Investor Presentation Interim results 6 MONTHS ENDED 31 DECEMBER 2011

Transcription

1 Investor Presentation Interim results 6 MONTHS ENDED 31 DECEMBER 2011

2 Cash Converters Overview Retailer of second hand goods and provider of personal financial services operating through owned and franchised stores Services Sale of second hand goods through owned stores, franchises and webshop Cash advance loans Personal loans Pawn broking Buybacks Competitive advantages Modern retailing practices Highly skilled staff with standardised systems High ethical standards Appealtoawidecrosssectionofthecommunity Cash advance admin 7% Revenue by segment Personal loans -Safrock 32% Personal loans -Safrock 51% Franchise operations 10% Store Operations 51% EBIT by segment Franchise operations 10% Store Operations 15% Page 2 Cash advance admin 24%

3 Corporate Snapshot 5 Year Summary Financial Year Ended $m Revenue PBT Board of Directors Reginald Webb (Non Executive Chairman) Peter Cummins (Managing Director) John Yeudall (Non Executive Director) William Love (Non Executive Director) Joseph Beal (Non Executive Director) Page 3

4 History 1984 First retail outlet established 1988 Seven stores open, franchising begins with two stores 1990 Commence national expansion 1991FirststoreopenedintheUK 1994 First store opened in non-english speaking market(france) 1999Firstpaydayloan 2005OpenedfirstcompanystoreinBoltonUK 2006 Acquired MON-E and Safrock Group 2007 Acquired first franchised stores in UK& Australia 2008 Launched Cash Converters online shopping Webshop 2009LaunchedpersonalloansandcashadvancesinUK 2011 Launched online lending 2011TotalUKstorenumbersexceed200forthefirsttime Page 4

5 Regulatory Environment Australia Joint Parliamentary Committee on Corporations and Financial Services report on phase 2 reforms proposed by the government as set out in the Consumer Credit and Corporations Legislation(Enhancements) Bill 2011 The Committee concluded on 2 December 2011 that the proposed fee caps comprising a10%establishmentfeeanda2%monthlyfeeareunworkable. The Committee has recommended that the Government revisit key aspects of its reform package with further industry consultation which took place in Feb of 2012 Minister Shorten was quoted in the press recently We are now thinking of a cap of 20% for establishment fees and 4% monthly charge United Kingdom BIS sponsored study currently under way but not expected to result in material changes OFT earlier concluded that price controls would not be an appropriate solution Page 5

6 BUSINESS OVERVIEW

7 Store Locations UK corporate stores Global store network 657 stores Country Store Numbers Country Store Numbers Australia 146 UK 208 Belgium 20 Ireland 4 Holland 8 USA 7 Italy 1 New Zealand 13 France 78 South Africa 46 Spain 73 Thailand 1 Portugal 5 Singapore 6 Canada 34 Malaysia 7 Page 7 Potential store growth in NSW where CCV is under represented Currently 3 owned stores and 13 franchised stores MajorityofgrowthfromUK Currently 54 owned stores and 154 franchised stores High level of corporate owned stores in Australia and UK with a strong management team and systems in place to assist in growth and management of further corporate stores

8 Personal Finance Products Australian lending is mature with UK loan book growing rapidly Core products are unsecured loans: Cash advance Personal loans Current average loan period: 7 months Bad Debts historically at 6.2% of principal advanced for Australia and 11%intheUK New measures adopted in H1 to improve UK bad debt ratio Australia UK Active loans: $60.4k 15.7k Loan book $62.1m 8.5m Average loan $1, Fees on average loan: Establishment fee: $ Interest: $ Total fee: $ Page 8

9 UK Operations CashConvertersopeneditsfirstUKstorein1991 Experienced management team in place Substantial market size, population of +60 million and well accepted industry sector Totalof208stores 154 franchise stores 54 corporate owned stores Further opportunity for growth: Opening new stores Acquisitions Acquiring franchised stores Target400UKstoresintotal Openingc.16-20newstoresp.a. c.3-4yearstoreachmaturity Increasing sales of finance products Increasing online presence Page 9

10 FINANCIAL REVIEW

11 2012HY Financial highlights Strong revenue growth of 28.2% to $111.7 million Adjustednetprofit 1 aftertaxincreased7%to$15.3m(2010hy:$14.3m) Nine greenfield storesopenedinh1(7intheukand2inaustralia) TotalUKstorenumbersfinishedthehalf-yearat208,anincreaseof14 RevenueforcompanyownedstoresinboththeUKandAustraliagrewby25.7% Impressive personal loan book growth Australia: 31.2% growth to $62.1 million UK:269.5% growthto 8.5million 24.7% growth in EBIT from personal loans and cash advances to $20.7million Online lending launched in the UK in October with promising early results Interim dividend of 1.75 cents per share, fully franked, announced representing payout ratio of approximately 50% of NPAT Page 11 1 Reported statutory NPAT of $13.2m reflects the impact of stamp duty on acquisitions ($665k), independent IT review ($53k), store acquisition additional earn-out payment ($580k), additional legal and professional fees ($615k) and redundancy costs ($88k). These one off costs include costs incurred relating to the EZCORP Inc strategic alliance which was terminated during the half year period

12 Corporate & franchise store operations Page 12 54corporatestoresinUKand43inAustralia 508franchisedstoresgloballywith 154 inuk,103in Australiaand304inRoW Franchising enabled the rapid global expansion of the Cash Converters business Opportunity to acquire franchisees on low multiples Management team and systems in place to acquire further franchises and open further corporate stores Average acquisition price of 4.2 EBIT in 2011 (2010: 3.9xEBIT) Store numbers Australia UK PBT of $4.3m (2010: $5.6m) from corporate owned stores Australia $3.9m(2010: $4.4m) UK$0.4m(2010:$1.3m) Profit declined largely due to one-off costs and greenfield openings and their associated profit drag LFLstoregrowthinAustraliawas1.4%for retail sales and 11.6% pawn broking interest growth UK achieved 8.6% retail growth, however, pawn broking interest fell by 12.6% and buyback income by 6.9% PBT from franchised stores declined to $2.8m (2010: $3.4m) primarily due to acquisitions of franchisees

13 Personal loans Page 13 Safrock Personal, unsecured, instalment loans Averageloan:$1,200over7months Australia loan book at 31 December 2011: $62.1m UKloanbookat31December2011: 8.5m Australia debt write off of principal advances: 6.3% UKdebtwriteoffofprincipaladvances:11.0% Customers increased by 290% since 2005 Loan Book at year end $m $55m $50m $45m $40m $35m $30m $25m $20m $15m $10m $5m $0m Safrock loan book Customer loans 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Customers PBT from personal loans increased 21.6% to $12.9m(2010: $10.6m) UK Finance Division PBT increased to $1.44m(2010:-$270k) A record for the month of December of $13.2m (2010: $10.9m) advanced in Australia and 1.5m (2010: 0.7m) in UK $6.5m of loans advanced through online platform Online lending launched in the UK in October 2011 with 0.43m was lent.

14 Page 14 Cash advance administration MON-E Administration fees from cash advance/payday loans Australia - $111.7m of loans advanced to 58,262 customers UK m of loans advanced during the period to 17,589 customers Customers numbers in Australia increased 199% since 2005 Value of loans advanced over the financial year $m $250 $225 $200 $175 $150 $125 $100 $75 $50 $25 $ MON-E Loaned MON-E Customers 350, , , , , ,000 50,000 0 Customers Australia Cash Advance 14.7% growth in active customers to 58,261 Average loan $364 Baddebt3% UK Cash Advance 36.5% growth in active customers to 17,589 Average loan 104 Baddebt3%

15 GROWTH STRATEGY

16 Growth Strategy Openingofnewcompanyownedstores.Keytargetgeographiesintheshorttermare the UK and, within Australia, New South Wales Increasing the penetration of financial products Acquiring and improving the performance of available franchised stores New franchisee store openings Creating new financial products and distributing them across the network Growing Cash Converters online shopping revenue Page 16

17 Growing Lending Services Cash advance and personal loan products introduced in the UK October 2009 still immature with opportunity to grow the loan book significantly and reduce bad debt ratios towards levels we experience in Australia Increase product penetration and growth across corporate stores and franchises Increase product penetration in the UK personal loan book now 8.5million Online capability for personal loans and cash advances New product opportunities Extensive store network and client base provides strong distribution channel Page 17

18 Summary & outlook Page 18 Summary Well positioned to take advantage of significant growth opportunities in the UK and other geographies Substantial franchisee network provides opportunities to acquire established stores thus avoiding profit drag of greenfield sites Significant opportunity to keep growing the loan book through increased penetration, new products and new channels (e.g. online) All self-funded through profits from the mature Australian business Outlook We expect continued revenue and profit growth primarily through: growth of the loan book, particularly in the UK improve return margins from the UK loan book UK new store openings and acquisitions of franchises Questions still remain over the outcome of the Australian regulatory review but the proposed caps have been deemed unworkable and the Minister has been reported as saying he is thinking of doubling the cap.

19 APPENDICES

20 Results summary 31 December December 2010 Variance % Revenue 111,671,665 87,108, EBITDA 22,267,924 22,109, EBIT 20,303,354 20,976, Income tax expense 6,007,896 6,238, Finance costs 1,052, , Net profit before non-controlling interest 13,242,843 14,311, Basic earnings per share Divisional Operating Profit 31 December December 2010 Variance % Franchise operations 2,876,335 3,443, Store operations 4,287,200 5,644, Financial services - administration * 6,615,416 5,942, Financial services - personal loans 14,113,125 10,624, Total operating profit before head office costs 27,892,076 25,655, Less corporate head office costs (8,641,337) (5,106,563) Total Divisional Operating profit 19,250,739 20,549, Page 20 *Financial services administration represents the fees charged by Cash Converters Personal Finance - Administration for cash advance services

21 Balance sheet Consolidated Current assets 31 December 2011 $ 31 June 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, ,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, ,997,519 Total assets 245,846, ,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 Page 21 Net assets 175,975, ,560,445

22 Cash flows Consolidated Half-year ended Cash flows from operating activities 31 December 2011 $ 31 December2010 $ Net working capital movement 4,764,529 8,960,699 Interest received 472, ,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 (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) Net instalment credit loans made to franchisees 308,903 78,359 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) Net borrowings 15,679,102 (1,828,345) 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 23,456,996 50,716,388 Effects of exchange rate changes on the balance of cash held in foreign currencies (603,607) (452,931) Page 22 Cash and cash equivalents at the end of the period 19,543,250 23,404,641

23 Appendix Product Overview Safrock Mon-e Pawn Broking Geography Australia and the UK Australia and the UK Both Australia and UK Security Unsecured Secured Unsecured Secured Loan Size $1,000 to $2,000 (avg is $1,500) $2,000 to $5,000 $50-$1,000 (avg is $303) (avg is $90) Loan Duration Usually four to seven months usually have a term of between one to two years usually repaid within four weeks Varies from a minimum of 1 month to a maximum of 3 months. Goods may be redeemed by their owner at any time. Credit Check Yes No N/A Loancapital provider Cash Converters Franchisee Franchisee Page 23

24 Target Market Group 1 Group 2 Group 3 No wealth Low wealth Growing wealth Profile Household Net worth: $24,321 Gross household income: $255 p/wk Household Net worth: $140,133 Gross household income $543 p/wk Household Net worth: $295,814 Gross household income $917 p/wk Aged up to 34 (stretch up to 44) Aged Aged 35+ Few loans & debt Mostly receive wages & salaries Mostly receive wages & salaries Demographic Wages & Salary / Government supported Young singles / One-parent households with dependent 91% renting 22% in Govt housing / 65% with private landlord Some vehicle, mortgage and personal loans Most owner occupied mortgage / some private renting Couple with dependents / Young single Vehicle & Mortgage, CC debts Owner occupied and mortgage Couples or Couple with dependents Page 24 Business Category Pawn Broking Sellers Retail Brand PFC Retail / Webshop Value sellers Brand Retail PFC WebShop