Cash Flows Show South Canterbury Finance Not Shrinking Loan Book

While waiting for the financial statements for the 6 months to 31 December 2009, I have analysed the company's known cash flows between 30 Sept. 2009 and 10 Feb 2010, based on the information released on 10 Feb 2010. This information shows that the company has not generated significant cash inflows from its other assets and liabilities. The company's statements have indicated that it is generating cash from investors, with claims of investor support, and given the attractive interest rates on offer and the government guarantee, it appears credible that the company has been able to maintain or possibly grow its debenture funding book. This implies that its other assets have not been producing cash inflows that would help its liquidity position.

The known cash positions, flows and transactions are:

1. Cash and readily realisable investments, both at 30 Sep 2009 and 10 Feb 2010.
2. US note payments due (I have assumed an exchange rate of US70c to the NZD).
3. The Credit Fund transaction
4. The sale of the ordinary shares in South Island Farm Holdings Ltd. for cash
5. The sale of the shares in PGC for cash (we will assume this was included in readily realisable investments).

This allows us to solve for the total other cash flows for the period as follows:Given the CEO Sandy Maier's reported statement:

During January, historically a quiet month for the Company in terms of investor activity, South Canterbury Finance experienced an encouraging inflow of funds from investors. The Company has averaged in excess of $1.7 million of new investment money per day for January and its retention rate of existing investors lifted to more traditional levels.

The only conclusion we can draw is that the company's assets have not been producing a lot of cash, if any. This is surprising given the company's need to increase liquidity and its stated plans to reduce its loan book and dispose of unnecessary investments.