Cash Converters continued to experience strong growth for its
financial services products during the financial year. The
Australian personal loan book has continued to grow and is
currently at $67.6 million. Bad debt levels continue to remain
stable at 5.6% of the principal loaned (5.9% of the principal
loaned in 2011). The UK personal loan book continues to grow at an
exceptional rate, as at 30 June 2012 it was GBP12.7 million. Bad
debt levels continue to remain at elevated levels of 11.3% of the
principal loaned (10.8% of the principal loaned in 2011). Cash
Converters is currently implementing a number of strategies to
reduce this level of bad debts. The UK personal loan book is only
two years old and the level of bad debts we are currently
experiencing is in line with the levels we initially experienced
when establishing
our Australian personal loan business. As our UK database
matures and our customer knowledge base increases, we expect the
level of bad debts to decrease steadily over the coming years. We
continue to invest in growing the UK personal loan business and,
despite the elevated level of bad debts currently being
experienced, our profitably continues to improve and the overall
return on investment is strong.
Cash Converters is currently examining securitisation
opportunities to provide capital to further increase the personal
loan business.
Online Strategy Highlights:
Cash Converters online presence allows us to stretch the Brand
and present the business to a new audience of potential customers
at a low delivery cost.
We have seen new customers visit stores and purchase products
after their first contact with the brand commenced with their
online search.
The Company receives a commission based on an agreed percentage
of sales for providing the 'Webshop' online service to its
franchisees. The Webshop provides a platform for the store network
to display inventory items in an online shop format. Online product
sales have grown 44.4% across the Australian and UK operations over
the past 12 months.
Some key online statistics:
UK Australia
----------------- ----------- -----------
Registered
users 134,236 42,486
----------------- ----------- -----------
Unique visitors 2,490,958 1,562,059
----------------- ----------- -----------
Total page
views 21,239,366 22,724,721
----------------- ----------- -----------
Retail Sales GBP832,120 $1,768,045
----------------- ----------- -----------
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 opportunities
Australia
Personal loans
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
the inconvenience of visiting a store.
The results so far show that a high percentage (76%) of these
customers are new to Cash Converters which demonstrates that this
is an exciting growth opportunity. In just two years, the online
loan product has grown to represent 11% of the overall personal
loan book.
Cash Advance
At this stage, online cash advance applications are being
forwarded to stores for completion. This requires the customer to
visit the store. The Company intends to launch a fully integrated
online product during the course of the new financial year.
UK
Personal loans
The Company launched the online personal loan system into the UK
market in October 2011 with similar results to those experienced in
Australia, in terms of new customers and the ramp up in loans being
completed.
Key metrics from online lending:
Australia 2012 2011 Variance
%
------------------------ ------------ ----------- ---------
Number of loans 8,066 4,327 86.4
------------------------ ------------ ----------- ---------
Number new customers 6,157 3,471 77.4
------------------------ ------------ ----------- ---------
% new customers 76% 80%
------------------------ ------------ ----------- ---------
Value of personal
loans written $14,202,789 $6,265,125 126.7
------------------------ ------------ ----------- ---------
Value of cash advances
written $783,468 $545,859 43.5
------------------------ ------------ ----------- ---------
Total value of loans
written $14,986,257 $6,810,984 120.0
------------------------ ------------ ----------- ---------
UK 2012
---------------------- -----------
Number of loans 1,305
---------------------- -----------
Number new customers 1,067
---------------------- -----------
% new customers 82%
---------------------- -----------
Value of personal GBP953,290
loans written
---------------------- -----------
Company owned store results
The corporate store network in the UK and Australia has seen
total revenue grow by 21.8% to $122.8 million producing a combined
EBIT of $5.6 million. On an adjusted basis after adding back one
off costs, the EBIT was $8.1 million; (2011 $8.6 million).
Add backs;
- Stamp duty on acquisitions $0.7 million;
- The net profit has been impacted by an additional charge of
$1.8 million resulting from the additional earn-out paid to acquire
seven stores in Queensland. Under accounting standards it is not
possible to capitalise this cost.
Other factors affecting the result;
- Negative profit impact ($1.6 million) associated with the
opening of the 13 "greenfield" sites in this year 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;
- Support staff redundancy costs ($88k) and hiring additional
business development managers ($100k);
- Additional amortisation charge to our UK business in relation
to re-acquired franchise rights (GBP40k) in relation to store
acquisitions.
On a same store sales basis, over the corresponding period last
year, the retail sales growth from our Australian corporate stores
was 4.5%, pawn broking interest growth 20.0%, and cash advance and
personal loans commission's growth of 14.5% and 30.5% respectively.
Our UK stores experienced retail sales growth of 4.1%, and cash
advance and personal loan commission's growth of 67.2% and 26.0%
respectively. However, pawn broking interest fell by 12.0% and
buyback income fell by 6.1%.
Carboodle
Cash Converters is associated with the Perth-based start-up
company, Carboodle.
Carboodle was established in 2010 with the first lease
contracted in October of that year. The concept is a car leasing
business set up to meet the needs of customers who don't have
access to main stream credit and need a reliable second hand
car.
A Carboodle car has the running costs packaged up so that the
customer can manage their personal budget without any untimely or
unexpected bills. The packaged running costs can include:
- Annual registration
- Insurance premium
- Extended manufacturer's warranty
- Servicing
- Tyres
- Roadside assistance
The running costs are bundled into one easy weekly payment over
a 48 month lease. For that weekly payment, the customer gets the
"whole kit and Carboodle".
Carboodle retains ownership of the car and at the end of the
lease term, the customer hands back the car and may initiate a new
lease on a new vehicle. Carboodle has been focussing on leasing a
range of popular models, including commercial vehicles for
tradesmen and small businesses.
Carboodle has an exclusive licence with Cash Converters that
allows it to use the 146 Cash Converter stores in Australia as its
agent to promote its product. Carboodle pays a royalty to the
Company and a commission to the stores.
Carboodle has distribution show room centres located in Perth,
Melbourne, Sydney and Brisbane with a centre due to open in
Adelaide later in the year. Initial sales and the rollout of
distribution show room centres have been progressing in line with
our expectations.
In addition to the business written through Cash Converter
stores, Carboodle deals directly with the public online and through
enquiries generated in mass media.
The Cash Converter store network and our knowledge of financial
services products in this market space have provided leverage to
the distribution of this product. This business represents a
significant growth opportunity and early indications are that it
will be a great success. We will continue to provide support and
advice to Carboodle's management when required.
Legislation Update
Consumer Credit Legislation Amendment (Enhancements) Bill
2012
As a result of various recommendations made by the Parliamentary
Joint Committee on Corporations and Financial Services and the
Senate Economics Legislation Committee, the Australian Government
implemented a number of changes to this Bill. On 27(th) June, 2012
the House of Representatives of the Federal Parliament passed the
Bill. The Bill was passed by the Senate on 20 August 2012 and is
awaiting Royal Assent.
The Bill contains a number of responsible lending obligations
which will take effect from 1(st) March, 2013. The main impact of
the legislation for Cash Converters relates to the definition of
small amount credit contracts and the limits on fees and charges
imposed with respect to such contracts. These provisions take
effect from 1(st) July, 2013.
In summary, the provisions impose the following regime which
effectively applies to all the micro lending engaged in by Cash
Converters:
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