TIDMCCVU
RNS Number : 9237X
Cash Converters International Ld
14 February 2013
CASH CONVERTERS INTERNATIONAL LIMITED
A.B.N 39 069 141 546
FINANCIAL REPORT
FOR THE HALF-YEAR ENDED 31 DECEMBER 2012
Cash Converters Reports a Record Half Year Result
Cash Converters International Limited is pleased to report a
growth in revenue of 20.8% to $134.9 million and a record net
profit after tax of $18.4 million for the period, an increase over
the previous period of 39.2%. In addition, the Directors are
pleased to advise that the interim dividend has been increased to 2
cents per share, up 14% on the 1.75 cents per share dividend paid
in the previous half and previous corresponding period.
Financial results summary
31 December 31 December Variance %
2012 2011
Revenue $134,915,553 $111,671,665 +20.8
Earnings before interest,
tax, depreciation and amortisation $30,390,648 $22,267,924 +36.5
Depreciation and amortisation $2,800,726 $1,964,570 +42.6
Earnings before interest
and tax $27,589,922 $20,303,354 +35.9
Income tax expense $7,754,306 $6,007,896 +29.1
Finance costs $1,404,303 $1,052,615 +33.4
Net profit before non-controlling
interest $18,431,313 $13,242,843 +39.2
Less minority interests - - -
Net profit after non-controlling
interests $18,431,313 $13,242,843 +39.2
Basic earnings per share
(cents per share) 4.7 3.5 +34.3
Divisional Operating Profit 31 December 31 December Variance %
2012 2011
Franchise operations $2,298,956 $2,876,335 * 20.1
Store operations $4,592,060 $4,287,200 +7.1
Financial services - administration
* $7,322,575 $6,615,416 +10.7
Financial services - personal
loans $21,468,267 $14,113,125 +52.1
Total operating profit
before head office costs $35,681,858 $27,892,076 +27.9
Less corporate head office
costs $(9,496,239) $(8,641,337) +9.9
Total Divisional Operating
profit $26,185,619 $19,250,739 +36.0
* Financial services administration represents the fees charged
by Cash Converters Personal Finance - Administration for cash
advance services
Major highlights for the half-year include:
- Strong revenue growth compared to the previous corresponding
period last year of 21% to $134.9 million (2011:$111.7 million).
The major drivers for revenue growth over the period included an
increase in personal loan income of $16.7 million, an increase in
corporate store revenue of $7.1 million and an increase in
financial services administration fees of $1.1 million;
- The statutory earnings per share were 4.7 cents per share, an
increase of 34% on the previous period;
- The corporate store network in the UK and Australia has seen
revenue grow by 11.6% to $67.9 million producing a combined EBIT of
$4.6 million, representing an increase of 7.1% on the corresponding
period;
- There were 2 "greenfield" company owned stores opened in the
first half of the financial period in Australia, and 2 franchised
stores were acquired in the period in the UK, taking total
corporate store numbers at the half-year to 106 with 61 located in
the UK and 45 in Australia;
- The personal loan book in Australia grew by 36% from $62.1
million at 31 December 2011 to $84.2 million at 31 December 2012.
The UK personal loan book grew by 108% from GBP8.5 million at 31
December 2011 to GBP17.7 million at 31 December 2012;
- The personal loan business and the cash advance administration
platforms in Australia and the UK generated a combined EBIT of
$28.7million (2011:$20.7 million) up 38.6%;
- The growth of the online personal loan business in Australia
continues to be very strong with the value of loans written
increasing by 66.4% to $10.8 million for the period;
- The Company raised $32.7 million of capital through a
placement of 38,500,000 shares at 85 cents per share in December
2012. The placement was substantially oversubscribed with strong
support from existing and new institutional investors. The funds
from the placement will be used to acquire stores within the
franchised network, to open new corporate stores and to finance the
growth of the Australian and UK personal loan books.
Dividend
The directors have declared an increase in the interim dividend
to 2.0 (two) cents per share. The dividend will be fully franked
and will be paid on 29 March 2013 to those shareholders on the
register at the close of business on 15 March 2013. This represents
a payout ratio of 46% of the net profit.
London Stock Exchange listing
The Company has requested the UK Financial Services Authority to
cancel the listing of the Company's ordinary shares of no par value
on the Official List of the London Stock Exchange's market for
listed securities. It is expected that the cancellation of the
listing will take effect from the 19 February 2013.
The Board considers that the listing on the ASX adequately
provides for the capital requirements of the Company and gives
shareholders a trading forum with reasonable liquidity and all the
necessary shareholder protection.
Financial services operations
The financial services business continues to grow strongly with
operating profit before tax from the personal loans products
increasing 52.1% to $21.5 million and the administration business
for cash advance services increasing 10.7% to $7.3 million.
The reported net profit after tax was impacted by a provision of
$900,000 (pre-tax effect) towards an exit bonus payable in October
2014 to Ausgroup Pty Ltd ("Ausgroup"), an Australian company that
has provided Cash Converters with specialist training support,
compliance services and franchisee establishment support in the
United Kingdom and Australia. Ausgroup is paid a commission based
on a percentage of turnover and this structure has incentivised
Ausgroup to drive the rapid growth in the UK operations. Cash
Converters will provide these services itself from October 2014
when Ausgroup's contract expires. Accounting Standards require that
Cash Converters recognise the expense related to the estimated exit
bonus payable to Ausgroup over the period of the contract. The
total bonus payable at the end of the term will be calculated based
on a mixed multiple of between 2.5 and 5.0 times the final annual
commission, depending on whether the commission relates to a
corporate store or a franchised store, net of the operational
costs, paid to Ausgroup. The expiry of the contract will have a
positive impact on UK earnings from 2015 onwards.
Australia
The Australian personal loan book has grown by 24.5% in the
first half, from $67.6 million at 30 June 2012 to $84.2 million at
31 December 2012.
Part of this growth has been generated by our online lending
platform, with 5,803 loans made totalling $10.8 million. Online
personal loans now represent 14.6% of the total loan book.
The Australian personal loan book produced an EBIT of $18.5
million (2011 $12.9 million) up 43.4% on the previous period.
The bad debt percentage of principal written off to principal
advanced for the Australian business reduced from 5.6% to 5.4% in
the period.
The Australian cash advance business has continued to grow in
the period, generating an EBIT of $6.8 million, up 7.9% on the
previous period. We expect to see further growth in the second half
as we now have launched a fully integrated online cash advance
product. This was launched in December and the early signs are
encouraging.
Cash advance (first half of 2013FY compared to second half of
2012FY)
- Total principal loaned increased by 7.1% to $126.5m
- Average loan amount decreased from $327 to $325
- Total customer numbers increased by 7.6% to 433,724
Personal loans (first half of 2013FY compared to second half of
2012FY)
- Total number of loans approved increased by 23.9% to 70,146
- Total number of active customers increased by 15.5% to 77,093
UK
The UK personal loan book grew by 39.3% in the first half, from
GBP12.7 million at 30 June 2012 to GBP17.7 million at 31 December
2012.
The EBIT for personal loans and cash advance for the period was
$3.9 million (2011: $1.4 million), up 64%. The online product
produced $301K of this EBIT.
The bad debt percentage of principal written off to principal
advanced for the UK increased from 11.01% to 11.5% during the
period. As the UK business matures and our customer information
database improves, we are expecting a decrease in the level of UK
bad debts.
Cash advance (first half of 2013FY compared to second half of
2012FY)
- Total principal loaned increased by 26.2% to GBP20.3 million
- Average loan amount increased from GBP126 to GBP134
- Total customer numbers increased by 31.8% to 97,569
Personal loans (first half of 2013FY compared to second half of
2012FY)
- Total number of loans approved increased by 1.7% to 13,972
- Total number of active customers increased by 18.5% to 22,817
Company owned store results
The corporate store network in Australia performed strongly in
the first half and produced an EBIT of $4.6 million (2011: $3.8
million) up 21% on the previous period. Two "greenfield" stores
were opened in the period and have performed strongly.
The UK corporate store network has struggled in very tough
trading conditions. The EBIT for the period was a small loss of
($9,959), down from the previous corresponding period profit of
$424,213.
The UK corporate store performance was affected by;
- The continued profit drag (GBP313,463) associated with the
opening of 19 "greenfield" stores in 2011, of which eight are still
operating at a loss (GBP88,541) and 11 of the 12 stores opened in
2012 are also still operating at a loss (GBP224,922). Based on
historical performance it takes an average of 12 months for a new
store to reach break-even;
- The EBIT on a same store basis excluding the new stores was
down (GBP241,239), primarily as a result of profit from gold sales
being down (GBP206,000) on the previous period.
The UK corporate stores have been instrumental in the
exponential growth of the financial loan products and remain a very
important part of the distribution strategy for driving future
growth. As the stores become more established we expect the trading
profitability of the UK stores to improve.
Green Light Auto
Cash Converters is associated with the Perth-based start-up
company, Green Light Auto (trading as Carboodle). Cash Converters
has provided Carboodle with funding through a convertible note
instrument. Carboodle (www.carboodle.com.au) was established in
2010 with the first lease contracted in October 2010. The concept
is a car leasing business set up to meet the needs of customers who
don't have access to main stream credit and need a reliable second
hand car. A Carboodle car has the running costs packaged up so that
the customer can manage their personal budget without any untimely
or unexpected bills.
Carboodle has distribution show room centres located in Perth,
Melbourne, Sydney and Brisbane. Initial sales and the rollout of
distribution show room centres have been progressing in line with
our expectations.
Carboodle has an exclusive licence with Cash Converters that
allows it to use the 148 Cash Converter stores in Australia as its
agent to promote its product. Carboodle pays a royalty to the
Company and a commission to the stores. The Cash Converter store
network and our knowledge of financial services products in this
market space have provided leverage to the distribution of this
financial services product. This business represents a significant
growth opportunity for the Company and early indications are that
it will be a great success.
Consumer Credit Legislation Amendment (Enhancements) Act
2012
The Consumer Credit Legislation Amendment (Enhancements) Act
2012 was passed in August 2012. This legislation introduces further
responsible lending provisions with effect from March 2013 and
certain caps on fees and charges from 1 July 2013. All Cash
Converters loans are within the small amount credit contract
definition. The Company has refined its system and trained its
staff so that we are ready to meet all these changes on time and in
a fully compliant way.
Outlook
The Company expects continued growth in its Australian and UK
loan books and in its profitability in the second half. As
mentioned earlier, the Company launched an online cash advance
product in December and we have high expectations that this will be
as successful as the online personal loan product.
Subsequent to the half year end, the Company opened another
"greenfield" store in Merrylands in New South Wales and also
acquired another franchised store in Gosnells, a suburb of Perth.
There are also a number of store acquisitions that the Company is
well placed to conclude very shortly.
The half year result endorses the Board's strategy of increasing
the corporate store network by acquiring and opening new stores.
This drives growth in financial service products through a larger
store distribution network. At the same time, the Company is
creating additional sales for our financial products through the
online channel.
In closing, we wish to thank the staff, management and
franchisees for their contributions to the strong financial result
this half year.
Reginald Webb
Chairman
Peter Cumins
Managing Director
Perth, Western Australia
Date: 14 February 2013
Directors' Report
CASH CONVERTERS INTERNATIONAL LIMITED AND CONTROLLED
ENTITIES
FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2012
In respect of the half-year ended 31 December 2012, the
Directors of Cash Converters International Limited, the Company and
parent entity, submit the following report in order to comply with
the provisions of the Corporations Act 2001.
Directors
The following persons held office as Directors of the Company
during or since the end of the half-year:
Mr Reginald Webb (Non-executive Director, Chairman)
Mr Peter Cumins (Managing Director)
Mr John Yeudall (Non-executive Director)
Mr William Love (Non-executive Director)
Mr Joseph Beal (Non-executive Director)
Dividends
The Directors of the Company recommend that an interim dividend
of 2.0 (two) cents per share be paid on 29 March 2013 to those
shareholders on the register at the close of business on 15 March
2013.
Review of operations
A summary of consolidated revenues and results by significant
industry segments is set out below:
Segment revenues Segment results
Half year ended Half year ended
31 Dec 31 Dec 31 Dec 31 Dec
2012 2011 2012 2011
Franchise operations 11,652,258 12,336,132 2,298,956 2,876,335
Store operations 67,964,248 60,847,415 4,592,060 4,287,200
Financial services -
administration 9,130,019 7,964,778 7,322,575 6,615,416
Financial services -
personal loans 54,687,977 37,973,740 21,468,267 14,113,125
Intersegment elimination
of revenues (8,584,061) (7,631,999) - -
Totals 134,850,441 111,490,066 35,681,858 27,892,076
Corporate head office
income/(costs) 65,112 181,599 (9,496,239) (8,641,337)
------------ ------------ ------------- ---------------------
Total revenue/operating
profit 134,915,553 111,671,665 26,185,619 19,250,739
============ ============
Income tax attributable
to operating profits (7,754,306) (6,007,896)
------------- ---------------------
Operating profit after
income tax 18,431,313 13,242,843
(Profit)/loss attributable - -
to outside equity interests
------------- ---------------------
Profit attributable to members of Cash Converters
International Limited 18,431,313 13,242,843
============= =====================
Franchise operations
The profit before tax for the franchise operations was
$2,298,956 (2011: $2,876,335) for the six month period ended 31
December 2012. The Australian business contributed $1,269,021
(2011: $1,566,464), the UK business $846,867 (2011: $1,003,073) and
the International operations $183,068 (2011: $306,798) of the
profit before tax. The main reason for the decrease in profit for
these operations was a reduction in monthly franchise fees due to
the acquisition of franchised stores by the corporate store
division in the prior years.
CCUK are planning to open a further eight franchised stores in
the next few months and two new franchised stores are also planned
to open in Australia over the same period.
The total number of franchised stores throughout the world now
stands at 603 with 161 stores in the UK, 104 in Australia and 338
throughout the rest of the world. Franchised stores continue to be
opened, with four stores opening in the UK and one store in
Australia in the period to the 31 December 2012. Internationally,
growth in Spain has slowed following difficult economic conditions,
however a further five stores have opened since June and the first
store in Dubai opened in August 2012.
Store operations
This division encompasses the corporate store network in both
the UK and Australia. Currently there are 61 stores in the UK and
46 in Australia, resulting in a total of 107 stores.
The store operations delivered a profit before tax of $4,592,060
(2011: $4,287,200). The Australian business contributed $4,614,140
(2011: $3,862,987) and the UK business a loss of $9,959 (2011:
$424,213 profit) of the profit before tax.
The UK business recorded a fall in profit primarily because of
the profit drag relating to 20 stores opened in the past 18 months
that are still moving to break even - this has reduced profits by
approximately $480,000.
On a same store sales basis, for the corresponding period last
year, the retail sales growth from our Australian corporate stores
was 6.5%, cash advance - principal advanced, and personal loans -
principal advanced, delivered growth of 5.0% and 29.9%
respectively, pawn broking interest was down slightly at 1.4% below
last year. Our UK stores experienced growth in retail sales of 0.4%
and cash advance commissions growth of 24.7% with personal loans
commission's remaining constant. However, pawn broking interest
fell by 5.1% and buyback income by 2.1%.
The current UK growth opportunities will come through the
development of financial services through both the corporate and
franchise networks. Although the opportunities for 'greenfield'
stores in Australia do not deliver the same level of opportunities
as the UK, certain states (New South Wales and Victoria) do offer
growth potential. The opportunities in Australia lie in franchise
store acquisitions, with a number of franchisees willing to sell
their stores.
Financial services operations and administration
These divisions incorporate the trading results of MON-E Pty Ltd
(Australia), Cash Converters Personal Finance Pty Ltd (Australia)
(formerly Safrock Finance Group Pty Ltd) and the UK Finance
Division. MON-E Pty Ltd is responsible for providing the internet
platform and administration services for the Cash Converters
network in Australia to offer small cash advance loans to their
customers (average loan size of approximately $330). Cash
Converters Personal Finance provides small, largely unsecured loans
through the franchise and corporate store networks in
Australia.
The UK Finance Division utilises the software developed in
Australia, for both cash advances and personal loans, and is
continuing to roll-out the finance products across both the
franchise and corporate store networks in the UK. CCUK is utilising
the knowledge and experience of Ausgroup Pty Ltd (Australian agent
experienced in financial services) to roll out the financial
services to corporate stores, franchisees and to train staff. The
agreement allows for a 3% commission, payable to Ausgroup, on all
principal and interest repayments, with Ausgroup covering all costs
associated with the financial services roll-out.
During the period under review the net profit before tax for
this division was $28,790,842 (2011: $20,728,541), representing an
increase on last year's corresponding period of 38.9%. Cash
Converters Personal Finance contributed $18,505,093
(2011:$12,904,387), MON-E $6,893,826 (2011:$6,344,090) and the UK
Finance Division a profit of $3,391,923 (2011:$1,473,728).
For Australia, bad debt levels continue to remain stable at 5.4%
of the cumulative principal loaned less bad debts recovered (2011:
5.6%), however, the UK bad debt levels continue to remain at
elevated levels of 11.5% of the cumulative principal loaned less
bad debts recovered (2011: 11.0% ). The UK personal loan book is
still maturing and the level of bad debts we are currently
experiencing is in line with the levels initially experienced when
establishing our Australian personal loan business. We expect that
the UK database will mature and our customer knowledge base will
increase allowing the level of bad debts to decrease steadily over
the coming years.
The Christmas period is one of the busiest periods for the
personal loan product and this year was no exception with a new
record of $16.9 million (2011:$13.2 million) advanced in Australia
and GBP1.4 million (2011:GBP1.5 million) in the UK. The loan books
are $84.2 million for Australia and GBP17.7 million for the UK, at
the end of December. Both loan books have bad debt provisions of
$8,525,962 (Australia) and GBP5,230,376 (UK).
Cash Converters is licensed to provide financial products
pursuant to the National Consumer Protection Act and has
responsible lending processes and controls in place.
Corporate office costs
These costs represent the corporate office and interest costs
for both Australia and the UK. These costs are shown separately
because it is difficult to allocate these costs to any specific
division/segment and to calculate an arbitrary split of the costs
would not be appropriate in obtaining an accurate contribution from
each of the divisions.
Subsequent events
Cash Converters International limited has requested the UK
Financial Services Authority to cancel the listing of the Company's
ordinary shares of no par value on the Official List of the United
Kingdom Listing Authority and to cancel the admission of the
Ordinary Shares to trading on the London Stock Exchange's market
for listed securities. It is expected that the cancellation of the
UK listing and of the admission of the Ordinary Shares to trading
on the London Stock Exchange will take effect at 8.00am on 19
February 2013.
The Board considers that the listing on the Australian Stock
Exchange adequately provides for the capital requirements of the
Company and gives shareholders a trading forum with reasonable
liquidity and all necessary shareholder protections. The additional
listing on the London Stock Exchange duplicates costs but does not
deliver a significant benefit given the make-up of the UK share
register and the low trading volume.
Independent declaration by Auditor
The Auditor's independence declaration is included on page 19 of
the half-year financial report.
On behalf of the Board. Signed in accordance with a resolution
of directors pursuant to S306(3) of the Corporations Act 2001.
Peter Cumins
Managing Director
Perth, Western Australia
Date: 14 February 2013
Condensed consolidated statement of profit or loss and other
comprehensive income
for the half-year ended 31 December 2012
Consolidated
Half-year ended
31 December 31 December
Notes 2012 2011
$ $
Franchise fees 3a 5,077,776 5,275,307
Financial services revenue 3b 57,267,588 38,181,862
Sale of goods 3c 47,612,059 45,493,357
Pawn broking fees 7,360,743 7,249,698
Financial services commission 3d 17,371,819 14,982,969
Other revenue 3e 225,568 488,472
------------------- ---------------------
Revenue 134,915,553 111,671,665
Cost of Sales 3f (43,302,764) (37,642,773)
Gross Profit 91,612,789 74,028,892
Administrative expenses 3g (30,358,391) (26,938,627)
Advertising expenses (2,427,204) (2,435,301)
Occupancy expenses 3h (7,143,699) (6,048,483)
Other expenses 3i (24,093,573) (18,303,127)
Finance costs 3j (1,404,303) (1,052,615)
------------------- ---------------------
Profit before income
tax 26,185,619 19,250,739
Income tax expense (7,754,306) (6,007,896)
------------------- ---------------------
Profit for the period 18,431,313 13,242,843
------------------- ---------------------
Other comprehensive income
Items that may be reclassified
subsequently to profit
or loss
Exchange differences
on translation of foreign
operations 826,798 (1,054,202)
------------------- ---------------------
Other comprehensive income
for the period 826,798 (1,054,202)
------------------- ---------------------
Total comprehensive income
for the period 19,258,111 12,188,641
=================== =====================
Profit attributable to:
Owners of the parent 18,431,313 13,242,843
Non-controlling interest - -
------------------- ---------------------
18,431,313 13,242,843
------------------- ---------------------
Total comprehensive income
attributable to:
Owners of the parent 19,258,111 12,188,641
Non-controlling interest - -
------------------- ---------------------
19,258,111 12,188,641
------------------- ---------------------
Earnings per share
Basic (cents per share) 4.7 3.5
Diluted (cents per share) 4.6 3.4
=================== =====================
The accompanying notes form an integral part of the condensed
consolidated statement of profit or loss and other comprehensive
income.
Condensed consolidated statement of financial position
for the half-year ended 31 December 2012
Consolidated
31 December 30 June
Current assets 2012 2012
$ $
Cash and cash equivalents 22,662,540 16,415,161
Trade and other receivables 11,094,595 10,862,191
Personal loan receivables 107,896,992 86,951,171
Inventories 17,373,408 17,078,602
Other assets 4,639,352 4,185,030
----------------- -----------------
Total current assets 163,666,887 135,492,155
----------------- -----------------
Non-current assets
Trade and other receivables 11,989,222 6,129,701
Plant and equipment 20,415,242 19,581,363
Deferred tax assets 5,910,731 4,812,130
Goodwill 77,699,429 77,249,320
Other intangible assets 16,190,354 15,478,179
Other financial assets 4,000,000 4,000,000
-----------------
Total non-current assets 136,204,978 127,250,693
----------------- -----------------
Total assets 299,871,865 262,742,848
----------------- -----------------
Current liabilities
Trade and other payables 18,678,221 19,578,758
Borrowings 4,566,794 11,283,694
Current tax payables 6,171,600 7,102,330
Deferred establishment fees 4,944,841 4,058,936
Provisions 2,987,625 2,657,437
----------------- -----------------
Total current liabilities 37,349,081 44,681,155
----------------- -----------------
Non-current liabilities
Borrowings 29,439,294 31,365,458
Provisions 96,948 63,275
Other payables 924,927 -
Total non-current liabilities 30,461,169 31,428,733
----------------- -----------------
Total liabilities 67,810,250 76,109,888
----------------- -----------------
Net assets 232,061,615 186,632,960
================= =================
Equity
Issued capital 151,708,645 116,812,467
Reserves (4,521,817) (3,366,804)
Retained earnings 84,873,738 73,186,248
----------------- -----------------
Equity attributable to owners
of the parent 232,060,566 186,631,911
Non-controlling interest 1,049 1,049
----------------- -----------------
Total equity 232,061,615 186,632,960
================= =================
The accompanying notes form an integral part of the condensed
consolidated statement of financial position
Condensed consolidated statement of changes in equity
for the half-year ended 31 December 2012
Consolidated Foreign
currency Attributable
translation Retained to owners Non-controlling
Issued reserve Other earnings of the interest Total
capital $ reserve $ parent $ $
$ $ $
Balance at 1
July 2011 116,812,467 (5,027,031) 706,776 57,067,184 169,559,396 1,049 169,560,445
Profit for the
period - - - 13,242,843 13,242,843 - 13,242,843
Exchange
differences
arising on
translation
of foreign
operations - (1,054,202) - - (1,054,202) - (1,054,202)
Income tax
relating
to components - - - - - - -
of other
comprehensive
income
Total
comprehensive
income for the
period - (1,054,202) - 13,242,843 12,188,641 - 12,188,641
Share-based
payments - - 877,246 - 877,246 - 877,246
Payment of
dividends - - - (6,651,133) (6,651,133) - (6,651,133)
Balance at 31
December 2011 116,812,467 (6,081,233) 1,584,022 63,658,894 175,974,150 1,049 175,975,199
-------------- -------------- ------------ ------------- -------------- ----------------- ----------------
Balance at 1
July 2012 116,812,467 (6,028,429) 2,661,625 73,186,248 186,631,911 1,049 186,632,960
Profit for the
period - - - 18,431,313 18,431,313 - 18,431,313
Exchange
differences
arising on
translation
of foreign
operations - 826,798 - - 826,798 - 826,798
Income tax
relating
to components - - - - - - -
of other
comprehensive
income
Total
comprehensive
income for the
period - 826,798 - 18,431,313 19,258,111 - 19,258,111
Issue of shares 32,725,000 - - - 32,725,000 - 32,725,000
Share issue
costs
(net of
tax ) (775,582) - - - (775,582) - (775,582)
Share-based
payments - - 964,949 - 964,949 - 964,949
Shares issued
on
exercise of
performance
rights 2,946,760 (2,946,760) - - -
Payment of
dividends - - - (6,743,823) (6,743,823) - (6,743,823)
Balance at 31
December 2012 151,708,645 (5,201,631) 679,814 84,873,738 232,060,566 1,049 232,061,615
-------------- -------------- ------------ ------------- -------------- ----------------- ----------------
The accompanying notes form an integral part of the condensed
consolidated statement of changes in equity
Condensed consolidated statement of cash flows
for the half-year ended 31 December 2012
Consolidated
Notes Half-year ended
31 December 31 December
2012 2011
$ $
Cash flows from operating
activities
Receipts from customers 104,394,911 104,665,925
Payments to suppliers and
employees (100,126,305) (99,901,396)
Interest received 203,817 472,846
Interest received from personal
loans 28,790,355 14,564,916
Net increase in personal
loans (19,617,329) (11,031,421)
Interest and costs of finance
paid (1,404,303) (1,052,615)
Income tax paid (9,040,727) (6,335,332)
-------------------- --------------------
Net cash flows provided by
operating activities 3,200,419 1,382,923
-------------------- --------------------
Cash flows from investing
activities
Net cash paid for acquisitions
of controlled entities 8 (971,506) (6,130,534)
Acquisition of intangible (1,144,528) -
asset
Proceeds from sale of plant 37,000 -
and equipment
Purchase of plant and equipment (2,708,556) (6,524,400)
Amounts advanced to third
parties (6,200,000) (1,375,000)
Instalment credit loans made - -
to franchisees
Instalment credit loans repaid
by franchisees 385,184 308,903
Net cash flows used in investing
activities (10,602,406) (13,721,031)
-------------------- --------------------
Cash flows from financing
activities
Dividends paid - members
of parent entity (8,921,136) (6,651,133)
Repayment of borrowings (13,751,399) (144,126)
Proceeds from borrowings 5,335,255 16,000,000
Capital element of finance
lease and hire purchase payments (245,965) (176,772)
Issue of shares by controlling 32,725,000 -
entity
Share issue costs (1,107,975) -
Redemption of unsecured notes - -
by controlled entity
Net cash flows provided by
financing activities 14,033,780 9,027,969
-------------------- --------------------
Net increase / (decrease)
in cash and cash equivalents 6,631,793 (3,310,139)
Cash and cash equivalents
at the beginning of the period
-------------------- --------------------
Effects of exchange rate 16,415,161 23,456,996
changes on the balance of
cash held in foreign currencies (384,414) (603,607)
-------------------- --------------------
Cash and cash equivalents
at the end of the period 7 22,662,540 19,543,250
-------------------- --------------------
The accompanying notes form an integral part of the condensed
consolidated statement of cash flows.
Notes to the condensed consolidated financial statements
for the half-year ended 31 December 2012
1. Significant accounting policies
Statement of compliance
The half-year financial report is a general purpose financial
report prepared in accordance with the Corporations Act 2001 and
AASB 134 "Interim Financial Reporting". Compliance with AASB 134
ensures compliance with International Financial Reporting Standard
IAS 34 "Interim Financial Reporting". The half-year financial
report does not include notes of the type normally included in an
annual financial report and shall be read in conjunction with the
most recent annual financial report.
Basis of preparation
The condensed consolidated financial statements have been
prepared on the basis of historical cost, except for the
revaluation of certain non-current assets and financial
instruments. Cost is based on the fair values of the consideration
given in exchange for assets. All amounts presented in Australian
dollars unless otherwise noted.
The accounting policies and methods of computation adopted in
the preparation of the half-year financial report are consistent
with those adopted and disclosed in the company's annual financial
report for the financial year ended 30 June 2012, other than the
impact of the adoption of the new and revised Standards and
Interpretations issued by the Australian Accounting Standard Board
(AASB) that are relevant to the consolidated entity and effective
for annual reporting periods beginning on or after 1 July 2012.
New and revised standards and amendments thereof and
interpretations effective for the current half-year that are
relevant to Cash Converters International Ltd include:
- Amendments to AASB 1, 5, 7, 101, 112, 120, 121, 132, 133 and
134 as a consequence of AASB 2011-9 'Amendments to Australian
Accounting Standards - Presentation of Items of Other Comprehensive
Income'
The adoption of new and revised Standards and Interpretations
has not affected the amounts reported for the current or prior
year. However the application of AASB 2011-9 has resulted in a
change to the Group's presentation of, or disclosure in, its half
year financial statements.
2. Segmental information
AASB 8 requires operating segments to be identified on the basis
of internal reports about components of the consolidated entity
that are regularly reviewed by the managing director (chief
operating decision maker) in order to allocate resources to the
segment and to assess its performance.
Information reported to the consolidated entity's Managing
Director for the purposes of resource assessment and assessment of
performance is focussed on the nature of the service and category
of customer. The consolidated entity's reportable segments under
AASB 8 are therefore as follows:
Franchise operations
This involves the sale of franchises for the retail sale of
second hand goods and the sale of master licences for the
development of franchises in countries around the world.
Store Operations
This involves the retail sale of second hand goods at corporate
owned stores in Australia and the UK.
Financial service - personal loans
This segment includes the Cash Converters Personal Finance -
Instalment Loans business.
Financial service - administration
This segment includes the Cash Converters Personal Finance -
Administration's cash advance administration platform.
Information regarding these segments is presented below. The
accounting policies of the reportable segments are the same as the
consolidated entity's accounting policies.
The following is an analysis of the consolidated entity's
revenue and results by reportable operating segment for the periods
under review.
Segment revenues Segment results
Half year ended Half year ended
31 Dec 31 Dec 2011 31 Dec 2012 31
2012 Dec
2011
$ $ $ $
Franchise operations 11,652,258 12,336,132 2,298,956 2,876,335
Store operations 67,964,248 60,847,415 4,592,060 4,287,200
Financial services -
administration 9,130,019 7,964,778 7,322,575 6,615,416
Financial services -
personal loans 54,687,977 37,973,740 21,468,267 14,113,125
Intersegment elimination
of revenue (8,584,061) (7,631,999) - -
134,850,441 111,490,066 35,681,858 27,892,076
Corporate/support office 65,112 181,599 (9,496,239) (8,641,337)
-------------- -------------- ---------------- ---------------
Total revenue/operating
profit 134,915,553 111,671,665 26,185,619 19,250,739
============== ==============
Income tax attributable
to operating profit (7,754,306) (6,007,896)
-------------- ---------------
Operating profit after
income tax 18,431,313 13,242,843
Less: Profit attributable to - -
outside equity interests
-------------- ---------------
Profit attributable to members of Cash Converters
International Limited 18,431,313 13,242,843
============== ===============
Segment profit represents the profit earned by each segment
without the allocation of central administration costs and
directors' salaries, interest income and expense in relation to
corporate facilities, and tax expense. This is the measure reported
to the managing director (chief operating decision maker) for the
purpose of resource allocation and assessment of segment
performance.
The following is an analysis of the consolidated entity's assets
by reportable segment:
31 December 30 June
2012
$ 2012
$
Franchise operations 21,679,830 21,583,737
Store operations 99,754,417 97,004,207
Financial services - administration 18,610,975 17,969,354
Financial services - personal
loans 121,793,328 108,001,201
Total of all segments 261,838,550 244,558,499
Unallocated assets 38,033,315 18,184,349
Total assets 299,871,865 262,742,848
================= =================
Unallocated assets include various corporate assets including
cash held at a corporate level that has not been allocated to the
underlying segments.
The following is an analysis of the consolidated entity's
liabilities by reportable segment:
31 December 30 June
2012 2012
$ $
Franchise operations 2,045,366 1,672,947
Store operations 6,463,802 7,748,823
Financial services - administration 2,052,888 3,268,958
Financial services - personal loans 20,859,643 22,959,081
Total of all segments 31,421,699 35,685,809
Unallocated liabilities 36,388,551 40,424,079
Total liabilities 67,810,250 76,109,888
============ ===========
Unallocated liabilities include consolidated entity borrowings
not specifically allocated to the underlying segments.
3. Revenues and Expenses
2012 2011
$ $
3a Franchise fees
Weekly franchise fees 3,658,904 3,683,479
Initial fees 110,808 201,932
Advertising levies 221,900 214,700
Training levies 184,800 179,942
Computer levies 901,364 995,254
----------- -----------
5,077,776 5,275,307
----------- -----------
3b Financial services revenue
Instalment credit loan
interest 940,095 338,014
Personal loan interest 44,015,321 29,711,036
Loan establishment fees 12,312,172 8,132,812
----------- -----------
57,267,588 38,181,862
----------- -----------
3c Sale of goods
Retail sales 45,803,383 42,634,124
Retail wholesales 1,808,676 2,859,233
----------- -----------
47,612,059 45,493,357
----------- -----------
3d Financial services commission
Cheque cashing commission 618,138 322,004
Financial services commission 16,753,681 14,660,965
----------- -----------
17,371,819 14,982,969
----------- -----------
3e Other revenue
Rent - 15,182
Interest 203,817 472,846
Other 21,751 444
----------- -----------
225,568 488,472
----------- -----------
2012 2011
$ $
3f Cost of Sales
Sale of goods 28,416,004 27,400,512
Personal loan bad debts 15,243,101 10,194,378
Cash advance bad debts 975,408 903,430
Franchise fees bad debts 8,896 158,554
Recovery of bad debts (1,340,645) (1,014,101)
------------ ------------
43,302,764 37,642,773
------------ ------------
3g Administrative expenses
Employee benefits 27,698,652 24,272,949
Provision for annual
leave 245,537 401,733
Superannuation expense 1,380,241 1,212,818
Motor vehicle/travel
costs 1,033,961 1,051,127
30,358,391 26,938,627
------------ ------------
3h Occupancy expenses
Rent 4,250,268 3,949,743
Outgoings 2,077,541 1,337,427
Other 815,890 761,313
------------ ------------
7,143,699 6,048,483
------------ ------------
3i Other expenses
Legal fees 594,002 912,929
Area agent fees/commission 11,719,946 7,072,098
Professional and registry
costs 1,870,935 1,282,753
Auditing and accounting
services 298,584 224,115
Bank charges 2,010,371 1,428,594
Loss/(Profit) on disposal
of plant and equipment 3,719 (1,804)
Loss in relation to increase
in contingent consideration - 582,595
Other expenses from ordinary
activities 4,795,290 4,837,277
Depreciation 2,099,062 1,466,519
Amortisation of intangibles 701,664 498,051
------------ ------------
24,093,573 18,303,127
------------ ------------
3j Finance costs
Interest 1,380,258 1,022,498
Finance lease charge 24,045 30,117
------------ ------------
1,404,303 1,052,615
------------ ------------
4. Issuances and repurchases of equity securities
During the current period, 5,600,000 ordinary shares were issued
as a result of the exercise of performance rights. An additional
38,500,000 shares were issued pursuant to the Company's ASX listing
rule 7.1 15% capacity. The total number of ordinary shares in issue
is 423,861,025 as at 31 December 2012. Refer to note 9 for
information in relation to share-based payments issued during the
period.
Balance at the beginning of the period 379,761,025
Shares issued during the year 44,100,000
Balance at end of the period 423,861,025
5. Subsequent events
The Directors recommend an interim dividend of 2.0 cents per
share. This dividend will be 100% franked and will be paid on 29
March 2013. The financial effect has not been reported in this
financial report.
Cash Converters International limited has requested the UK
Financial Services Authority to cancel the listing of the Company's
ordinary shares of no par value on the Official List of the United
Kingdom Listing Authority and to cancel the admission of the
Ordinary Shares to trading on the London Stock Exchange's market
for listed securities. It is expected that the cancellation of the
UK listing and of the admission of the Ordinary Shares to trading
on the London Stock Exchange will take effect at 8.00am on 19
February 2013.
The Board considers that the listing on the Australian Stock
Exchange adequately provides for the capital requirements of the
Company and gives shareholders a trading forum with reasonable
liquidity and all necessary shareholder protections. The additional
listing on the London Stock Exchange duplicates costs but does not
deliver a significant benefit given the make-up of the UK share
register and the low trading volume.
Aside from the matter discussed above, the Directors are not
aware of any matter or circumstance that has significantly affected
or may significantly affect the operations of the economic entity
or the state of affairs of the economic entity in subsequent
financial periods.
6. Dividends
2012 2011
Cents Total Cents per Total
Recognised amounts per $ share $
Fully paid ordinary share
shares
Final dividend: 1.75 6,743,820 1.75 6,645,818
Unrecognised amounts
Fully paid ordinary
shares
Interim dividend: 2.00 8,477,221 1.75 6,645,818
7. Reconciliation of cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash
equivalents includes cash on hand in banks net of outstanding bank
overdrafts. Cash and cash equivalents at the end of the financial
period as shown in the statement of cash flows is reconciled to the
related items in the statement of financial position as
follows:
31 December 31 December
2012 2011
$ $
Cash and cash equivalents 22,662,540 19,543,250
Bank overdrafts - -
------------ ------------
22,662,540 19,543,250
8. Acquisitions of business
During the period the Group acquired the trade and assets of two
stores in the UK. The consideration transferred was $1,062,253 and
comprised of cash and deferred consideration components.
This transaction has been accounted for using the acquisition
method of accounting.
The net assets acquired in the business combination, and the
goodwill arising, are as follows:
Fair Value
recognised
on acquisition
$
Net assets acquired:
Cash and cash equivalents 24,208
Trade and other receivables 145,557
Inventories 204,020
Plant and equipment 92,308
Intangible assets 334,678
Trade and other payables (27,333)
---------------------
Fair value of net identifiable
assets acquired 773,438
Consideration:
Consideration satisfied by cash 995,714
Deferred consideration 66,538
---------------------
Total consideration 1,062,252
Goodwill arising on acquisition 288,814
The cash outflow on acquisition
is as follows:
Net cash acquired with the stores 24,208
Cash paid (995,714)
---------------------
Net consolidated cash outflow (971,506)
=====================
The acquisition of two stores included deferred consideration in
the form of retention payments. These payments are held for the
retention period of 12 months following the acquisition to meet any
warranty or other claims against the stores arising from the
acquisition.
The initial accounting for the acquisition of the two stores has
only been provisionally determined at the reporting date.
In accordance with AASB3 'Business Combinations' the acquirer is
required to fair value all acquired assets and liabilities. The
valuation of the re-acquired rights and customer relationships
(intangible assets) associated with the store purchases has not
been completed at the date of finalisation of this report.
Additionally, for tax purposes the tax values of the assets are
required to be reset based on market values and other factors. At
the date of finalisation of this report, the necessary market
valuations and other calculations had not been finalised and the
adjustments to deferred tax liabilities and goodwill noted above
has therefore only been provisionally determined based on the
directors' best estimate of the likely tax values. These valuations
may also impact the recognised fair values of other assets acquired
as part of the business combination.
Goodwill arose in the business combination because the cost of
the combination included a control premium paid to acquire the two
stores. In addition, the consideration paid for the combination
effectively included amounts in relation to the benefit of expected
synergies, revenue growth, future market development and the
assembled workforce of the two stores. These benefits are not
recognised separately from goodwill as the future economic benefits
arising from them cannot be reliably measured.
Included in the net profit for the period is $111,323
attributable to the additional business generated by the two
stores.
9. Share-based payment plan
The Executive Performance Rights Plan, which was approved by
shareholders on 30 November 2010, allows the Directors of the
Company to issue up to 20,000,000 Performance Rights which will
vest into ordinary shares in the Company upon the achievement of
certain vesting conditions. As at 30 June 2012, the shareholders
approved the issue of 13,800,000 Performance Rights under the Plan
to the managing director and the Company's senior management team.
Refer to the Annual Report for the year ended 30 June 2012 for
further details.
On 25 September 2012, the Company's Board of Directors approved
a resolution to issue 851,000 Performance Rights under the Plan to
members of the Company's senior management team. The rights were
issued free of charge. The 851,000 Performance Rights were split
into three Tranches, with Tranche 1 comprising 283,666 Performance
Rights, Tranche 2 comprising 283,667 Performance Rights and Tranche
3 comprising 283,667 Performance Rights. All three Tranches contain
different vesting conditions.
Each right entitles the holder to subscribe for one fully paid
ordinary share in the Company at the exercise price of $Nil.
These Performance Rights vest and are immediately converted into
ordinary shares once certain performance conditions are met. During
the period, the following performance rights were granted:
Fair value
per right
Number at grant First
of rights date Expiry Exercise Last Exercise
Vested granted Grant Date $ Date Date Date
Senior Management
Team
Ian Day
Tranche
1 - 66,667 25/9/2012 0.751 1/7/2013 1/7/2013 1/7/2013
Tranche
2 - 66,667 25/9/2013 0.714 1/7/2014 1/7/2014 1/7/2014
Tranche
3 - 66,666 25/9/2014 0.679 1/7/2015 1/7/2015 1/7/2015
Ralph Groom
Tranche
1 - 76,667 25/9/2012 0.751 1/7/2013 1/7/2013 1/7/2013
Tranche
2 - 76,667 25/9/2013 0.714 1/7/2014 1/7/2014 1/7/2014
Tranche
3 - 76,666 25/9/2014 0.679 1/7/2015 1/7/2015 1/7/2015
Glen Fee
Tranche
1 - 17,000 25/9/2012 0.751 1/7/2013 1/7/2013 1/7/2013
Tranche
2 - 17,000 25/9/2013 0.714 1/7/2014 1/7/2014 1/7/2014
Tranche
3 - 17,000 25/9/2014 0.679 1/7/2015 1/7/2015 1/7/2015
Gavin Irons
Tranche
1 - 16,667 25/9/2012 0.751 1/7/2013 1/7/2013 1/7/2013
Tranche
2 - 16,667 25/9/2013 0.714 1/7/2014 1/7/2014 1/7/2014
Tranche
3 - 16,666 25/9/2014 0.679 1/7/2015 1/7/2015 1/7/2015
Peter Wessels
Tranche
1 - 16,667 25/9/2012 0.751 1/7/2013 1/7/2013 1/7/2013
Tranche
2 - 16,667 25/9/2013 0.714 1/7/2014 1/7/2014 1/7/2014
Tranche
3 - 16,666 25/9/2014 0.679 1/7/2015 1/7/2015 1/7/2015
David Patrick
Tranche
1 - 56,667 25/9/2012 0.751 1/7/2013 1/7/2013 1/7/2013
Tranche
2 - 56,667 25/9/2013 0.714 1/7/2014 1/7/2014 1/7/2014
Tranche
3 - 56,666 25/9/2014 0.679 1/7/2015 1/7/2015 1/7/2015
Mike Osborne
Tranche
1 - 33,333 25/9/2012 0.751 1/7/2013 1/7/2013 1/7/2013
Tranche
2 - 33,333 25/9/2013 0.714 1/7/2014 1/7/2014 1/7/2014
Tranche
3 - 33,334 25/9/2014 0.679 1/7/2015 1/7/2015 1/7/2015
The following vesting conditions are attached to the performance
rights:
Tranche Vesting hurdle
1 i) The Consolidated Entity achieving budgeted Net Profit after
tax for the financial year ending 30 June 2013.
ii) Continuous employment through to vesting determination date,
being 1 July 2013.
2 i) The Consolidated Entity achieving budgeted Net Profit after
tax for the financial year ending 30 June 2014.
ii) Continuous employment through to vesting determination date,
being 1 July 2014.
3 i) The Consolidated Entity achieving budgeted Net Profit after
tax for the financial year ending 30 June 2015.
ii) Continuous employment through to vesting determination date,
being 1 July 2015.
Fair value of performance rights:
The fair value of the performance rights granted is estimated as
at the grant date using a Black Scholes model taking into account
the terms and conditions upon which the options were granted. The
following table lists the inputs to the model used to determine the
fair value of performance rights issued during the period ended 31
December 2012.
Tranche 1 Tranche 2 Tranche 3
Dividend yield (%) 5.00 5.00 5.00
Expected future volatility
(%) 40.00 40.00 40.00
Risk-free interest rate
(%) 2.60 2.60 2.56
Expected life of right (years) 0.8 1.8 2.8
Underlying share price at
grant date ($) 0.78 0.78 0.78
Expected life of performance rights:
Grant date Grant number Expected life
of right
Tranche 1 25/09/2012 283,667 0.8 years
Tranche 2 25/09/2013 283,667 1.8 years
Tranche 3 25/09/2014 283,666 2.8 years
The dividend yield is based on analysis of the Company's
dividend yield over the past 5 years and considers the ability of
the Company to pay dividends in the future. The expected volatility
reflects the assumption that the historical volatility is
indicative of future trends over the life of the Performance
Rights.
The expense recognised for employee services received by the
Company during the period is shown in the table below:
Half year ended
31 December 31 December
2012 2011
------------ ------------
Expense arising from equity-settled share-based
payment transaction 964,949 877,243
------------ ------------
Total expense arising from share-based payment
transaction 964,949 877,243
------------ ------------
Directors' declaration
The directors declare that:
(a) in the directors' opinion, there are reasonable grounds to
believe that the company will be able to pay its debts as and when
they become due and payable; and
(b) in the directors' opinion, the attached financial statements
and notes thereto are in accordance with the Corporations Act 2001,
including compliance with accounting standards and giving a true
and fair view of the financial position and performance of the
consolidated entity.
Signed in accordance with a resolution of the directors made
pursuant to S303(5) of the Corporations Act 2001.
On behalf of the Directors
Peter Cumins
Managing Director
Perth, Western Australia
Date: 14 February 2013
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GGUCWPUPWGCC
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