TIDMCCVU
RNS Number : 1569S
Cash Converters International Ld
16 November 2011
At the Company's AGM today Peter Cumins, Managing Director, made
the following statement:
The directors are pleased to report a record profit of $27.6
million for the 2011 financial year, an increase of 27.5% over the
previous year and our sixth consecutive record performance.
Further highlights for the year were:
-- Revenue growth of 47.6% to $186.1 million. The major drivers
for revenue growth over the year included an increase in personal
loan interest of $12.2 million and establishment fees of $5.0
million, an increase in corporate store revenue of $38.3 million
and an increase in financial services commission of $4.8
million.
-- The franchised store acquisition strategy maintained momentum
with the acquisition of 21 franchised stores during the financial
year (six in the UK and 15 in Australia). In addition, 14
'greenfield' company owned stores were opened in the UK and one in
Australia, taking total corporate store numbers as at 30 June 2011
to 88 - 46 in the UK and 42 in Australia. Since the year end a
further 6 Greenfield corporate stores have opened in the UK taking
their store numbers to 52 and total numbers to 94.
-- The corporate store network in the UK and Australia has seen
revenues grow by 61.3% to $100.9 million producing a combined EBIT
of $8.6 million (up 24.7% on 2010), with only a part year
contribution from 21 staggered store acquisitions.
-- The personal loan book in Australia grew 36.1% to $52.7
million and the loan book in the UK grew 746% to GBP5 million. The
personal loans business generated an EBIT of $24.4 million (2010
$15.4 million) which is 58.6% up on the previous year.
-- The cash advance administration platform in Australia and the
UK, generated an EBIT of $12.3 million (2010 $9.1 million) which is
up 35.6% on the previous year.
-- The UK franchised business performed strongly and contributed
an EBIT of $2.1 million. Store numbers (company owned and
franchised) grew by a record 37 stores to 194 stores. Since the
year end store numbers have grown to 204.
-- The sub-master licence for Scotland was acquired on 2
December 2010. There are currently ten franchised stores in
Scotland contracted to pay weekly fees which total GBP188,000 per
annum. It is this income stream that the company has acquired from
the sub-master licence holder, plus the rights to develop the Cash
Converters store network in Scotland to its full potential, which
is anticipated to be approximately 60 stores in total.
Webshop
Cash Converters Webshop presence allows us to present the
business to a new audience of potential customers at a low delivery
cost.
We have seen new customers visit stores and purchase product
after their first contact with the brand commenced with their
online search. We are also beginning to see commercial quantities
of product sales, with over $2.1 million of sales during 2011.
Combined, the UK and Australian sites had over 2.3 million
unique visitors and 65 million page views.
These statistics show that we now have a significant number of
visitors to our UK and Australian Webshop sites. Our strategy will
be to maximise the commercial opportunities that these new
customers present.
Online lending is one of these opportunities
In Australia the Company launched a fully integrated online
personal loan system on 1 July 2010. This allows a customer to
complete an application, sign contracts and receive funds without
visiting a store. This enhances the successful lead generation
system launched the previous year.
As expected, this system lifted the conversion rate from
application to loan, from a low 17%, to 31% as customers will no
longer be required to visit a store and will therefore benefit from
the convenience of an end to end application.
Over $6.2 million of personal loans were written during the
year.
At this stage, cash advance applications are still being
forwarded to stores for completion.
Dividend
The directors declared a fully franked final dividend of 1.75
cents per share. The dividend was paid on 30 September 2011 to
those shareholders on the register at the close of business on 16
September 2011. That took the total dividend payment for the year
to 3.5 cents per share, fully franked. This represents a payout
ratio of approximately 48.1%.
Subsequent events
On 22 March 2010 the Company announced that it had entered into
a Transaction Implementation Agreement with its 33% unit holder
EZCORP. The Agreement proposed the acquisition by EZCORP of 30% of
the outstanding issued capital that it did not already own in Cash
Converters. Successful completion of the Scheme would also have
facilitated the implementation of two joint ventures between the
Company and EZCORP.
Unfortunately this transaction did not complete due to EZCORP
withdrawing from the transaction in response to the uncertainty
generated by the announcement by the Australian Federal Government
on 24th August, 2011 that it intends to amend the National Consumer
Credit Protection Act and seek to introduce strict caps on fees and
charges for micro-lenders.
Although the amendments have not yet been passed, the
limitations proposed could have a material impact on Cash
Converters' consumer loan business in Australia. Accordingly,
EZCORP was not willing to proceed with the transaction.
EZCORP indicated that as the major shareholder in Cash
Converters, it remained committed to its investment and to the
strategic importance of the global brand that Cash Converters is
building.
This was reinforced when EZCORP acquired from Cash Converters
United LC ("CC United") its rights as sub-franchisor to the Cash
Converters brand and name in several states in the USA.
Since 2001, CC United has held a licence to the territories of
Virginia, North Florida and Eastern Pennsylvania and the first
right of refusal over a number of other States. Under its licence,
it had the exclusive right to develop Cash Converters stores within
its territory and was contracted to pay a royalty of 20% of its
gross receipts from its franchisees to Cash Converters.
Under its licence CC United had opened and operated seven
corporate stores. EZCORP's subsidiary has taken an assignment of
all of the rights of CC United and has also acquired all seven Cash
Converters stores. EZCORP intends to roll out new Cash Converter
stores in these territories and will be responsible to pay all
royalties to Cash Converters under the licence.
.
Additionally, in April 2011, EZCORP acquired the trademark and
licensing rights of Cash Converters in Canada, including the
franchisor rights with respect to 13 Cash Converters franchised
stores in Canada. Since then, EZCORP has opened one company-owned
store under the Cash Converters brand and has converted 14 of its
existing CASHMAX stores to the Cash Converters format and brand.
EZCORP pays franchisee royalties to Cash Converters on all stores
operating under our brand.
EZCORP intends to convert the remainder of its 58 CASHMAX stores
to the Cash Converters brand over the next year. As a result of
these transactions, there are no sub-franchisors or trade mark
licensees within the USA and Canada other than wholly owned
subsidiaries of EZCORP. Cash Converters International Limited
played no role in these acquisitions by EZCORP other than providing
a formal consent to the assignment of the licences.
The Company is delighted that the commitment by our major
shareholder to the Cash Converters brand has taken such a tangible
form. We see this as a very promising start by EZCORP along the
path of developing our brand in the USA and Canada to the mutual
benefit of both companies.
Eric Fosse, EZCORP's President of North American Operations,
stated: "This is a strategically important acquisition for several
reasons. First, it gives us an immediate footprint in a new
geographic area of operations. This area nicely complements our
existing operations in Florida, Georgia and Tennessee, allowing us
to leverage our existing management infrastructure. Second, it
kicks off our utilization of the Cash Converters brand and the
buy/sell format in the United States, a strategy we have been
pursuing in Canada for several months now with positive results.
And third, it provides us with access to additional
opportunities to expand our presence, under the Cash Converters
brand, across the US."
Outlook
As mentioned previously, the Australian Federal Government
announced on 24th August 2011, that it intended to amend the
National Consumer Credit Protection Act and seek to introduce
strict caps on fees and charges for micro-lenders that could, if
passed without amendment, have a material impact on the Company's
loan business in Australia.
The Company was pleased to report that, following a series of
representations from both the Company and over 30,000 of our
customers, the Australian Parliament, on 22 September 2011,
referred the Bill to both the Senate Economics Committee and to the
Joint Committee on Corporations and Financial Services for
review.
A public hearing was held in Canberra on the 24 October by the
Joint Committee and the Company's Managing Director and Australian
General Manager were invited to address the committee and to answer
questions put by Committee Members.
It is expected that the Committee will report back to Parliament
by 24 November.
An exciting development has been the successful launch of the
personal loan and cash advance products in the UK. The UK personal
loan book grew by 746% to GBP5.0 million at 30 June and there were
100,988 cash advances made during the period, totalling GBP10.5
million.
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. Since the year end a further 39 stores
have joined the system, taking the number of stores offering
these products to 145 with a roll out programme for the remaining
60 stores to continue over the next 12 months.
In closing we wish to thank the staff, management and
franchisees for their contributions to the strong financial result
this year.
Enquiries
Charles Stanley Securities
Dugald Carlean / Karri Vuori
+44 20 7149 6000
This information is provided by RNS
The company news service from the London Stock Exchange
END
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