What is it we don't know?, page-57

Pockets

My guess is that FY18 will be a clear-the-stables year, with as much expensed as possible. This need not be a major issue, because there may be little discretionary fiddling left to be fiddled. Much of the clean-up happened in FY17, which needed to be done to correct an earlier management's tendency to gild the lily when things started to look bad.

A one-off expense that we can expect is the recruitment cost of the new CEO (I am stuffed if I can understand why this cost $500K on the previous occasion). Legal expenses too can be expected to be high. Lease renewals should improve as we move past the effects that switching to 4-year leases caused. The Annual Report in June may have some good news, even if it is hidden in the cracks, and the Half-Year Report in November should give the market a good idea if TGA has turned things around (increased contract renewals, reduced debt, et cetera). There is a chance that by November, the Class Action would have withered on the vine, but I would not count on that happening.

One stable-cleaning decision that I would like to see is for TGA to return to its earlier revenue and profit recognition over the life of leases, rather than taking the retail margin up-front. It is illogical to take a retail margin up-front if a business is not a retailer. This will negatively impact reported NPAT, but make no difference to cash flow, and the underlying health of the company would actually improve by delaying dividend outflow for a fixed payout ratio. The recent switch to revenue and profit recognition practice was probably part of the lily gilding in recent years. Other lily-gilding components were, IMO, the non-amortisation of NCML's goodwill, and the lifting of the dividend payout ratio to signal that all was well, when it was not.

Anyhow, like you, I'll hold until a clearer picture emerges.