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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 |
From May 2019 to May 2024
TIDMCCVU
RNS Number : 5188X
Cash Converters International Ld
16 February 2012
CASH CONVERTERS INTERNATIONAL LIMITED
A.B.N 39 069 141 546
FINANCIAL REPORT
FOR THE HALF-YEAR ENDED 31 DECEMBER 2011
Chairman and Managing Director's Review
CASH CONVERTERS INTERNATIONAL LIMITED AND CONTROLLED ENTITIES
FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2011
The Company is pleased to report an increase of 28.2% in revenue to $111.7 million and a net profit after tax of $13.2 million for the period. Although the result represented a decrease of 7.5% on last year's net profit, on an adjusted basis, excluding one-off items, the net profit after tax was $15.3 million compared to a net profit of $14.3 million in the corresponding period last year representing an increase of 7%.
The strong revenue growth was driven by increases in personal loan income of $14.0 million, an increase in corporate store revenue of $12.5 million and an increase in financial services administration fees of $1.4 million.
The investment associated with the implementation of the growth strategy transitioning 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 half year results, as we have ramped up corporate overheads 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 directors have declared an interim fully franked dividend of 1.75 cents per share (previous corresponding period 1.75 cents per share).
Financial results summary
Hot Features
Premium
31 December 31 December Variance %
2011 2010
------------------------------------- -------------- -------------- -------------
Revenue 111,671,665 87,108,276 +28.2
------------------------------------- -------------- -------------- -------------
Earnings before interest, tax,
depreciation and amortisation 22,267,924 22,109,892 +0.7
------------------------------------- -------------- -------------- -------------
Depreciation and amortisation 1,964,570 1,133,553 +73.3
------------------------------------- -------------- -------------- -------------
Earnings before interest and
tax 20,303,354 20,976,339 -3.2
------------------------------------- -------------- -------------- -------------
Income tax expense 6,007,896 6,238,122 -3.7
------------------------------------- -------------- -------------- -------------
Finance costs 1,052,615 426,969 +146.5
------------------------------------- -------------- -------------- -------------
Net profit before non-controlling
interest 13,242,843 14,311,248 -7.5
------------------------------------- -------------- -------------- -------------
Less minority interests - 7,285 -100.0
------------------------------------- -------------- -------------- -------------
Net profit after non-controlling
interests 13,242,843 14,303,963 -7.4
------------------------------------- -------------- -------------- -------------
Basic earnings per share 3.5 3.8 -7.9
------------------------------------- -------------- -------------- -------------
Divisional Operating Profit 31 December 31 December Variance %
2011 2010
------------------------------------- -------------- -------------- -------------
Franchise operations 2,876,335 3,443,908 -16.4
------------------------------------- -------------- -------------- -------------
Store operations 4,287,200 5,644,455 -24.0
------------------------------------- -------------- -------------- -------------
Financial services - administration
* 6,615,416 5,942,921 +11.3
------------------------------------- -------------- -------------- -------------
Financial services - personal
loans 14,113,125 10,624,649 +32.8
------------------------------------- -------------- -------------- -------------
Total operating profit before
head office costs 27,892,076 25,655,933 +8.7
------------------------------------- -------------- -------------- -------------
Less corporate head office costs
(including additional one-off
costs outlined below) (8,641,337) (5,106,563) +69.2
------------------------------------- -------------- -------------- -------------
Total Divisional Operating profit 19,250,739 20,549,370 -6.3
------------------------------------- -------------- -------------- -------------
*Financial services administration represents the fees charged by Cash
Converters Personal Finance - Administration for cash advance services
------------------------------------------------------------------------------------
The reported net profit after tax was impacted by the following one-off, non-recurring expenses:
Reported net profit after tax: $13.2m Add back: stamp duty on acquisition $665k Add back: independent IT review $53k Add back: store acquisition additional earn-out payment $580k Add back: additional legal and professional fees $615k Add back: redundancy costs $88k Adjusted net profit after tax: $15.3m
The above one-off costs include costs incurred relating to the EZCORP Inc strategic alliance which was terminated following the announcement by the Australian Federal Government on 24 August 2011 relating to the intention to introduce caps of fees.
The business also incurred the following additional costs that were not incurred in the corresponding period last year:
-- Share based long term incentive $877k -- Additional interest and bank fees $886k -- Additional brand and PR costs $182k
-- Additional support staff costs $510k
Major highlights for the half-year include:
-- Strong revenue growth against the same period last year of 28.2% to $111.7 million. The major drivers for revenue growth over the period included an increase in personal loan income of $14.0 million, an increase in corporate store revenue of $12.5 million and a increase in financial services administration fees of $1.4 million;
-- The Company owned store strategy has maintained momentum with the opening of nine "greenfield" company owned stores in the first half of the financial period with seven in the UK and two in Australia, taking total corporate store numbers at the half-year to 97 with 54 located in the UK and 43 in Australia;
-- Revenue for company owned stores in both the UK and Australia grew by 25.7%;
-- The UK opened its 200(th) store during the first half and its 50(th) company owned store. UK store numbers finished the half-year at 208, an increase of 14;
-- The personal loan book in Australia grew by 31.2% from $47.3 million at 31 December 2010 to $62.1 million at 31 December 2011. The UK personal loan book grew by 269.5% from GBP2.3 million at 31 December 2010 to GBP8.5 million at 31 December 2011;
-- The personal loan business and the cash advance administration platforms in Australia and the UK generated a combined EBIT of $20.7 million (2010:$16.6 million) up 24.7%;
-- Online lending was launched in the UK in October with promising early results.
Dividend
The directors have declared an unchanged interim dividend of 1.75 cents per share. The dividend will be fully franked and will be paid on 30 March 2012 to those shareholders on the register at the close of business on 16 March 2012. This represents a payout ratio of approximately 50.2% of the net profit after tax.
Financial services operations
Australia
The Australian personal loan book has grown by 17.8% in the first half, from $52.7 million at 30 June 2011 to $62.1 million at 31 December 2011.
Part of this growth has been generated by our online lending platform, with 4,073 loans made totalling $6.5 million. A most pleasing aspect of this online activity is the fact that 75% of the customers are new to our business and this suggests that there is a substantial untapped market for this product.
The Australian cash advance business has also grown strongly in the period with a 14.7% growth in active customers to 58,261 - borrowing $111.7 million during the period.
The bad debt percentage of principal written off to principal advanced for the Australian business reduced from 6.30% to 6.17% in the period.
UK
The UK personal loan book grew by 70% in the first half, from GBP5 million at 30 June 2011 to GBP8.5 million at 31 December 2011 and active customer numbers grew by 43.4% to 16,241 in the same period.
The UK cash advance business also grew strongly in the period with a 36.5% growth in active customers to 17,589, borrowing GBP13.0 million during the period.
The online personal loan product was launched in October 2011 with pleasing results. A total of 733 loans have been made, with a value of GBP433,936. As with Australia, a very high proportion of customers are new to our business (95.9%).
Month on month results continue to grow as the number of stores offering both the personal loan and cash advance products in the UK increases. There are now 143 stores offering these products and a roll out programme for the remaining 65 stores in the UK.
The bad debt percentage of principal written off to principal advanced for the UK increased from 9.16% to 11.01% during the period. The UK business reviewed its lending criteria in November 2011 and as a result has made certain adjustments to their procedures. This action combined with the appointment of a new collections manager should reduce the bad debt percentage going forward. Over time as the UK business matures and our customer information data base improves we would be targeting a significant decrease in the level of UK bad debts.
Company owned store results
The corporate store network, which comprises company owned stores in Australia and the UK, has performed strongly in the first half. Revenues have grown by 25.7% against the same period last year to $60.8 million.
The combined EBIT of $4.3 million is down however, by 23.2% from the corresponding period in 2010, primarily because of the following:
-- The result of the profit impact ($399k) associated with the opening of the nine "greenfield" sites in this half 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;
-- The net profit has been impacted by an additional charge of $580k resulting from the additional earn-out paid to acquire seven stores in Queensland - under accounting standards it is not possible to capitalise this cost;
-- Support staff redundancy costs of $88k and additional business development managers of $100k;
-- Additional amortisation charge to our UK business in relation to 're-acquired rights' (GBP117,488) in relation to store acquisitions;
-- Fall in cheque cashing income of GBP117,018 following the decision by UK banks to end the 'cheque guarantee card'.
On a same store sales basis, over the corresponding period last year, the retail sales growth from our Australian corporate stores was 1.4%, with pawn broking interest growth of 11.6%. Our UK stores experienced retail sales growth of 8.6%. However, pawn broking interest fell by 12.9% and buyback income fell by 6.9%.
CONSUMER CREDIT AND CORPORATIONS LEGISLATION (ENHANCEMENTS) BILL 2011
Parliamentary Committee Recommendations
Cash Converters International Limited welcomed the recommendations made by the Parliamentary Joint Committee on Corporations and Financial Services and the Senate Economics Legislation Committee in their reports on the phase II reforms proposed by the Government as set out in the Consumer Credit and Corporations Legislation (Enhancements) Bill 2011.
Following representations from Cash Converters, its customers and other industry executives, the Committees, in their reports released in December 2011, analysed a wide range of matters pertaining to the Bill. Of the greatest relevance to Cash Converters is the Committee's finding concerning short term small amount credit contracts (Cash Advances and Personal Loans).
The Committee has concluded that the proposed fee caps comprising a 10% establishment fee and a 2% monthly fee are unworkable. The Committee has recommended that the Government revisit key aspects of its reform package with further industry consultation - which is expected to take place in the first half of 2012.
Outlook
The Company expects to see continued growth in the second half in the personal loan books in Australia and the UK and also from the UK cash advance business. The online personal loan product is currently being upgraded to facilitate a more rapid loan approval so as to be more competitive in this market space. These upgrades will be operational in the second half of the financial year.
We expect to open a further eight new company owned stores in the second half of the year. Six are expected to be opened in the UK and two in New South Wales as part of our plan to capture a greater market share of business in the most populous state in Australia.
The overall outlook for continued growth in the UK remains strong. The outlook for our Australian operations and growth opportunities will become clearer as the Government revisits key aspects of proposed reforms as set out in the Consumer Credit and Corporations Legislation (Enhancements) Bill 2011.
Managing Director, Peter Cumins, said "the strong half year growth is reflective of our expanding UK and Australian store network, increasing financial services product range and loan books while making a significant investment in the business in terms of increasing our administrative infrastructure in preparation for the next leg of business expansion. The regulatory outlook in Australia remains challenging but we are hopeful that the recommendation from the Parliamentary Joint Committee will give rise to a sensible outcome which preserves a viable industry and maintains access to short term loans for all those Australians who need this form of finance".
In closing, we would like to thank our fellow directors, management and staff for a very pleasing result.
Reginald Webb
Chairman
Peter Cumins
Managing Director
Perth, Western Australia
Date: 15 February 2012
Directors' Report
CASH CONVERTERS INTERNATIONAL LIMITED AND CONTROLLED ENTITIES
FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2011
Directors' report
In respect of the half-year ended 31 December 2011, 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 1.75 (one and a three quarter) cents per share be paid on 30 March 2012 to those shareholders on the register at the close of business on 16 March 2012.
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
2011 2010 2011 2010
Franchise operations 12,336,132 13,314,922 2,876,335 3,443,908
Store operations 60,847,415 48,385,704 4,287,200 5,644,455
Financial services - administration 7,964,778 6,567,383 6,615,416 5,942,921
Financial services - personal
loans 37,973,740 24,006,302 14,113,125 10,624,649
Intersegment elimination of
revenues (7,631,999) (5,821,410) - -
Totals 111,490,066 86,452,901 27,892,076 25,655,933
Corporate head office income/(costs) 181,599 655,375 (8,641,337) (5,106,563)
------------ ------------ ------------- -----------------
Total revenue/operating profit 111,671,665 87,108,276 19,250,739 20,549,370
============ ============
Income tax attributable to
operating profits (6,007,896) (6,238,122)
------------- -----------------
Operating profit after income
tax 13,242,843 14,311,248
(Profit)/loss attributable to outside
equity interests - (7,285)
------------- -----------------
Profit attributable to members of Cash Converters
International Limited 13,242,843 14,303,963
============= =================
Franchise operations
The profit before tax for the franchise operations was $2,876,335 (2010: $3,443,908) for the six month period ended 31December 2011. The Australian business contributed $1,566,464, the UK business $1,003,073 and the International operations $306,798 of the profit before tax. The main reason for the fall in profit against last year resulted from the move from franchised stores to corporate stores and the resultant fall in franchise fees.
The total number of franchised stores throughout the globe now stands at 561 with 154 stores in the UK, 103 in Australia and 304 throughout the rest of the world. Franchised stores continue to be opened, with seven stores opening in the UK and two stores in Australia in the period to the 31 December 2011. Internationally (excluding the UK) most growth is coming from Canada, Spain, South Africa and France although other countries are also growing albeit at a slower rate.
The potential for franchise expansion is still large with few countries, outside of Australia, reaching saturation level of franchised stores.
Store operations
This division encompasses the corporate store networks in both the UK and Australia. Currently there are 54 stores in the UK and 43 in Australia, resulting in a total of 97 stores. Not all stores are being acquired from existing franchisees with seven 'greenfield' sites opening in the UK and two in Australia in the last six months. Greenfield sites have the benefit to the company of not having to pay for goodwill but result in a profit 'drag' as stores typically take about 12 months to reach break-even and a further 3 to 4 years to reach maturity.
The store operations delivered a profit before tax of $4,287,200 (2010:$5,644,455) down $1,357,255 (24.0%) on the corresponding period. The Australian business contributed $3,862,987 (2010:$4,375,416) and the UK business $424,213 (2010:$1,269,039) of the net profit before tax.
The main reason for the drop in profit for the Australian network of stores is because of profit drag resulting from the opening of the two new 'greenfield' stores, in Melbourne, Victoria - these stores produced losses of approximately $179,000 for the six month period. The refit of existing stores has also had an impact with two stores in particular (Collingwood in Victoria and Victoria Park in WA) falling approximately $151,000 behind budget in the period. However these two stores are now improving, following their refits and are close to meeting budgets.
The UK business recorded a fall in profit primarily because of the profit drag on opening seven new stores in the period which has caused a reduction in profits of approximately GBP220,000. Although we opened a similar number of 'greenfield' stores last year, we also acquired six stores which offset the losses produced by the new stores. The UK also lost a store in the UK riots in August 2011 which has impacted the result by approximately GBP20,000. The UK business has also been charged amortisation in relation to re-acquired rights of GBP117,488, following the acquisition of a number of stores in the UK. The decision by the banks to end the 'cheque guarantee' card in July 2011 has also impacted the income for the business which has dropped by GBP117,018 as a result. The personal financial services income grew strongly in the period delivering an additional GBP134,394.
The corporate store network in the UK has good opportunities to secure high street locations for new stores. This, coupled with the excellent potential for developing financial services, augurs well for strong growth in the UK. Although the opportunities for 'greenfield' sites in Australia are not as strong as in the UK, certain states (New South Wales and Victoria) do offer strong growth potential. The opportunities in Australia lie in selective acquisitions of franchise stores.
Webshop
Cash Converters Webshop presence allows the business to be presented to a whole new audience of potential customers at a low delivery cost. New customers visit stores and purchase product after their first contact with the brand commenced with their online search. During the six month period, over $1.3 million in sales has been generated, with by far the highest sales category, being jewellery items.
Combined, the UK and Australian sites had over 2.4 million unique visitors and 26.8 million page views compared to 1.8 million and 19.1 million respectively at this time last year. This growth, in a relatively new area of our business, is encouraging and now allows us to focus on maximising the commercial opportunities that these new customers present.
Financial services operations and administration
These divisions incorporate the trading results of MON-E Pty Ltd, the Safrock Finance Group Pty Ltd (Safrock) 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 $340).
Safrock provides small, 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 has contracted Ausgroup Pty Ltd to roll-out the finance products across both the franchise and corporate store networks in the UK. Cash Converters have utilised the principals of Ausgroup extensively in growing its business in Australia.
During the period under review, the net profit before tax for this division was $20,728,541 (2010:$16,567,570), representing an increase on last year's corresponding period of 25.1%. Safrock contributed $12,910,723, MON-E $6,344,090 and the UK Finance Division contributed $1,473,728 (2010: loss $270,751).
The bad debt percentage of principal written off to principal advanced for the Australian business reduced from 6.30% to 6.17% in the period. However, the UK percentage increased from 9.16% to 11.01% reflecting the maturity of the Australian finance products offering compared to the UK. In total the Australian business incurred bad debt principal write-off of $4,320,280 (2010:$4,739,509) and the UK business GBP817,308 (2010:GBP373,233) for the period. The UK business reviewed its lending criteria in November 2011 and as a result has made certain adjustments to their procedures. This action combined with the appointment of a new collections manager should reduce the bad debt percentage going forward.
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 $13.2 million (2010:$10.9 million) advanced in Australia and GBP1.5 million (2010: GBP0.7 million) advanced in the UK with the loan books standing at $62.1 million (2010:$47.3 million) for Australia and GBP8.5 (2010:GBP2.3 million) for the UK, as at the end of December.
The Federal Government in late August 2011 tabled proposed legislative changes to the micro-lending industry that would severely impact the industry. Industry leaders, backed by significant support from customers, lobbied the government and as a result, the proposed legislation was referred to the Joint Standing Committee on Corporations and Financial Services and the Senate Economics Legislation Committee. These committees requested submissions from industry and consumer advocates in relation to the proposed changes.
In early December the committees tabled their findings with both committees unanimously supporting the industry viewpoint that the proposed changes are not realistic when compared to industry costs associated with providing micro-lending products. . The committees concluded that the proposed fee caps comprising a 10% establishment fee and a 2% monthly fee are unworkable. The Joint Standing Committee said: "In this regard, it does not appear that an appropriate balance has been struck between consumer protection and industry viability." The committees have recommended that the Government revisit key aspects of its reform package with further industry consultation.
Corporate office costs
These costs represent the support office 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.
Independent declaration by Auditor
The Auditor's independence declaration is included on page 22 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.
Reginald Webb
Chairman
Perth, Western Australia
Date: 15 February 2012
Condensed consolidated statement of comprehensive income
for the half-year ended 31 December 2011
CASH CONVERTERS INTERNATIONAL LIMITED AND CONTROLLED ENTITIES
FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2011
Consolidated
Half-year ended
31 December 31 December
Notes 2011 2010
$ $
Franchise fees 3a 5,275,307 5,649,165
Financial services revenue 3b 38,181,862 23,969,922
Sale of goods 3c 45,493,357 37,452,030
Pawn broking fees 7,249,698 5,483,533
Financial services commission 3d 14,982,969 13,516,017
Other revenue 3e 488,472 1,037,609
------------- ----------------
Revenue 111,671,665 87,108,276
Cost of Sales 3f (37,642,773) (26,768,914)
Gross Profit 74,028,892 60,339,362
Administrative expenses 3g (26,468,824) (19,649,797)
Advertising expenses (2,435,301) (3,131,899)
Occupancy expenses 3h (6,048,483) (4,684,531)
Other expenses 3i (18,772,930) (11,896,796)
Finance costs 3j (1,052,615) (426,969)
------------- ----------------
Profit before income tax 19,250,739 20,549,370
Income tax expense (6,007,896) (6,238,122)
------------- ----------------
Profit for the period 13,242,843 14,311,248
------------- ----------------
Other comprehensive income
Exchange differences on translation
of foreign operations (1,054,202) (3,281,647)
------------- ----------------
Other comprehensive income for the
period (1,054,202) (3,281,647)
------------- ----------------
Total comprehensive income for the
period 12,188,641 11,029,601
============= ================
Profit attributable to:
Owners of the parent 13,242,843 14,303,963
Non-controlling interest - 7,285
------------- ----------------
13,242,843 14,311,248
------------- ----------------
Total comprehensive income attributable
to:
Owners of the parent 12,188,641 11,022,316
Non-controlling interest - 7,285
------------- ----------------
12,188,641 11,029,601
------------- ----------------
Earnings per share
Basic (cents per share) 3.5 3.8
Diluted (cents per share) 3.4 3.7
============== ===============
The accompanying notes form an integral part of the condensed consolidated statement of comprehensive income
Condensed consolidated statement of financial position
for the half-year ended 31 December 2011
CASH CONVERTERS INTERNATIONAL LIMITED AND CONTROLLED ENTITIES
FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2011
Consolidated
31 December 30 June
Current assets 2011 2011
$ $
Cash and cash equivalents 19,543,250 23,456,996
Trade and other receivables 11,009,650 9,028,292
Personal loan receivables 77,394,174 64,156,414
Inventories 14,707,830 14,068,118
Other assets 3,439,742 2,204,346
------------------- ------------------
Total current assets 126,094,646 112,914,166
------------------- ------------------
Non-current assets
Trade and other receivables 1,866,120 2,475,982
Plant and equipment 16,824,957 13,112,279
Deferred tax assets 5,377,784 4,588,631
Goodwill 77,131,590 76,859,229
Other intangible assets 14,551,245 14,336,398
Other financial assets 4,000,000 2,625,000
-------------------
Total non-current assets 119,751,696 113,997,519
------------------- ------------------
Total assets 245,846,342 226,911,685
------------------- ------------------
Current liabilities
Trade and other payables 14,539,098 19,700,490
Borrowings 4,583,916 4,632,376
Current tax payables 6,997,444 6,714,380
Deferred establishment fees 4,045,873 2,899,313
Provisions 2,554,375 2,141,454
------------------- ------------------
Total current liabilities 32,720,706 36,088,013
------------------- ------------------
Non-current liabilities
Borrowings 33,660,077 17,979,211
Deferred tax liabilities 3,490,360 3,284,016
------------------- ------------------
Total non-current liabilities 37,150,437 21,263,227
------------------- ------------------
Total liabilities 69,871,143 57,351,240
------------------- ------------------
Net assets 175,975,199 169,560,445
=================== ==================
Equity
Issued capital 116,812,467 116,812,467
Reserves (4,497,211) (4,320,255)
Retained earnings 63,658,894 57,067,184
------------------- ------------------
Equity attributable to owners
of the parent 175,974,150 169,559,396
Non-controlling interest 1,049 1,049
------------------- ------------------
Total equity 175,975,199 169,560,445
=================== ==================
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 2011
CASH CONVERTERS INTERNATIONAL LIMITED AND CONTROLLED ENTITIES
FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2011
Consolidated Foreign
currency Attributable Non-controlling
Issued translation Other Retained to owners interest
capital reserve reserve earnings of the $ Total
$ $ $ $ parent $
$
Balance at 1
July 2010 116,812,467 (1,421,453) - 47,149,168 162,540,182 315,514 162,855,696
Effect of
prior
year
adjustment
(note 8) - - - (5,721,248) (5,721,248) - (5,721,248)
------------ ------------ ------------ ------------ ------------- ---------------- ------------
As restated 116,812,467 (1,421,453) - 41,427,920 156,818,934 315,514 157,134,448
Profit for the
period - - - 14,303,963 14,303,963 7,285 14,311,248
Exchange
differences
arising on
translation
of foreign
operations - (3,281,647) - - (3,281,647) - (3,281,647)
Income tax
relating
to components - - - - - - -
of other
comprehensive
income
Total
comprehensive
income for
the
period - (3,281,647) - 14,303,963 11,022,316 7,285 11,029,601
Payment of
dividends - - - (5,696,455) (5,696,455) - (5,696,455)
Balance at 31
December 2010 116,812,467 (4,703,100) - 50,035,428 162,144,795 322,799 162,467,594
------------ ------------ ------------ ------------ ------------- ---------------- ------------
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
------------ ------------ ------------ ------------ ------------- ---------------- ------------
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 2011
CASH CONVERTERS INTERNATIONAL LIMITED AND CONTROLLED ENTITIES
FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31DECEMBER 2011
Consolidated
Notes Half-year ended
31 December 31 December
2011 2010
$ $
Cash flows from operating activities
Receipts from customers 104,665,925 71,510,455
Payments to suppliers and employees (99,901,396) (62,549,756)
Interest received 472,846 860,512
Interest received from personal
loans 14,564,916 10,218,956
Net increase in personal loans (11,031,421) (7,640,187)
Interest and costs of finance
paid (1,052,615) (385,108)
Income tax paid (6,335,332) (5,142,155)
-------------- --------------
Net cash flows provided by operating
activities 1,382,923 6,872,717
-------------- --------------
Cash flows from investing activities
Net cash paid for acquisitions
of controlled entities 7 (6,130,534) (22,690,286)
Purchase of plant and equipment (6,524,400) (3,324,806)
Deposit to financial services
company (1,375,000) (270,000)
Instalment credit loans made
to franchisees - (161,328)
Instalment credit loans repaid
by franchisees 308,903 239,687
Net cash flows used in investing
activities (13,721,031) (26,206,733)
-------------- --------------
Cash flows from financing activities
Dividends paid - members of parent
entity (6,651,133) (5,696,455)
Repayment of borrowings (144,126) (1,462,808)
Proceeds from borrowings 16,000,000 -
Capital element of finance lease
and hire purchase payments (176,772) (176,437)
Redemption of unsecured notes
by controlled entity - (189,100)
Net cash flows provided by /(used
in) financing activities 9,027,969 (7,524,800)
-------------- --------------
Net (decrease) in cash and cash
equivalents (3,310,139) (26,858,816)
Cash and cash equivalents at
the beginning of the period
-------------- --------------
Effects of exchange rate changes 23,456,996 50,716,388
on the balance of cash held in
foreign currencies (603,607) (452,931)
-------------- --------------
Cash and cash equivalents at
the end of the period 7 19,543,250 23,404,641
-------------- --------------
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 2011
CASH CONVERTERS INTERNATIONAL LIMITED AND CONTROLLED ENTITIES
FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2011
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 2011, 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 2011. The adoption of the new and revised Standards and Interpretations has not affected the amounts reported for the current or prior period.
Presentation of condensed consolidated statement of comprehensive income
The presentation and related classification of amounts included in the condensed consolidated statement of comprehensive income has been amended in this half year financial report with revenue and expenses now classified by function. As a result of this amendment the comparative information has been reclassified to be comparable to the current period presentation.
This amended classification by function has been adopted because it more accurately reflects the consolidated entity's operations given the significant growth in the stores and financial services operations over the last year. This amended classification has had no effect on the profit before or after tax in either period presented.
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.
2. Segmental information (cont'd)
Segment revenues Segment results
Half year ended Half year ended
31 Dec 31 Dec 31 Dec 31 Dec
2011 2010 2011 2010
$ $ $ $
Franchise operations 12,336,132 13,314,922 2,876,335 3,443,908
Store operations 60,847,415 48,385,704 4,287,200 5,644,455
Financial services
- administration 7,964,778 6,567,383 6,615,416 5,942,921
Financial services
- personal loans 37,973,740 24,006,302 14,113,125 10,624,649
Intersegment elimination
of revenue (7,631,999) (5,821,410) - -
111,490,066 86,452,901 27,892,076 25,655,933
Corporate/support
office 181,599 655,375 (8,641,337) (5,106,563)
------------ ------------ ------------ ------------
Total revenue/operating
profit 111,671,665 87,108,276 19,250,739 20,549,370
============ ============
Income tax attributable
to operating profit (6,007,896) (6,238,122)
------------ ------------
Operating profit
after income tax 13,242,843 14,311,248
Less: Profit attributable
to outside equity
interests - (7,285)
------------ ------------
Profit attributable to members of Cash
Converters International Limited 13,242,843 14,303,963
============ ============
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
2011
$ 2011
$
Franchise operations 25,436,523 25,421,798
Store operations 90,389,759 87,478,235
Financial services - administration 18,724,394 19,487,180
Financial services - personal
loans 93,665,905 84,296,740
Total of all segments 228,216,581 216,683,953
Unallocated assets 17,629,761 10,227,732
Total assets 245,846,342 226,911,685
============ ============
Unallocated assets include various corporate assets including cash held at a corporate level that has not been allocated to the underlying segments.
2. Segmental information (cont'd)
The following is an analysis of the consolidated entity's liabilities by reportable segment:
31 December 30 June
2010 2011
$ $
Franchise operations 200,235 1,522,818
Store operations 6,936,617 11,159,910
Financial services - administration 3,958,203 3,062,495
Financial services - personal loans 22,517,088 21,347,017
Total of all segments 33,612,143 37,092,240
Unallocated liabilities 36,259,000 20,259,000
Total liabilities 69,871,143 57,351,240
============ ===========
Unallocated liabilities include consolidated entity borrowings not specifically allocated to the underlying segments.
3. Revenues and Expenses
2011 2010
$ $
3a Franchise fees
Weekly franchise fees 3,683,479 3,685,306
Initial fees 201,932 164,608
Ten-year renewals - 8,273
Advertising levies 214,700 211,300
Training levies 179,942 467,394
Computer levies 995,254 1,112,284
------------ -----------
5,275,307 5,649,165
------------ -----------
3b Financial services revenue
Instalment credit loan interest 338,014 126,829
Personal loan interest 29,711,036 19,270,529
Loan establishment fees 8,132,812 4,572,564
------------ -----------
38,181,862 23,969,922
------------ -----------
3c Sale of goods
Retail sales 42,634,124 34,807,913
Retail wholesales 2,859,233 2,644,117
------------ -----------
45,493,357 37,452,030
------------ -----------
3d Financial services commission
Cheque cashing commission 322,004 372,621
Financial services commission 14,660,965 13,143,396
------------ -----------
14,982,969 13,516,017
------------ -----------
3e Other revenue
Rent 15,182 73,035
Interest 472,846 919,350
Other 444 45,224
------------ -----------
488,472 1,037,609
------------ -----------
3. Revenues and expenses (cont'd)
2011 2010
$ $
3f Cost of Sales
Sale of goods 27,400,512 22,138,629
Personal loan bad debts 10,194,378 5,033,405
Cash advance bad debts 903,430 372,471
Franchise fees bad debts 158,554 35,340
Recovery of bad debts (1,014,101) (810,931)
------------ -----------
37,642,773 26,768,914
------------ -----------
3g Administrative expenses
Employee benefits 24,272,949 17,469,245
Provision for annual leave 401,733 289,653
Superannuation expense 1,212,818 1,304,006
Motor vehicle/travel costs 581,324 586,893
26,468,824 19,649,797
------------ -----------
3h Occupancy expenses
Rent 3,949,743 3,115,000
Outgoings 1,337,427 993,655
Other 761,313 575,876
------------ -----------
6,048,483 4,684,531
------------ -----------
3i Other expenses
Legal fees 912,929 404,887
Area agent fees/commission 4,436,298 3,594,209
Professional and registry costs 1,282,753 1,276,421
Auditing and accounting services 224,115 187,042
Bank charges 1,428,594 638,647
Loss on disposal of plant and equipment (1,804) -
Loss in relation to increase in contingent consideration 582,595 -
Other expenses from ordinary activities 7,942,880 4,662,037
Depreciation 1,466,519 1,017,552
Amortisation of intangibles 498,051 116,001
------------ -----------
18,772,930 11,896,796
------------ -----------
3j Finance costs
Interest 1,022,498 383,623
Finance lease charge 30,117 43,346
------------ -----------
1,052,615 426,969
------------ -----------
4. Issuances and repurchases of equity securities
There have been no issuances or repurchases of issued capital during the current period. The total number of ordinary shares in issue is 379,761,025 as at 31 December 2011. Refer to note 9 for information in relation to share-based payments issued during the period.
5. Subsequent events
The Directors recommend an interim dividend of 1.75 cents per share. This dividend will be 100% franked and will be paid on 30 March 2012. The financial effect has not been reported in this financial report.
Aside from proposed legislative changes to micro-lending in Australia already 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
2011 2010
Cents per Total Cents per Total
Recognised amounts Fully share $ share $
paid ordinary shares
Final dividend: 1.75 6,645,818 1.50 5,696,455
Unrecognised amounts
Fully paid ordinary shares
Interim dividend: 1.75 6,645,818 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:
Consolidated
31 December 31 December
2011 2010
$ $
Cash and cash equivalents 19,543,250 23,404,641
Bank overdrafts - -
19,543,250 23,404,641
------------ ------------
The cash paid for acquisitions of controlled entities amounting to $6,130,534
pertains to earn-out payments for the store acquisitions made in June 2011
financial year.
8. Prior year adjustments
Following a review of the accounting adopted in relation to the acquisition,
during the year ended 30 June 2010, of right previously held by Quickdraw
Financial Solutions Pty Ltd to provide the cash advance platform and associated
services to Franchisees within South Australia and the Northern Territories,
it has been concluded that the payment made should have been accounted
for as a termination payment in accordance with AASB 138 'Intangible Assets'
and not capitalised and subsequently amortised.
The accounting treatment has been amended by restating the affected line
items within the Statement of Financial Position as at 30 June 2011, and
the opening position as at 1 July 2010.
The adjustment resulted in a reduction of $5,721,248 to other intangible
assets and retained earnings with a consequent reduction in net assets
of the same amount.
There is no impact on profit or earnings per share or cashflows for any
of the periods presented.
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. On 30 November
2010, the shareholders approved the issue of 10,000,000 Performance Rights
under the Plan to Mr Peter Cumins, the Company's Managing Director. Refer
to the Annual Report for the year ended 30 June 2011 for further details.
On 19 September 2011, the Company's Board of Directors approved a resolution
to issue 3,800,000 Performance Rights under the Plan to members of the
Company's senior management team. The rights were issued free of charge.
The 3,800,000 Performance Rights were split into three Tranches, with Tranche
1 comprising 1,600,000 Performance Rights, Tranche 2 comprising 400,000
Performance Rights and Tranche 3 comprising 1,800,000 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 First Last Exercise
Number at grant Exercise Date
Vested of right Grant date Expiry Date
granted Date $ Date
------------------- --------- ---------- ---------- ------------ --------- ---------- ---------------
Senior Management
Team
Ian Day
Tranche 1 - 100,000 19/9/2011 0.4165 1/7/2012 1/7/2012 1/7/2012
Tranche 2 - 100,000 19/9/2011 0.3884 1/7/2013 1/7/2013 1/7/2013
Tranche 3 - - - - - - -
Ralph Groom
Tranche 1 - 115,000 19/9/2011 0.4165 1/7/2012 1/7/2012 1/7/2012
Tranche 2 - 115,000 19/9/2011 0.3884 1/7/2013 1/7/2013 1/7/2013
Tranche 3 - - - - - - -
Michael Cooke
Tranche 1 - 1,200,000 19/9/2011 0.4165 1/7/2012 1/7/2012 1/7/2012
Tranche 2 - - - - - - -
Tranche 3 - 1,800,000 19/9/2011 0.3147 1/7/2016 1/7/2016 1/7/2016
Gavin Irons
Tranche 1 - 25,000 19/9/2011 0.4165 1/7/2012 1/7/2012 1/7/2012
Tranche 2 - 25,000 19/9/2011 0.3884 1/7/2013 1/7/2013 1/7/2013
Tranche 3 - - - - - - -
Peter Wessels
Tranche 1 - 25,000 19/9/2011 0.4165 1/7/2012 1/7/2012 1/7/2012
Tranche 2 - 25,000 19/9/2011 0.3884 1/7/2013 1/7/2013 1/7/2013
Tranche 3 - - - - - - -
David Patrick
Tranche 1 - 85,000 19/9/2011 0.4165 1/7/2012 1/7/2012 1/7/2012
Tranche 2 - 85,000 19/9/2011 0.3884 1/7/2013 1/7/2013 1/7/2013
Tranche 3 - - - - - - -
Mike Osborne
Tranche 1 - 50,000 19/9/2011 0.4165 1/7/2012 1/7/2012 1/7/2012
Tranche 2 - 50,000 19/9/2011 0.3884 1/7/2013 1/7/2013 1/7/2013
Tranche 3 - - - - - - -
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 2012.
ii) Continuous employment through to vesting determination date, being 1 July 2012.
2 i) The Consolidated Entity achieving budgeted Net Profit after tax in each of FY2012 and FY2013.
ii) Continuous employment through to vesting determination date, being 1 July 2013.
3 i) The Consolidated Entity achieving budgeted Net Profit after tax in each of FY2012 - FY2016.
ii) Continuous employment through to vesting determination date, being 1 July 2016.
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 accounts 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 2011.
Tranche 1 Tranche 2 Tranche 3
Dividend yield (%) 7.00 7.00 7.00
Expected future volatility
(%) 50.00 50.00 50.00
Risk-free interest rate
(%) 3.53 3.53 4.04
Expected life of right (years) 0.8 1.8 4.8
Underlying share price at
grant date ($) 0.44 0.44 0.44
9. Share-based payment plan (cont'd)
Expected life of performance rights:
Grant date Grant number Expected life
of right
Tranche 1 19/09/2011 1,600,000 0.8 years
Tranche 2 19/09/2011 400,000 1.8 years
Tranche 3 19/09/2011 1,800,000 4.8 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
2011 2010
------------ ------------
Expense arising from equity-settled share-based
payment transaction 877,243 103,350
------------ ------------
Total expense arising from share-based payment
transaction 877,243 103,350
------------ ------------
Directors declaration
CASH CONVERTERS INTERNATIONAL LIMITED AND CONTROLLED ENTITIES
FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2011
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
Reginald Webb
Chairman
Perth, Western Australia
Date: 15 February 2012
Click on, or paste the following links into your web browser, to view the associated PDF documents.
http://www.rns-pdf.londonstockexchange.com/rns/5188X_1-2012-2-16.pdf
http://www.rns-pdf.londonstockexchange.com/rns/5188X_2-2012-2-16.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
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