Half - Cash Converters

Transcription

CASH CONVERTERS INTERNATIONAL LIMITED
A.B.N 39 069 141 546
Half-Year Report
For the half-year ended 31 December 2013
CASH CONVERTERS INTERNATIONAL LIMITED AND CONTROLLED ENTITIES
FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2013
Directors’ Report
Directors’ report
In respect of the half-year ended 31 December 2013, 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)
The above named directors held office during and since the end of the half-year except for:Mr John Yeudall – resigned 20 November 2013
Dividends
The Directors of the company paid a fully franked final dividend of 2.0 (two) cents per share for the 2013 Financial Year on the 27
September 2013. The Directors of the Company recommend that an interim dividend of 2.0 (two) cents per share be paid on 28 March
2014 to those shareholders on the register at the close of business on 14 March 2014.
The Company’s Dividend Reinvestment Plan (DRP) will apply to this dividend, providing shareholders with the option to reinvest all or
part of the their eligible dividend at a discount of 2.5% of the price established by the 5 day VWAP up to and including the record
date.
Review of operations
Revenue
EBITDA
Depreciation and amortisation
EBIT
Income tax
Finance costs
Net profit
Basic earnings per share (cents per share)
Divisional EBITDA
Franchise operations
Store operations
Financial services - administration
Financial services - personal loans
Green Light Auto (after minority)
Total before head office costs
Corporate head office costs
Total Divisional EBITDA
|P a g e 2
31 December 2013
31 December 2012
$155,760,342
$21,731,131
$3,801,175
$17,929,956
$4,010,072
$4,039,471
$9,880,413
2.3
$134,915,553
$30,390,648
$2,800,726
$27,589,922
$7,754,306
$1,404,303
$18,431,313
4.7
31 December 2013
31 December 2012
$3,179,386
$6,870,046
$4,920,328
$18,288,097
$(292,880)
$32,964,977
$(11,233,846)
$21,731,131
$3,165,102
$6,501,637
$7,328,828
$21,742,052
$38,737,619
$(8,346,971)
$30,390,648
Variance %
+15.5
-28.5
+35.7
-35.0
-48.3
+187.6
-46.4
-51.1
Variance %
+0.5
+5.7
-32.9
-15.9
-14.9
34.6
-28.5
Directors’ Report
Cash Converters International Limited is pleased to report a growth in revenue of 15.3% to $155.6 million. The normalised EBITDA
profit for the period was $24.9 million, down 20.3% on the previous period.
As previously disclosed in the Trading Update released to the ASX on 31 October 2013 the first half result has been impacted by the
effect of the transition to new regulatory requirements in Australia. Whilst the result is disappointing, it was pleasing that the second
quarter EBITDA result was up on the first quarter. This upward trend should continue in the second-half following a record breaking
December lending performance in Australia for both the personal loans and cash advance products.
Major highlights for the half-year include:
•
•
•
•
•
•
Strong recovery experienced in the second quarter. This upward trend should continue in the second-half, following
a record breaking December lending performance in Australia for both the personal and cash advance loans
products.
Strong revenue growth compared to the previous corresponding period last year of 15.3% to $155.6 million
(2012:$134.9 million). The major drivers for revenue growth over the period included an increase in personal loan
income of $7.1 million and an increase in corporate store revenue of $15.8 million;
The personal loan book in Australia grew by 12.0%, from $84.2 million as at 31 December 2012 to $94.3 million as
at 31 December 2013. The value of loans written in the month of December (2013) of $18.3 million was a record,
up 9% on the previous December;
The growth of the online personal loan business in Australia continues to be very strong with the value of loans
written increasing to $18.9 million for the period, up 74.2% on the previous corresponding period. December 2013
was a record month at $6.1 million in value of loans written, up 148.7% on the previous December;
The value of online cash advance and personal loans approved in the period increased 88.4% to $21.6 million; and
The corporate store network in the UK and Australia has seen revenue grow by 23.3% to $83.8 million over the
corresponding period last year. The combined EBITDA was $6.9 million, representing an increase of 5.7% on the
corresponding period last year.
Normalised EBITDA
EBITDA
Ausgroup provision
Stamp duty on store acquisitions
Green Light Auto (after minority)
EBITDA normalised
31 December
2013
$21,731,131
$1,101,197
$1,827,508
$292,880
$24,952,716
31 December
2012
$30,390,648
$900,000
$31,290,648
Variance
-28.5%
-20.3%
The above table provides a normalised EBITDA with adjustments to provide a direct comparison with the previous corresponding
period.
The Company has been experiencing subdued trading conditions as the transition to the new regulatory regime in Australia (Consumer
Credit Legislation Amendment (Enhancements) Act 2012) impacted customer credit behaviour resulting in a 20.3% fall in normalised
EBITDA compared to the previous corresponding period.
Cash Converters acquired an 80% equity interest in Green Light Auto Group Pty Ltd (“GLA”) during the period. Consequently the result
includes for the first time the performance of GLA which contributed an EBITDA loss of $292,880 after minority interests.
The reported result was impacted by a provision of $1.1 million (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. 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
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Directors’ Report
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.
A stamp duty liability of $1.8 million was incurred during the period on the acquisition of nine stores acquired in Australia.
Financial services operations
The financial services business, UK and Australia combined, produced an EBITDA profit from the personal loans products of $18.3
million, down 15.9% on last year. The administration business for cash advance services produced a combined EBITDA of $4.9 million,
down 32.9% on the previous period.
Australia
The Australian personal loan book has grown by 3.1% in the first half, from $91.5 million as at 30 June 2013 to $94.3 million as at 31
December 2013.
A significant part of this growth has been generated by our online personal loan lending platform, with 16,357 loans made totalling
$18.9 million. Online personal loans now represent 23.6% of the total loan book. The online business has considerable potential for
further growth and contributes strongly to the development of the customer base. This view is supported by the fact that
approximately 60% of all online customers are new to the Cash Converters loan products. The month of January, traditionally a quiet
period for the personal loan product, has continued the trend with $14.1 million advanced, an increase of 16.5% on January 2013.
The Australian personal loan book produced an EBITDA of $17.4 million (2012: $18.6 million) down 6.5% on the previous period.
Following the introduction of the new legislation with effect from 1 July 2013, the board recommended a review of the accounting
treatment for interest and initial fees, to ensure that the effective interest rate method was being appropriately applied to income
from the new personal loan products. Thus ensuring continued appropriate revenue recognition and comparability to prior periods.
The bad debt percentage of principal written off to principal advanced for the Australian business remained constant at 5.6% for the
period.
The Australian cash advance business suffered a drop in the volume of loans advanced compared to the corresponding period last
year. This product also experienced a drop in the margin per loan from 1 July 2013, as a result of implementing the new rate cap
required by the new regulatory regime. As a result the EBITDA for the Australian cash advance products fell 34.2%, to $4.5 million
(2012: $6.9 million).
We expect to see an improvement in the second half as loan volumes have increased in the second quarter of this financial year. Part
of this growth has come from the online cash advance business, with the value of loans written in the period being $2.7 million, up
346.6% on the previous six month period. As with online personal loans, approximately 60% of online cash advance customers are
new to Cash Converters.
Cash advance (first half of 2014FY compared to second half of 2013FY)
•
•
•
Total principal loaned decreased by 7.8% to $117.7 million
Average loan amount increased from $341 to $431
Total customer numbers increased by 5.0% to 488,284
Personal loans (first half of 2014FY compared to second half of 2013FY)
•
•
Total number of active customers increased by 39.0% to 112,945
Total principal loaned decreased by 8.7% to $74.7 million
A pleasing sign has been the growth in new customer numbers over the previous period for both products.
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Directors’ Report
UK
The UK personal loan book decreased by 25.1% in the first half, from £20.3 million at 30 June 2013 to £15.2million at 31 December
2013. The main impact of this decrease has resulted from the write-off of bad debts, previously provided for, and now deemed
uncollectable.
The UK personal loan and cash advance business produced an EBITDA of $1.3 million, down 63.8% on the previous period. The online
product produced $505,849 (£294,167) of this EBITDA.
The bad debt percentage of principal written off to principal advanced for the UK increased from 11.5% to 12.1% 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 2014FY compared to second half of 2013FY)
•
•
•
Total principal loaned increased by 4.3% to £18.6 million
Average loan amount increased from £121 to £124
Total customer numbers increased by 17.9% to 138,834
Personal loans (first half of 2014FY compared to second half of 2013FY)
•
•
Total number of loans approved increased by 28.1% to 15,500
Total principal loaned increased by 32.2% to £9.2 million
Company owned store results
The corporate store network in Australia produced an EBITDA of $6.2 million, up 8.1% on the previous period (2012: $5.8 million).
The performance of the Australian stores has been impacted by the lower volume of cash advance loans made in the first quarter and
the rate cap margin decrease from 1 July 2013. The impact on the EBITDA of these events has been approximately $2.3 million.
Subsequent to the half year end, the Company acquired five franchised stores, four in Victoria and one in NSW. These acquisitions
take the number of corporate stores in Australia to 61, with 63 stores in the UK. The acquisition price of $4.0 million for these latest
five stores represents an EBIT multiple of 4 times on earnings and a multiple of 2.2 times excluding assets.
The corporate store network in the UK produced an EBITDA of $650,830, down 13.1% on the previous period (2012: $749,226).
The performance of the UK stores was impacted by an increase in operating overheads of $1,934,916 (£1,125,213). The most
significant increase was wage costs of $1,291,972 (£751,321) due to a new ‘blue print’ store concept trial that involves a higher level
of wage costs associated with better qualified and trained staff to drive a number of KPI improvements across the corporate store
network.
The UK corporate stores have been instrumental in the 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 (Trading as Carboodle)
The Carboodle brand was established by Green Light Auto Group Pty Ltd (“GLA”) in 2010. GLA is a licensed motor vehicle dealer
providing customers who don’t have access to main stream credit with a reliable and well maintained car (retail and commercial).
GLA provides late model vehicles to its customers via a four year lease term including most running costs (insurance, maintenance,
registration, roadside assistance etc) for a weekly payment.
GLA has been successful in securing $40 million of funding to cover 75% of the purchase price of vehicles with Fortress, a USA based
lender.
Cash Converters acquired an 80% equity interest during the period. GLA produced an EBITDA loss of $292,880 after minorities for the
period.
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Directors’ Report
Trading Highlights
•
•
•
Active leases increased by 29.7% over the six months to end of December 2013 by 178 to 778 (FY2013: 600)
Forward contracted lease payments increased to $28.5 million at the end of December 2013 (FY2013: $21.2 million)
Total revenue for the six months to 31 December of $3.8 million
Strategic Investment in New Zealand Master Franchisor
The Company acquired a 25% equity interest in the New Zealand Cash Converters Master Franchisor on 22 January, 2014 for a
consideration of $5 million. In addition, the Company has lent CCNZ $15 million at a rate of 8% per annum to fund the delivery of an
agreed business plan.
CCNZ commenced franchised operations in 1993 and the network now consists of 14 stores. Nine stores are franchised and five are
owned and operated by CCNZ. In the 2013 financial year, CCNZ generated an EBIT of approximately NZ$4 million.
The Company sees a significant opportunity to increase the sale of financial products through an expanding network of stores across
New Zealand and also through the online platform. The New Zealand franchisor has a strong track record of managing franchised and
corporate stores. With the appropriate level of funding, the Company is confident that CCNZ will enjoy a strong period of growth over
the next five years.
Outlook
The first half result reflects the transition that the Company is going through in Australia. As in previous years, the main profit driver
of the group has been the financial service products delivered in store and now online in Australia. The UK business has always been
a small contributor to the overall group profit but we have continued to grow the operations and believe that the opportunity remains
for it to be a significant contributor to the Company’s earnings in the future. The Australian corporate store network has suffered the
most in this transitionary period due to lower lending volumes and margin pressure on its cash advance loans.
Since a low point in September, lending volumes in Australia have been increasing and for the month of December, loan volumes
returned to record levels for personal loans and cash advances. The improvement has been driven by our customers becoming more
familiar with the documentation required to meet the new regulatory requirements. The volume of loans written at the corporate
store level is still down year to date - cash advance by 5.7% and personal loans by 15.5%. The trend though over the past few months
is upward with December cash advance loans written being in line with last December and personal loans down by only 5.9%.
Independent declaration by Auditor
The Auditor’s independence declaration is included on page 23 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 2014
|P a g e 6
Condensed consolidated statement of profit or loss and other comprehensive income
for the half-year ended 31 December 2013
Notes
Franchise fees
Financial services interest revenue
Sale of goods
Other revenue
Revenue
3a
3b
3c
3d
Cost of Sales
3e
Half-year ended
31 December
31 December
2013
2012
$
$
5,190,098
5,077,776
90,701,974
82,000,150
57,407,256
47,612,059
2,461,014
225,568
155,760,342
134,915,553
(56,341,092)
(43,302,764)
99,419,250
91,612,789
(40,788,578)
(4,137,940)
(9,487,743)
(29,698,339)
(4,039,471)
11,267,179
(30,358,391)
(2,427,204)
(7,143,699)
(24,093,573)
(1,404,303)
26,185,619
Income tax expense
(4,010,072)
(7,754,306)
Profit for the period
7,257,107
18,431,313
6,874,842
6,874,842
14,131,949
826,798
826,798
19,258,111
9,880,413
(2,623,306)
7,257,107
18,431,313
18,431,313
16,755,255
(2,623,306)
14,131,949
19,258,111
19,258,111
2.32
2.28
4.70
4.60
Gross Profit
Administrative expenses
Advertising expenses
Occupancy expenses
Other expenses
Finance costs
Profit before income tax
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
Other comprehensive income for the period
Total comprehensive income for the period
Profit attributable to:
Owners of the parent
Non-controlling interest
Total comprehensive income attributable to:
Owners of the parent
3f
3g
3h
3i
Earnings per share
Basic (cents per share)
Diluted (cents per share)
The accompanying notes form an integral part of the condensed consolidated statement of profit or loss and other comprehensive
income.
|P a g e 7
Condensed consolidated statement of financial position
Notes
Current assets
Cash and cash equivalents
Trade and other receivables
Personal loan receivables
Inventories
Other assets
4
Total current assets
Consolidated
31 December
30 June
2013
2013
$
$
50,764,169
20,729,330
22,521,124
13,031,595
119,148,970
109,279,232
23,771,499
21,783,101
12,287,089
8,587,646
228,492,851
173,410,904
Non-current assets
Plant and equipment
Deferred tax assets
Goodwill
Other intangible assets
Other financial assets
Total non-current assets
105,709
24,137,296
11,053,707
109,411,237
22,107,464
166,815,413
14,476,490
22,534,872
5,627,598
98,771,899
22,423,074
4,000,000
167,833,933
Total assets
395,308,264
341,244,837
26,537,307
55,092,751
927,926
4,521,263
87,079,247
20,048,464
70,538,531
4,662,548
3,870,515
99,120,058
59,069,026
125,752
59,194,778
389,521
104,474
493,995
Total liabilities
146,274,025
99,614,053
Net assets
249,034,239
241,630,784
154,276,576
5,972,703
92,239,277
151,708,656
(914,097)
90,835,176
252,488,556
241,629,735
(3,454,317)
249,034,239
1,049
241,630,784
Current liabilities
Trade and other payables
Borrowings
Current tax payables
Provisions
6
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Total non-current liabilities
6
Equity
Issued capital
Reserves
Retained earnings
Equity attributable to owners of the
parent
Total equity
The accompanying notes form an integral part of the condensed consolidated statement of financial position
|P a g e 8
Condensed consolidated statement of changes in equity
Issued
capital
$
Foreign
currency
translation
reserve
$
Retained
earnings
$
Attributable
to owners
of the
parent
$
Other
reserve
$
Noncontrolling
interest
$
116,812,467
(6,028,429)
2,661,625
73,186,248
186,631,911
1,049
186,632,960
-
-
-
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
32,725,000
-
-
-
32,725,000
-
32,725,000
(775,582)
-
-
-
(775,582)
-
(775,582)
-
-
964,949
-
964,949
-
964,949
2,946,760
-
(2,946,760)
-
-
-
-
-
-
-
(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
Balance at 1 July 2013
151,708,656
(2,629,872)
1,715,775
90,835,176
241,629,735
1,049
241,630,784
-
-
-
9,880,413
9,880,413
(2,623,306)
7,257,107
Exchange differences arising
on translation of foreign
operations
-
6,874,842
-
-
6,874,842
-
6,874,842
Income tax relating to
components of other
comprehensive income
-
-
-
-
-
-
-
Total comprehensive
income for the period
-
6,874,842
-
9,880,413
16,755,255
(2,623,306)
14,131,949
Issue of shares (DRP)
2,199,526
-
-
(2,199,526)
-
-
-
-
-
380,352
-
380,352
-
380,352
368,394
-
(368,394)
-
-
-
-
-
-
-
(6,276,786)
(6,276,786)
-
(6,276,786)
Balance at 1 July 2012
Issue of shares
Share issue costs (net of tax)
Share-based payments
Shares issued on exercise of
performance rights
Payment of dividends
Share-based payments
Shares issued on exercise of
performance rights
Payment of dividends
Acquisition of non(832,060)
controlling interests
Balance at 31 December
154,276,576
4,244,970
1,727,733 92,239,277 252,488,556 (3,454,317)
2013
The accompanying notes form an integral part of the condensed consolidated statement of changes in equity
|P a g e 9
Total
$
(832,060)
249,034,239
Condensed consolidated statement of cash flows
Notes
Consolidated
Half-year ended
31 December
31 December
2013
2012
$
$
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest received from personal loans
Net increase in personal loans
Interest and costs of finance paid
Income tax paid
97,064,940
(115,344,497)
375,264
40,201,112
(13,344,406)
(4,039,471)
(9,109,871)
104,394,911
(100,126,305)
203,817
28,790,355
(19,617,329)
(1,404,303)
(9,040,727)
(4,196,929)
3,200,419
(2,532,455)
3,833,411
(835,849)
74,000
(2,643,514)
220,298
(971,506)
(1,144,528)
37,000
(2,708,556)
(6,200,000)
385,184
(1,884,109)
(10,602,406)
(6,276,786)
(24,841,526)
64,953,293
(1,180,825)
(252,831)
-
(8,921,136)
(13,751,399)
5,335,255
(245,965)
32,725,000
(1,107,975)
-
Net cash flows provided by financing activities
32,401,325
14,033,780
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
26,320,287
20,729,330
6,631,793
16,415,161
3,714,552
(384,414)
50,764,169
22,662,540
Net cash flows (used in)/provided by operating activities
Cash flows from investing activities
Net cash paid for acquisitions of controlled entities
Cash acquired in relation to Green Light Auto
Acquisition of intangible asset
Proceeds from sale of plant and equipment
Purchase of plant and equipment
Amounts advanced to third parties
Instalment credit loans repaid by franchisees
9
9
Net cash flows used in investing activities
Cash flows from financing activities
Dividends paid – members of parent entity
Repayment of borrowings
Proceeds from borrowings
Borrowing Costs
Capital element of finance lease and hire purchase payments
Issue of shares by controlling entity
Share issue costs
Redemption of unsecured notes by controlled entity
Effects of exchange rate changes on the balance of cash held in foreign
currencies
Cash and cash equivalents at the end of the period
8
The accompanying notes form an integral part of the condensed consolidated statement of cash flows
| P a g e 10
Notes to the condensed consolidated financial statements
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 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 are 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 2013, except for the impact
of the Standards and Interpretations described below. These accounting policies are consistent with Australian Accounting Standards
and with International Financial Reporting Standards.
The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board
(the AASB) that are relevant to their operations and effective for the current half-year
Comparative financial information
Certain comparative information within the statement of financial position has been reclassified to allow comparability with current
period presentation.
Impact of the application of AASB 10
AASB 10 replaces the parts of AASB 127 ‘Consolidated and Separate Financial Statements’ that deal with consolidated financial
statements and Interpretation 112 ‘Consolidation – Special Purpose Entities’. AASB 10 changes the definition of control such that an
investor controls an investee when a) it has power over an investee, b) it is exposed, or has rights, to variable returns from its
involvement with the investee, and c) has the ability to use its power to affect its returns.
All three of these criteria must be met for an investor to have control over an investee. Previously, control was defined as the power
to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Additional guidance has been
included in AASB 10 to explain when an investor has control over an investee. Some guidance included in AASB 10 that deals with
whether or not an investor that owns less than 50 per cent of the voting rights in an investee has control over the investee is relevant
to the Group.
The adoption of AASB 10 did not have any impact on the group’s current or prior period financial information.
AASB 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates
and/or unconsolidated structured entities. In general, the application of AASB 12 has resulted in more extensive disclosures in the
consolidated financial statements. However this did not result in any changes to the half year financial report.
The Group has applied AASB 13 for the first time in the current year. AASB 13 establishes a single source of guidance for fair value
measurements and disclosures about fair value measurements. The scope of AASB 13 is broad; the fair value measurement
requirements of AASB 13 apply to both financial instrument items and non-financial instrument items for which other AASBs require
or permit fair value measurements and disclosures about fair value measurements, except for share-based payment transactions
that are within the scope of AASB 2 ‘Share-based Payment’, leasing transactions that are within the scope of AASB 117 ‘Leases’, and
| P a g e 11
1. Significant accounting policies (continued)
measurements that have some similarities to fair value but are not fair value (e.g. net realisable value for the purposes of measuring
inventories or value in use for impairment assessment purposes).
AASB 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in
the principal (or most advantageous) market at the measurement date under current market conditions. Fair value under AASB 13 is
an exit price regardless of whether that price is directly observable or estimated using another valuation technique. Also, AASB 13
includes extensive disclosure requirements.
AASB 13 requires prospective application from 1 January 2013. In addition, specific transitional provisions were given to entities such
that they need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before
the initial application of the Standard. In accordance with these transitional provisions, the Group has not made any new disclosures
required by AASB 13 for the 2012 comparative period, the application of AASB 13 has not had any material impact on the amounts
recognised in the consolidated financial statements.
In the current year, the Group has applied AASB 119 (as revised in 2011) ‘Employee Benefits’ and the related consequential
amendments for the first time. Specific transitional provisions are applicable to first-time application of AASB 119 (as revised in 2011).
AASB 119 (as revised in 2011) changes the definition of short- term employee benefits. Short-term employee benefits under the
superseded AASB 119 were benefits that are due to be settled within 12 months after the end of the period in which the employees
render the related service. In contrast, under the revised AASB 119, only benefits that are expected to be settled wholly within 12
months after the end of the annual reporting period in which the employees render the related service are classified as short-term
employee benefits. The inclusion of ‘expected’ and ‘wholly’ in the definition of short-term employee benefits might lead to a change
of classification. For the company, this is demonstrated in the accrued annual leave in Australia that is generally not required (or
‘expected’) to be wholly used (settled) before the end of the next annual reporting period. Due to the adjusted definition, similar
benefits classified as short-term employee benefits under the superseded standard would be classified as longterm employee benefits under the revised AASB 119. The impact of this would be that annual leave classified as long term would need
to be discounted allowing for expected salary levels in the future period when the leave is expected to be taken.
The adoption of AASB 119 did not result in any changes to the half-year financial report.
| P a g e 12
2. Segmental information
AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly
reviewed by the chief operating decision maker (the Managing Director of CCIL) 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:
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 – the cash advance administration platform.
Vehicle Leasing
Following the acquisition of Green Light Auto Group during the period, the company has established a new reporting segment of
Vehicle Leasing to reflect the revenue’s from the Carboodle brand by way of lease interest, and the fully maintained vehicle product
offering.
Information regarding these segments is presented below. The accounting policies of the reportable segments are the same as the
consolidated entity’s accounting policies.
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.
| P a g e 13
2. Segmental information (continued)
The following is an analysis of the consolidated entity’s revenue and results by reportable operating segment for the periods under
review.
For the half year
ended 31 December
2013
Gross revenue
Less intercompany
sales
Segment revenue
Interest revenue
Total revenue
Financial
Services Personal
Loans
61,602,376
Vehicle
Leasing
4,077,835
Corporate
Head Office
1,264,614
Total
166,850,898
Franchise
Operations
9,050,384
Store
Operations
83,796,303
Financial
Services Administration
7,059,386
(3,014,905)
6,035,479
6,035,479
(5,369,647)
78,426,656
18,406
78,445,062
(1,955,668)
5,103,718
2,132
5,105,850
61,602,376
175,753
61,778,129
4,077,835
11,690
4,089,525
(1,125,600)
139,014
167,283
306,297
(11,465,820)
155,385,078
375,264
155,760,342
EBITDA
3,179,386
6,870,046
Depreciation and
amortisation
(124,637) (2,508,596)
EBIT
3,054,749
4,361,450
Interest expense
(16,974)
Profit/(Loss) before
tax
3,054,749
4,344,476
Income tax expense
Operating profit after tax
Loss attributable to outside equity interests
Profit attributable to members of CCIL
4,920,328
18,288,097
(2,916,186)
(11,233,846)
19,107,825
(2,339)
4,917,989
-
(400,312)
17,887,785
(1,480,895)
(82,088)
(2,998,274)
(575,663)
(683,203)
(11,917,049)
(1,965,939)
(3,801,175)
15,306,650
(4,039,471)
4,917,989
16,406,890
(3,573,937)
(13,882,988)
11,267,179
(4,010,072)
7,257,107
2,623,306
9,880,413
Financial
Services Personal
Loans
54,587,479
Vehicle
Leasing
Corporate
Head Office
998,198
Total
143,295,797
For the half year
ended 31 December
2012
Gross revenue
Less intercompany
sales
Segment revenue
Interest revenue
Total revenue
Franchise
Operations
10,654,335
Store
Operations
67,929,437
Financial
Services Administration
9,126,348
(3,518,784)
7,135,551
7,135,551
(2,887,944)
65,041,493
34,811
65,076,304
(2,177,333)
6,949,015
3,671
6,952,686
54,587,479
100,498
54,687,977
-
998,198
64,837
1,063,035
(8,584,061)
134,711,736
203,817
134,915,553
7,328,828
21,742,052
-
(8,346,971)
30,390,648
(6,253)
7,322,575
-
(273,785)
21,468,267
-
-
(490,388)
(8,837,359)
(1,392,182)
(2,800,726)
27,589,922
(1,404,303)
7,322,575
21,468,267
-
(10,229,541)
26,185,619
(7,754,306)
18,431,313
18,431,313
EBITDA
3,165,102
6,501,637
Depreciation and
amortisation
(132,844) (1,897,456)
EBIT
3,032,258
4,604,181
Interest expense
(12,121)
Profit/(Loss) before
tax
3,032,258
4,592,060
Income tax expense
Operating profit after tax
(Profit)/Loss attributable to outside equity interests
Profit attributable to members of CCIL
| P a g e 14
-
2. Segmental Information (continued)
The following is an analysis of the consolidated entity’s assets by reportable segment:
Store operations
Financial services – administration
Financial services – personal loans
Vehicle Leasing
Total of all segments
Unallocated assets
Total assets
31 December
2013
30 June
2013
$
21,408,073
146,362,788
18,219,536
148,810,551
24,413,272
359,214,220
36,094,044
395,308,264
$
21,437,821
136,281,822
18,071,113
134,200,107
309,990,863
31,253,974
341,244,837
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:
Store operations
Financial services – administration
Financial services – personal loans
Vehicle Leasing
Total of all segments
Unallocated liabilities
Total liabilities
31 December
2013
30 June
2013
$
2,367,819
11,522,616
3,600,580
76,788,433
5,259,114
99,538,562
46,735,463
146,274,025
$
2,030,329
9,020,978
2,974,992
74,251,328
88,277,627
11,336,426
99,614,053
Unallocated liabilities include consolidated entity borrowings not specifically allocated to the underlying segments.
| P a g e 15
3. Revenue and expenses
3a
3b
3c
3d
3e
3f
Franchise fees
Weekly franchise fees
Initial fees
Advertising levies
Training levies
Computer levies
Financial services interest revenue
Instalment credit loan interest
Personal loan interest
Loan establishment fees
Pawn broking fees
Cheque cashing commission
Financial services commission
Vehicle lease interest
Sale of goods
Retail sales
Retail wholesales
Vehicle trade sales
Other revenue
Bank interest
Other vehicle revenue
Other
Cost of Sales
Sale of goods
Personal loan bad debts
Cash advance bad debts
Franchise fees bad debts
Recovery of bad debts
Vehicles
Administrative expenses
Employee benefits
Provision for annual leave
Superannuation expense
Motor vehicle/travel costs
| P a g e 16
2013
$
2012
$
3,759,604
18,488
242,500
196,200
973,306
5,190,098
3,658,904
110,808
221,900
184,800
901,364
5,077,776
51,772
49,164,031
14,016,099
9,947,990
733,943
15,031,894
1,756,245
90,701,974
940,095
44,015,321
12,312,172
7,360,743
618,138
16,753,681
82,000,150
56,595,339
488,034
323,883
57,407,256
45,803,383
1,808,676
47,612,059
375,264
1,988,770
96,980
2,461,014
203,817
21,751
225,568
32,788,485
21,555,908
991,541
(8,315)
(2,154,609)
3,168,082
56,341,092
28,416,004
15,243,101
975,408
8,896
(1,340,645)
43,302,764
36,976,503
458,376
1,953,134
1,400,565
40,788,578
27,698,652
245,537
1,380,241
1,033,961
30,358,391
3. Revenues and expenses (continued)
3g
3h
3i
Occupancy expenses
Rent
Outgoings
Other
Other expenses
Legal fees
Area agent fees/commission
Professional and registry costs
Auditing and accounting services
Bank charges
(Profit)/Loss on disposal of plant and equipment
Other expenses from ordinary activities
Depreciation
Amortisation of intangibles
Finance costs
Interest
Finance lease charge
2013
$
2012
$
5,982,976
2,773,195
731,572
9,487,743
4,250,268
2,077,541
815,890
7,143,699
997,851
12,254,103
1,994,528
236,563
2,184,955
(797)
8,229,961
2,710,058
1,091,117
29,698,339
594,002
11,719,946
1,870,935
298,584
2,010,371
3,719
4,795,290
2,099,062
701,664
24,093,573
4,005,266
34,205
4,039,471
1,380,258
24,045
1,404,303
4. Personal loans receivables
Personal short term loans
Allowance for impairment losses
Deferred establishment fees
Net personal loan receivables
| P a g e 17
31 December
2013
$
152,107,524
(23,510,750)
(9,447,804)
119,148,970
30 June
2012
$
145,716,872
(30,707,354)
(5,730,286)
109,279,232
5. Issuances and repurchases of equity securities
During the current period, 683,668 ordinary shares were issued as a result of the exercise of performance rights. An additional
1,758,074 shares were issued pursuant to the Company’s Dividend Reinvestment Plan (DRP). The total number of ordinary shares in
issue is 426,302,767 as at 31 December 2013.
Balance at the beginning of the period
Shares issued during the period
Balance at end of the period
423,861,025
2,441,742
426,302,767
6. Borrowings
On the 19 September 2013, the group completed a Bond issue through FIIG securities, the issue comprised of $60 million of medium
term, unsecured notes with a fixed coupon rate of 7.95% per annum payable half yearly, in arrears. The notes have a maturity date
of 19 September 2018. The additional funds are destined to facilitate future acquisitions and the growth of the personal loan book.
As a consequence of the Bond issue (above), the Group elected to renegotiate the terms of its corporate facility with Westpac Banking
Corporation. As a result of this the group repaid its $18 million corporate loan and replaced this with a working capital facility of $10
million that can be drawn on demand. At the balance date the amount of this facility utilised was Nil.
As part of the acquisition of the Green Light Auto Group (GLA), the Group inherited a securitisation facility with FCCD (Australia) Pty
Ltd (Fortress). The facility has a capacity of $20 million (with the option to increase to $40 million) and funds up to 75% of eligible
lease receivables for GLA. At the balance date the facility has been drawn to $6.2 million. The facility carries and interest rate of BBSY
+ 9% and has a maturity date of 23 May 2018.
At 31 December 2013, the Group’s $60 million securitisation/warehousing facility with Westpac Banking Corporation, secured against
eligible personal loan receivables, was drawn to $49.0 million (30 June 2013 - $52.1 million).
7. Dividends
2013
Cents
per
share
2012
$
Cents
per
share
2.00
8,476,312
1.75
6,743,820
2.00
8,526,055
2.00
8,477,221
Total
Total
$
Recognised amounts
Fully paid ordinary shares
Final dividend:
Unrecognised amounts
Fully paid ordinary shares
Interim dividend:
| P a g e 18
8. 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
Bank overdrafts
31 December
2013
$
31 December
2012
$
50,764,169
22,662,540
-
-
50,764,169
22,662,540
9. Business Combinations
During the period the Group acquired the trade and assets of the Cash Converters store in Rockingham, WA. The cash consideration
transferred was $2,550,890. The Group also acquired 80% of the equity in Green Light Auto Group Pty Ltd (GLA). This acquisition
was effected by the conversion of a $4.0 million convertible note held by CCIL to equity.
This transactions have been accounted for using the acquisition method of accounting.
The initial accounting for the acquisition of both the Rockingham Store and GLA have 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 any re-acquired rights and customer relationships (intangible assets) associated with the business combinations 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 combinations.
Goodwill arose in the business combination because the cost of the combination included a control premium paid to acquire the
two businesses. 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 entities. These benefits
are not recognised separately from goodwill as the future economic benefits arising from them cannot be reliably measured
The net assets acquired in the business combinations, and the goodwill arising, are as follows:
| P a g e 19
9. Business Combinations (continued)
Rockingham WA, corporate store
Fair Value recognised on
acquisition
$
Net assets acquired:
Inventories
Fair value of net identifiable assets acquired
18,435
451,820
259,245
(59,803)
669,698
Consideration:
Consideration satisfied by cash
2,550,890
Goodwill arising on acquisition
1,881,192
The cash outflow on acquisition is as follows:
Net cash acquired with the stores
Cash paid
Net consolidated cash outflow
18,435
(2,550,890)
(2,532,455)
Included in the net profit for the period is $111,323 attributable to the additional business generated by the Rockingham store.
Green Light Auto Group Pty Ltd
Fair Value recognised on
acquisition
$
Net assets acquired:
Deferred Tax Asset
Inventories
Plant and equipment
Fair value of 100% net identifiable liabilities acquired
NCI at 20% of acquired net assets at carrying value
3,833,411
6,275,349
3,891,518
2,109,064
582,876
(20,852,520)
(4,160,301)
(832,060)
Consideration:
Consideration by conversion of loan
Deemed consideration
4,000,000
3,167,940
Goodwill arising on acquisition
Recognised amount of NCI
7,328,241
(832,060)
The cash outflow on acquisition is as follows:
Net cash acquired with the business
Cash paid
Net consolidated cash inflow
3,833,411
3,833,411
Included in the net profit (after minority interests and intercompany eliminations) for the period is a loss of $328,691 attributable to
the additional business and associated costs generated by the Green Light Auto Group Pty Ltd
| P a g e 20
10. Contingent Liability
As previously disclosed to the Australian Securities Exchange, a class action has been commenced against the Company and three
subsidiaries alleging that lending in New South Wales between 1/7/2010 and 30/6/2013 was based on an unlawful model and
therefore borrowers are entitled to damages. The current status is that the matter is being defended and is in the early procedural
stages. The Company is satisfied that these loans were made in a lawful manner. The potential financial impact cannot be reliably
estimated at this stage.
11. 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 28 March
2014. The financial effect has not been reported in this financial report.
On 23 January 2014, the company settled on the acquisition of a 25% equity interest in all aspects of the Cash Converters New Zealand
Master Franchisor enterprise, including corporate stores, franchise contracts, financial services and software. The consideration paid
was AUD $5million.
At the same time, the company also lent Cash Converters New Zealand $15 million by way of a fully secured, interest only facility
repayable in 2016 (or earlier). The interest rate on this loan is 8% per annum. The facility was fully drawn down on the completion of
the acquisition.
On the 16 January 2014, the company completed the purchase of five Cash Converters franchised stores, four in Victoria and one in
New South Wales. The stores were acquired from an existing franchisee for total consideration of $4.0million, including net asset of
$1.8 million. The acquisition price represents an EBIT multiple of 4.0 times on an adjusted earnings and an EBIT multiple of 2.2 times
excluding acquired assets.
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.
12. Financial Instruments
The fair value of the Group’s financial assets and liabilities are determined on the following basis.
Financial assets and financial liabilities that are measured at fair value on a recurring basis
Subsequent to initial recognition, at fair value financial instruments are grouped into levels 1 to 3 based on the degree to which the
fair value is observable. Levels are defined as follows:



Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets of
liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included with level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable inputs).
At 31 December 2013 the Group has no material financial assets and liabilities that are measured on a recurring basis.
Financial assets and financial liabilities that are not measured at fair value on a recurring basis (but where fair value disclosures are
required)
At 31 December 2013 and 31 December 2012, the carrying amount of financial assets and financial liabilities for the Group is
considered to approximate their fair values.
| P a g e 21
Directors’ Declaration
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 2014
| P a g e 22
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Woodside Plaza
Level 14
240 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 (0) 9365 7001
www.deloitte.com.au
The Board of Directors
Cash Converters International
Level 18 Citibank House
Perth WA 6000
14 February 2014
Dear Directors
Cash Convertors International Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Cash Converters International Limited.
As lead audit partner for the review of the financial statements of Cash Converters International Limited
for the half year ended 31 December 2013, I declare that to the best of my knowledge and belief, there
have been no contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the review;
and
(ii) any applicable code of professional conduct in relation to the review.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Peter Rupp
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Woodside Plaza
Level 14
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
DX 206
Tel: +61 (0) 8 9365 7000
Fax: +61 (0) 8 9365 7001
www.deloitte.com.au
Independent Auditor’s Review Report
to the members of Cash Converters
International Limited
Report on the Half-Year Financial Report
We have reviewed the accompanying half-year financial report of Cash Converters
International Limited, which comprises the condensed statement of financial position as at 31
December 2013, and the condensed statement of profit or loss and other comprehensive
income, the condensed statement of cash flows and the condensed statement of changes in
equity for the half-year ended on that date, selected explanatory notes and the directors’
declaration of the consolidated entity, comprising the company and the entities it controlled at
the end of the half-year or from time to time during the half-year as set out on pages 7 to 22.
Directors’ Responsibility for the Half-Year Financial Report
The directors of the company are responsible for the preparation of the half-year financial
report that gives a true and fair view in accordance with Australian Accounting Standards and
the Corporations Act 2001 and for such internal control as the directors determine is
necessary to enable the preparation of the half-year financial report that is free from material
misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express a conclusion on the half-year financial report based on our
review. We conducted our review in accordance with Auditing Standard on Review
Engagements ASRE 2410 Review of a Financial Report Performed by the Independent
Auditor of the Entity, in order to state whether, on the basis of the procedures described, we
have become aware of any matter that makes us believe that the half-year financial report is
not in accordance with the Corporations Act 2001 including: giving a true and fair view of the
consolidated entity’s financial position as at 31 December 2013 and its performance for the
half-year ended on that date; and complying with Accounting Standard AASB 134 Interim
Financial Reporting and the Corporations Regulations 2001. As the auditor of Cash
Converters International Limited, ASRE 2410 requires that we comply with the ethical
requirements relevant to the audit of the annual financial report.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
A review of a half-year financial report consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in accordance
with Australian Auditing Standards and consequently does not enable us to obtain assurance
that we would become aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Auditor’s Independence Declaration
In conducting our review, we have complied with the independence requirements of the
Corporations Act 2001. We confirm that the independence declaration required by the
Corporations Act 2001, which has been given to the directors of Cash Converters
International Limited, would be in the same terms if given to the directors as at the time of
this auditor’s review report.
Conclusion
Based on our review, which is not an audit, we have not become aware of any matter that
makes us believe that the half-year financial report of Cash Converters International Limited
is not in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the consolidated entity’s financial position as at 31
December 2013 and of its performance for the half-year ended on that date; and
(b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the
Corporations Regulations 2001.
DELOITTE TOUCHE TOHMATSU
Peter Rupp
Partner
Chartered Accountants
Perth, 14 February 2014

Half - Cash Converters

Transcription

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