Corporate,Ah, but remember that when modelling debt balances we...

Corporate,

Ah, but remember that when modelling debt balances we need to think in strict cash flow terms. The MD spoke of Interest Expense as it pertains to the P&L.

But if you look at the Notes to the Accounts (specifically, Note 7 on page 67 of the FY12 Annual Report, you'll see that COF includes non-cash items in their interest expense line reported in the P&L.

Specifically, in FY12, over $2m was expensed for ineffective interest rate hedges.

That means the CASH interest expense in FY12 was just over $13m. This relates to average Net Debt over FY13 of $90m (taking a crude average of the reporte NIBD @ 30 June 2011, 31 Dec 211 and 30 June 2012). (The implied borrowing cost for FY12 is calculated at over 14%!)

By comparison for FY 13 the average NIBD I expect will end up being around $55m, yielding a derived cash interest expense by me of $7m. (Implied borrowing cost of $12.7%)

The accounting alchemy aside, I might be guilty of being a few hundred kay or so light-on in my cash interest assumptions, but I don't think its enough to de-rail my thesis.

Thanks for pointing it out though.

Cam