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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Cash Convert | LSE:CCVU | London | Ordinary Share | AU000000CCV1 | ORD NPV |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 85.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
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
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