Cash Converters International Ld Final Results -2-

Cash Converters continued to experience strong growth for its financial services products during the financial year. The Australian personal loan book has continued to grow and is currently at $67.6 million. Bad debt levels continue to remain stable at 5.6% of the principal loaned (5.9% of the principal loaned in 2011). The UK personal loan book continues to grow at an exceptional rate, as at 30 June 2012 it was GBP12.7 million. Bad debt levels continue to remain at elevated levels of 11.3% of the principal loaned (10.8% of the principal loaned in 2011). Cash Converters is currently implementing a number of strategies to reduce this level of bad debts. The UK personal loan book is only two years old and the level of bad debts we are currently experiencing is in line with the levels we initially experienced when establishing

our Australian personal loan business. As our UK database matures and our customer knowledge base increases, we expect the level of bad debts to decrease steadily over the coming years. We continue to invest in growing the UK personal loan business and, despite the elevated level of bad debts currently being experienced, our profitably continues to improve and the overall return on investment is strong.

Cash Converters is currently examining securitisation opportunities to provide capital to further increase the personal loan business.

Online Strategy Highlights:

Cash Converters online presence allows us to stretch the Brand and present the business to a new audience of potential customers at a low delivery cost.

We have seen new customers visit stores and purchase products after their first contact with the brand commenced with their online search.

The Company receives a commission based on an agreed percentage of sales for providing the 'Webshop' online service to its franchisees. The Webshop provides a platform for the store network to display inventory items in an online shop format. Online product sales have grown 44.4% across the Australian and UK operations over the past 12 months.

Some key online statistics:

 
                            UK    Australia 
-----------------  -----------  ----------- 
 Registered 
  users                134,236       42,486 
-----------------  -----------  ----------- 
 Unique visitors     2,490,958    1,562,059 
-----------------  -----------  ----------- 
 Total page 
  views             21,239,366   22,724,721 
-----------------  -----------  ----------- 
 Retail Sales       GBP832,120   $1,768,045 
-----------------  -----------  ----------- 
 

These statistics show that we now have a significant number of visitors to our UK and Australian Webshop sites. Our strategy will be to maximise the commercial opportunities that these new customers present.

Online lending opportunities

Australia

Personal loans

In Australia the Company launched a fully integrated online personal loan system on 1 July 2010. This allows a customer to complete an application, sign contracts and receive funds without the inconvenience of visiting a store.

The results so far show that a high percentage (76%) of these customers are new to Cash Converters which demonstrates that this is an exciting growth opportunity. In just two years, the online loan product has grown to represent 11% of the overall personal loan book.

Cash Advance

At this stage, online cash advance applications are being forwarded to stores for completion. This requires the customer to visit the store. The Company intends to launch a fully integrated online product during the course of the new financial year.

UK

Personal loans

The Company launched the online personal loan system into the UK market in October 2011 with similar results to those experienced in Australia, in terms of new customers and the ramp up in loans being completed.

Key metrics from online lending:

 
 Australia                        2012         2011   Variance 
                                                          % 
------------------------  ------------  -----------  --------- 
 Number of loans                 8,066        4,327       86.4 
------------------------  ------------  -----------  --------- 
 Number new customers            6,157        3,471       77.4 
------------------------  ------------  -----------  --------- 
 % new customers                   76%          80% 
------------------------  ------------  -----------  --------- 
 Value of personal 
  loans written            $14,202,789   $6,265,125      126.7 
------------------------  ------------  -----------  --------- 
 Value of cash advances 
  written                     $783,468     $545,859       43.5 
------------------------  ------------  -----------  --------- 
 Total value of loans 
  written                  $14,986,257   $6,810,984      120.0 
------------------------  ------------  -----------  --------- 
 
 
 UK                            2012 
----------------------  ----------- 
 Number of loans              1,305 
----------------------  ----------- 
 Number new customers         1,067 
----------------------  ----------- 
 % new customers                82% 
----------------------  ----------- 
 Value of personal       GBP953,290 
  loans written 
----------------------  ----------- 
 

Company owned store results

The corporate store network in the UK and Australia has seen total revenue grow by 21.8% to $122.8 million producing a combined EBIT of $5.6 million. On an adjusted basis after adding back one off costs, the EBIT was $8.1 million; (2011 $8.6 million).

Add backs;

   -     Stamp duty on acquisitions $0.7 million; 

- The net profit has been impacted by an additional charge of $1.8 million resulting from the additional earn-out paid to acquire seven stores in Queensland. Under accounting standards it is not possible to capitalise this cost.

Other factors affecting the result;

- Negative profit impact ($1.6 million) associated with the opening of the 13 "greenfield" sites in this year and the additional drag of the 14 new stores opened last year. It takes on average 12 months for a new store to reach break-even;

- Support staff redundancy costs ($88k) and hiring additional business development managers ($100k);

- Additional amortisation charge to our UK business in relation to re-acquired franchise rights (GBP40k) in relation to store acquisitions.

On a same store sales basis, over the corresponding period last year, the retail sales growth from our Australian corporate stores was 4.5%, pawn broking interest growth 20.0%, and cash advance and personal loans commission's growth of 14.5% and 30.5% respectively. Our UK stores experienced retail sales growth of 4.1%, and cash advance and personal loan commission's growth of 67.2% and 26.0% respectively. However, pawn broking interest fell by 12.0% and buyback income fell by 6.1%.

Carboodle

Cash Converters is associated with the Perth-based start-up company, Carboodle.

Carboodle was established in 2010 with the first lease contracted in October of that year. 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. The packaged running costs can include:

   -     Annual registration 
   -     Insurance premium 
   -     Extended manufacturer's warranty 
   -     Servicing 
   -     Tyres 
   -     Roadside assistance 

The running costs are bundled into one easy weekly payment over a 48 month lease. For that weekly payment, the customer gets the "whole kit and Carboodle".

Carboodle retains ownership of the car and at the end of the lease term, the customer hands back the car and may initiate a new lease on a new vehicle. Carboodle has been focussing on leasing a range of popular models, including commercial vehicles for tradesmen and small businesses.

Carboodle has an exclusive licence with Cash Converters that allows it to use the 146 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.

Carboodle has distribution show room centres located in Perth, Melbourne, Sydney and Brisbane with a centre due to open in Adelaide later in the year. Initial sales and the rollout of distribution show room centres have been progressing in line with our expectations.

In addition to the business written through Cash Converter stores, Carboodle deals directly with the public online and through enquiries generated in mass media.

The Cash Converter store network and our knowledge of financial services products in this market space have provided leverage to the distribution of this product. This business represents a significant growth opportunity and early indications are that it will be a great success. We will continue to provide support and advice to Carboodle's management when required.

Legislation Update

Consumer Credit Legislation Amendment (Enhancements) Bill 2012

As a result of various recommendations made by the Parliamentary Joint Committee on Corporations and Financial Services and the Senate Economics Legislation Committee, the Australian Government implemented a number of changes to this Bill. On 27(th) June, 2012 the House of Representatives of the Federal Parliament passed the Bill. The Bill was passed by the Senate on 20 August 2012 and is awaiting Royal Assent.

The Bill contains a number of responsible lending obligations which will take effect from 1(st) March, 2013. The main impact of the legislation for Cash Converters relates to the definition of small amount credit contracts and the limits on fees and charges imposed with respect to such contracts. These provisions take effect from 1(st) July, 2013.

In summary, the provisions impose the following regime which effectively applies to all the micro lending engaged in by Cash Converters: