m – $4m
- Revenue around $283m
- EBITDA (operating income) $22m – $23m
- EBITDA before FY19 adjustments $45m – $47m
- Net profit before adjustments $18m – $20
As we can see there’s a big difference (around $16m) between the accounting net profit and what Cash Converters describes as net profit before one offs or ‘adjustments’.
The adjustments it flags include “accelerated amortisation and depreciation” worth $3.5m, a written off UK IT investment worth $1.6m, $5 million worth of debts being classed as doubtful due to credit risks, $1.4m worth of “restructuring costs”, $0.5m of other miscellaneous costs thrown in as adjustments, and $3.2m of legal costs in defending another class action.
Judging by the share price reaction this backing out of costs is not washing with investors and it must be said these costs are of varying legitimacy in terms of how an investor should view them in analysing the true performance of a business.
Writing off investments in IT businesses or backing out restructuring costs does not really seem credible, although in fairness a lot of companies will present numbers shorn off depreciation or amortisation.
As you can probably guess I wouldn’t suggest buying Cash Converters shares on the basis they look cheap or for some other reasons.
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