Cash Converters International Ld Final Results (5856K)

TIDMCCVU

RNS Number : 5856K

Cash Converters International Ld

23 August 2012

23 August 2012

Cash Converters International Limited

Chairman and Managing Director's Review

The directors of Cash Converters International Limited ('Cash Converters') are pleased to report a growth in revenue of 25.7% to $234.3 million and a record profit result of $29.4 million for the 2012 financial year, an increase of 6.2% over the previous year.

On an adjusted basis, excluding one-off items, the net profit after tax was $32.6 million compared to an adjusted net profit of $29.7 million in the corresponding period last year representing an increase of 9.8%. The statutory earnings per share were 7.75 cents per share (an increase of 6.5% on the previous corresponding period) and the adjusted earnings per share were 8.58 cents per share (an increase of 9.8% on the previous corresponding period).

The reported net profit after tax was impacted by the following expenses (pre-tax effect), most of which are non-recurring:

   Reported net profit after tax:                                      $29.4m 
   -     stamp duty on acquisition of new stores               $665k 
   -     independent IT review                                        $53k 
   -     store acquisition additional earn-out payment        $1,756k 
   -     additional legal and professional fees                    $615ka 
   -     redundancy costs                                                $88k 
   Adjusted net profit after tax:                                       $32.6m 

The majority of the one-off costs were incurred in the first half of the financial year.

The legal and professional fees noted above include costs incurred relating to the proposed Ezcorp Inc strategic alliance which was terminated during the first half of the financial year.

The business also incurred the following additional costs that were not incurred in the corresponding period last year:

Additional costs:

   -     Share based long term incentives                        $1,255k 

Investing for the future:

   -     Additional interest costs                                     $1,392k 
   -     Additional brand and public relations costs           $182k 
   -     Additional support staff costs                             $905k 

The investment associated with the implementation of the growth strategy transforming the company from a franchisor to a large, international entity, with our own store network and rapidly growing range of financial services products, has impacted the full year results, due to the increased corporate overheads necessary to drive the next stage of expansion.

This investment in overheads and personnel is significant but will be proportionally lower as the scale of the organisation grows and the costs are amortised over a far larger business.

The table below provides a summary of the financial performance.

Financial Results Summary

 
                                    30 June        30 June      Variance 
                                      2012           2011 
                                        $              $            % 
-------------------------------  -------------  -------------  --------- 
 Revenue                           234,354,795    186,384,204       25.7 
-------------------------------  -------------  -------------  --------- 
 EBITDA                             48,105,111     43,231,175       11.3 
-------------------------------  -------------  -------------  --------- 
 Depreciation and amortisation     (4,291,780)    (2,964,480)       44.8 
-------------------------------  =============  =============  ========= 
 EBIT                               43,813,331     40,266,695        8.8 
-------------------------------  -------------  -------------  --------- 
 Income tax                       (12,009,250)   (11,578,126)        3.7 
-------------------------------  -------------  -------------  --------- 
 Finance costs                     (2,388,057)      (996,136)      139.7 
-------------------------------  =============  =============  ========= 
 Net profit before minority 
  interests                         29,416,024     27,692,433        6.2 
-------------------------------  -------------  -------------  --------- 
 Less minority interests                     -              - 
-------------------------------  =============  =============  ========= 
 Net profit after minority 
  interests                         29,416,024     27,692,433        6.2 
-------------------------------  -------------  -------------  --------- 
 
 Basic earnings per 
  share                                   7.75           7.28        6.5 
-------------------------------  -------------  -------------  --------- 
 
 Divisional operating                  30 June        30 June   Variance 
  profit                                  2012           2011       % 
-------------------------------  -------------  -------------  --------- 
 Franchise operations                6,054,033      6,509,558       -7.0 
-------------------------------  -------------  -------------  --------- 
 Store operations                    5,628,791      8,569,649      -34.3 
-------------------------------  -------------  -------------  --------- 
 Financial services 
  - administration                  13,651,754     12,319,667       10.8 
-------------------------------  -------------  -------------  --------- 
 Financial services 
  - personal loans                  33,477,570     24,420,011       37.1 
-------------------------------  =============  =============  ========= 
 Total                              58,812,148     51,818,885       13.5 
-------------------------------  -------------  -------------  --------- 
 Corporate head office 
  costs                           (17,386,874)   (12,548,326)       38.6 
-------------------------------  -------------  -------------  --------- 
 
 Total divisional operating 
  profit before tax and 
  minority interest                 41,425,274     39,270,559        5.5 
-------------------------------  =============  =============  ========= 
 

Highlights

- Revenue growth of 25.7% to $234.3 million. The major drivers for revenue growth over the year included an increase in personal loan interest of $21.6 million and establishment fees of $7.1 million, an increase in corporate store revenue of $22.0 million and an increase in cash advance administration fees of $2.7 million.

- The statutory earnings per share were 7.75 cents per share (an increase of 6.5% on the previous corresponding period) and the adjusted earnings per share were 8.58 cents per share (an increase of 9.8% on the previous corresponding period).

- UK cash advance and personal loans business up 285.7% to a combined EBIT of $4.6 million, an outstanding result for a business launched in May 2010.

- The growth of the online personal loan business in Australia continues to be very strong with the value of loans written increasing 126.7% to $14.2 million (2011 $6.3 million). There continues to be a very high percentage of first time customers (76%), which suggests a significant untapped market for the Company.

- The personal loan book in Australia grew 28.0% to $67.6 million and the loan book in the UK grew 154.0% to GBP12.7 million. The personal loans business generated an EBIT of $33.5 million (2011 $24.4 million) which is 37.1% up on the previous year.

- The cash advance administration platform in Australia and the UK, generated an EBIT of $13.6 million (2011 $12.3 million) which is up 10.8% on the previous year.

- 12 'greenfield' company owned stores were opened in the UK and one in Australia, taking total corporate store numbers as at 30 June 2012 to 102 (59 in the UK and 43 in Australia).

- The corporate store network in the UK and Australia has seen 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 of stamp duty of $0.7 million and an earn-out payment on new store acquisitions, the EBIT was $8.1 million; (2011 $8.6 million). As expected and previously disclosed, the impact of the profit drag from opening 27 new stores in both Australia and the UK in 2011 and 2012 has reduced the result. On average, it takes at least 12 months from the establishment a new store until it reaches break-even point. The corporate store network has been an important platform for the ongoing growth in our financial product range.

Dividend

The directors have declared a fully franked final dividend of 1.75 cents per share. The dividend will be paid on 28 September 2012 to those shareholders on the register at the close of business on 14 September 2012. This will take the total dividend payment for the year to 3.5 cents per share, fully franked. This represents a payout ratio of approximately 45% of net profit after tax.

Some key Finance division statistics for the twelve months ending 30 June 2012:

Australia

Cash Advance

   -     Total principal loaned increased by 12.3% to $229.8 million 
   -     Average loan amount increased from $325 to $331 
   -     Total customer numbers increased by 16.8% to 403,137 

Personal Loans

   -     Total number of loans approved increased by 34.7% to 106,779 
   -     Total number of active customers increased by 31.5% to 66,760 
   -     Loan Book increased by 28.0% to $67.6 million 

United Kingdom

Cash Advance

   -     Total principal loaned increased by 177.3% to GBP29.1 million 
   -     Average loan amount increased from GBP104 to GBP121 
   -     Total customer numbers increased by 136.8% to 75,169 

Personal Loans

   -     Total number of loans approved increased by 76.7% to 28,234 
   -     Total number of active customers increased by 70% to 19,252 
   -     Loan Book increased by 154.0% to GBP12.7 million 

Personal Loan and Cash Advance Highlights