The earnings season has started, we assess three FIIG-led issues which may be particularly interesting
Cash Converters - 1H16, results out 16 February
In September 2015, the company appointed consulting group CACE Partners to conduct a full review of the business across geographies, distribution channels and product lines. CCV will formulate a ‘three year strategic growth plan’ and may be in a position to provide a market update on the outcomes of the review and the forward strategic plan at the results announcement.
We are also looking for any comment on the review of the small amount credit contract laws which have moved into a second round of consultation (second round submissions were due 22 January).
G8 Education - FY15 to December, results due 22 February
From a bondholders perspective a key focus point will be if the firm makes any comment around potential changes to its funding structure. The recent changes to the board as well as the upcoming maturity and call dates for its facilities may prompt a reassessment of the group’s funding strategy and composition.
Currently, the group does not have any bank funding, with its facilities comprising four bond lines both in AUD and SGD as detailed below.
| Amount | Currency | Coupon | Next call date | Maturity | Coupon type |
| SGD155m | SGD | 3.5 | 07/03/2016 | 31/07/2016 | Fixed |
| SGD260m | SGD | 4.75 | | 19/05/2017 | Fixed |
| AUD50m | AUD | 3M BBSW + 390 bps | 03/03/2017 | 03/03/2018 | Floating |
| AUD70m | AUD | 7.65 | 07/08/2016 | 07/08/2019 | Fixed |
The SGD155m (AUD equivalent $156m) bond line matures in July and a call date on the relatively expensive AUD70m fixed line is in August. Further, the SGD lines are unhedged and caused a gross $10.5m foreign exchange loss during the year which may be considered excessively risky. We also note the changes to the board including the departure of Jenny Hutson as Chairperson, replaced with Mark Johnson (a director of HSBC Bank Australia) and the appointment of David Foster (previous CEO of Suncorp Bank) as a non-executive director.
These factors may prompt a reassessment of funding structure and composition and may see the group replacing some bond funding with more traditional banking facilities.
Other items to look out for include commentary on the acquisition pipeline and any positive/negative impacts from potential regulatory changes.
McPherson’s – 1H16, results released 24 February
Performance this half and any update to full year guidance and beyond will be particularly important. In November, MCP guided that 1H16 results would be approximately in line with 1H15, suggesting an EBITDA figure of around $17m. If this level of profitability is maintained during 2H16 it will bring MCP back to circa $30m EBITDA per annum originally sought when the bond was issued.
Another focus point will be an update on the divestment of the remaining 49% share of the Housewares business. The company has previously stated that this would probably go through and bring in some $15-18m during March/April 2016. The funds are likely to be used to reduce debt and if this occurs would be credit positive.
Any update on the Household Consumables division which remains for sale will also be important as it drives the majority of USD exposure.