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Leslie'sa n n u a l r e p o r t
2014
w w w . c a s h c o n v e r t e r s . c o m . a u
a B n 3 9 0 6 9 1 4 1 5 4 6
cash converters international limited / / c a s h c o n v e r t e r s i n t e r n a t i o n a l
c o r p o r a t e
d i r e c t o r y
d i r e c t o r s
Reginald Webb
Chairman
Peter Cumins
Managing Director
Lachlan Given
Non-Executive Director
c o m p a n y s e c r e t a r y
Ralph Groom
r e g i s t e r e d o f f i c e
Level 18, Citibank House
37 St George’s Terrace
Perth
Western Australia 6000
w e b s i t e
www.cashconverters.com
s h a r e r e g i s t r a r s
b a n k e r s
Investor Services
In Australia:
Computershare
Pty Ltd
Level 2, Reserve Bank Building
45 St George’s Terrace
Perth
Western Australia 6000
In United Kingdom:
HSBC
8 Canada Square
London
United Kingdom E14 5HQ
s t o c k e x c h a n g e
Australian Securities Exchange
Exchange Plaza
2 The Esplanade
Perth
Western Australia 6000
l e a d m a n a g e r &
i n t i t i a l s u b s c r i b e r
f o r n o t e i s s u e
FIIG Securities
Level 8, Emirates House
167 Eagle Street
Brisbane
Queensland 4000
t r u s t e e f o r n o t e s
i s s u e
Perpetual Corporate Trust Limited
Level 12, Angel Place
123 Pitt Street
Sydney
New South Wales 2000
Investor Services
In United Kingdom:
Computershare
PLC
PO Box 82
The Pavilions
Bridgewater Road
Bristol BS 99 7NH
a u d i t o r s
Deloitte Touche Tohmatsu
Level 14, Woodside Plaza
240 St George’s Terrace
Perth
Western Australia 6000
s o l i c i t o r s
Cooke & Co
50 Eora Creek Terrace
Dianella
Perth
Western Australia 6059
b a n k e r s
In Australia:
Westpac Business Bank
109 St George’s Terrace
Perth
Western Australia 6000
a n n u a l r e p o r t 2 0 1 4 / /
c o n t e n t s
2
4
10
11
12
12
13
15
16
24
28
29
30
31
32
84
99
review of the year
chairman & managing director’s report
corporate structure
history
corporate objectives
core business
directors’ profiles
financial report contents
operating and financial review
corporate governance
consolidated statement of profit or loss and other comprehensive income
consolidated statement of financial position
consolidated statement of changes in equity
consolidated statement of cash flows
notes to the consolidated financial statements
directors’ report
directors’ declaration
100
101
auditor’s independence declaration
independent audit report to the members
103
shareholder information
1.
•
•
•
•
•
•
•
•
•
•
•
•
Strong revenue growth up 21.6% to $331.7 million
Online loans strong growth continues in Australia with $55.8 million of
loans written (2013:$28.4 million)
Store operations - earnings before interest, tax, depreciation and
amortisation up 71.6% to $15,615,352 (2013: $9,100,109)
Installment personal loan book in Australia rises by 19.3% to $109.2
million (2013: $91.5 million)
New micro-credit rate cap came into effect in Australia from 1 July 2013
Rate cap impacted loan volumes in first half, particularly cash advance,
however, upward trend in volumes has started in the second half
Normalised earnings before interest, tax, depreciation and amortization
(EBITDA) slightly down by 1.9% to $56,894,363 (2013:$58,042,085)
following new micro credit legislation in Australia
Financial services - administration, earnings before interest, tax,
depreciation and amortisation down 26.7% to $10,410,310 (2013:
$14,196,639)
Financial services – personal loans, earnings before interest, tax,
depreciation and amortisation tax down 6.2% to $39,835,270 (2013:
$42,460,724)
Franchise operations - earnings before interest, tax, depreciation and
amortisation, slightly higher by 3.9% at $6,633,516 (2013: $6,387,128)
Fully franked dividend for the year of 4.0 cents
Corporate store network in the Australia expands to 64 stores with 58
stores in the UK
r e v i e w o f
t h e y e a r
2.
//cash converters international
g r o u p e b i t d a
f i n a n c i a l s e r v i c e s e b i t d a
60!
50!
40!
30!
20!
10!
0!
50.2!
56.7!
47.6!
36.7!
24.5!
2014!
2013!
2012!
2011!
2010!
2009!
2008!
2007!
2006!
17.3!
17.3!
13.0!
5.0!
2005!
3.2!
w e e k l y f r a n c h i s e f e e s
l o a n b o o k a u s t r a l i a
9
8
7
6
5
4
3
2
1
109.2!
91.5!
2014!
2013!
2012!
2011!
2010!
2009!
2008!
67.6!
52.8!
38.8!
21.5!
13.8!
2007!
12.8!
2006!
8.9!
0
20
40
60
80
100
120
(Millions)!
s t o r e o p e r a t i o n s e b i t d a
c a s h a d v a n c e p r i n c i p a l a d v a n c e d
- a u s t r a l i a
15.6!
300!
250!
200!
150!
100!
50!
0!
9.1!
8.6!
8.6!
6.9!
5.4!
2014!
2013!
2012!
2011!
2010!
2009!
2008!
2007!
2006!
0.7!
2005!
0.2!
1.9!
1.6!
0!
2!
4!
6!
8!
10!
12!
14!
16!
(Millions)!
18!
p e r s o n a l l o a n p r i n c i p a l a d v a n c e d
- a u s t r a l i a
180!
160!
140!
120!
100!
80!
60!
40!
20!
0!
All graphs are in $ millions
3.
//annual report 2014
c h a i r m a n a n d m a n a g i n g
d i r e c t o r ’ s r e p o r t
The 2014 financial year was marked by contrasting halves where we experienced a
strongly improved second half following the transitory period that impacted the first half
due to the implementation of the new micro credit regulatory requirements in Australia.
Cash Converters International Limited (“Cash Converters”) reported revenue growth of
13% in the second half of FY14 compared to the first half and net profit after tax growth
of 45% in the second half.
/ / s t r o n g s e c o n d h a l f p e r f o r m a n c e
As previously disclosed, the first half result of FY14 was
impacted by the effect of the transition to new micro credit
regulatory requirements in Australia. Whilst the normalised
annual EBITDA result for FY14 is marginally down on the
previous year, it is pleasing that there has been an upward
trend in the second half. The EBITDA second half result
was up 37.5% on the first half and indications are that
growth will continue into the 2015 financial year.
The following table provides a breakdown between the first half and second half for the 2014 financial year.
s e c o n d h a l f
30 j u n e 20 14
f i r s t h a l f
31 d e c 20 13
v a r i a n c e
Revenue
EBITDA
EBIT
Net profit after tax
$
$
175,908,565
155,760,342
29,870,275
25,747,739
14,311,922
21,731,131
17,929,956
9,880,413
Basic earnings per share
3.35
2.32
d i v i s i o n a l e b i t d a
Franchise operations
Store operations
Financial services – administration
Financial services – personal loans
Green Light Auto (after minority)
Total
Corporate head office costs
Total EBITDA after head office costs
3,454,130
8,745,306
5,489,982
21,547,173
(685,768)
38,550,823
(8,680,548)
29,870,275
3,179,386
6,870,046
4,920,328
18,288,097
(292,880)
32,964,977
(11,233,846)
21,731,131
%
+12.9
+37.5
+43.6
+44.9
+44.4
+8.6
+27.3
+11.6
+17.8
+134.1
+16.9
-22.7
+37.5
4.
//cash converters international / / f u l l y e a r r e s u l t s s u m m a r y
Cash Converters revenue grew by 21.6% to $331.7 million in FY 14 (FY13:$272.7 million) and the normalised
EBITDA was $56.9 million, a decrease of 1.9% over the previous year.
30 j u n e 20 14
30 j u n e 20 13
v a r i a n c e
f i n a n c i a l r e s u l t s s u m m a r y
$
$
Revenue
EBITDA
Depreciation and amortisation
EBIT
Income tax
Finance costs
Net profit after tax
331,668,907
272,722,719
51,601,406
(7,923,711)
43,677,695
57,035,934
(6,455,993)
50,579,941
(10,908,176)
(14,794,235)
(8,577,184)
24,192,335
(2,915,734)
32,869,972
%
+21.6
-9.5
+22.7
-13.6
-26.3
+194.2
-26.4
Basic earnings per share
5.67
8.09
-29.9
d i v i s i o n a l e b i t d a
Franchise operations
Store operations
Financial services – administration
Financial services – personal loans
Green Light Auto (after minority)
Total
6,633,516
15,615,352
10,410,310
39,835,270
(978,648)
71,515,800
6,387,128
9,100,109
14,196,639
42,460,724
-
72,144,600
Corporate head office costs
(19,914,394)
(15,108,666)
Total EBITDA after head office costs
51,601,406
57,035,934
n o r m a l i s e d e b i t d a
EBITDA
Ausgroup provision
Stamp duty on store acquisition
Green Light Auto (after minority)
GST adjustment
EBITDA normalised
51,601,406
1,358,333
1,820,093
978,648
1,135,883
57,035,934
1,000,000
6,151
-
-
56,894,363
58,042,085
-1.9
+3.9
+71.6
-26.7
-6.2
-
-0.9
-31.8
-9.5
-9.5
+35.8
-
-
-
The above table provides a normalised EBITDA with adjustments to the respective periods to better reflect the
underlying performance of the Cash Converters business.
5.
//annual report 2014 / / c a s h c o n v e r t e r s i n t e r n a t i o n a l
h i g h l i g h t s
•
•
•
•
•
•
•
Revenue growth of 21.6% to $331.7 million. The major drivers for revenue growth over the year
included an increase in personal loan interest of $29.6 million and establishment fees of $7.5 million,
and an increase in corporate store revenue of $35.9 million;
The Australian personal loan book has grown by 19.3% from $91.5 million at 30 June 2013 to $109.2
million as at 30 June 2014;
The growth of the online personal loan business in Australia continues to be very strong with the value
of loans written increasing 81% to $48.7 million (2013: $26.9 million);
The value of online cash advance in Australia has also been strong with the value of loans written
increasing by 373.3% to $7.1 million. (2013: $1.5 million);
The Australian cash advance business suffered a drop in the volume of loans advanced in the first half
of the year compared to the corresponding period and 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 28.3%, to $9.6 million. (2013:
$13.4 million);
The trend, however, is upward for the Australian cash advance product with a second half EBITDA
result of $5.1 million, up 13.3% on the first half result of $4.5 million;
The corporate store network in the UK and Australia has seen revenue grow by 26.3% to $171.9 million
over the previous corresponding period. The corporate store network EBITDA was $15.6 million,
representing an increase of 71.6% on the corresponding period. (2013: $9.1 million).
/ / d i v i d e n d
The directors have declared a fully franked final dividend of two cents per share. The dividend will be paid
on 30 September 2014 to those shareholders on the register at the close of business on 16 September
2014, with the final election date for the dividend reinvestment plan being 17 September 2014. This will
take the total dividend payment for the year to four cents per share, fully franked. This represents a pay-
out ratio of approximately 70.5% of net profit after tax.
/ / f i n a n c i a l s e r v i c e s o p e r a t i o n s
a u s t r a l i a
The Australian personal loan book has grown by 19.3%
from $91.5 million at 30 June 2013 to $109.2 million at 30
June 2014. Part of this growth has been generated by our
online lending platform, with 43,728 loans made totalling
$48.7 million, up 81% on the previous period. Online
personal loans represent 30.1% of the total principal lent
during the period.
The Australian personal loan book produced an EBITDA
of $38.7 million (2013: $40.7 million) down 4.9% on the
previous period. During the period this division also
incurred an additional GST charge of $1.1 million relating
to third party financial support services where the GST
input credit was denied on the services provided under the
current GST legislation.
The bad debt percentage of net principal written off to
principal advanced for the Australian business increased
to 6.6% (2013: 5.3%). This marginal increase has resulted
from the new lending legislation and Cash Converters is
looking more closely at loan applications and improving
company collection procedures to ensure the bad debt
percentage improves over the next reporting period.
6.
6.
//cash converters international
/ / f i n a n c i a l s e r v i c e s o p e r a t i o n s
a u s t r a l i a
p r i n c i p a l a d v a n c e d - p e r s o n a l l o a n p r o d u c t
s
n
o
i
l
l
i
M
$
A
20
18
16
14
12
10
8
6
4
2
0
LAST YEAR
THIS YEAR
The Australian cash advance business suffered a decrease
in the volume of loans advanced in the first half of the
year compared to the corresponding period. 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 28.3%, to $9.6
million. (2013: $13.4 million).
The trend, however, is upward with the second half EBITDA
of $5.1 million, up 13.3% on the first half result of $4.5
million.
p r i n c i p a l a d v a n c e d - c a s h a d v a n c e p r o d u c t
s
n
o
i
l
l
i
M
$
A
25.0
20.0
15.0
10.0
5.0
0.0
c a s h a d v a n c e
p e r s o n a l l o a n s
LAST YEAR
THIS YEAR
Total principal loaned increased by 1.3% to $238.8
million
Total number of loans approved increased by 15.4% to
155,820
Average loan amount increased from $341 to $413
Total customer numbers increased by 15.2% to 535,738
Total number of active customers increased by 53.7%
to 124,853
Loan book increased by 19.3% to $109.2 million
7.
//annual report 2014
/ / f i n a n c i a l s e r v i c e s o p e r a t i o n s
u n i t e d k i n g d o m
The UK personal loan book decreased by 22.7% from
£20.3 million at 30 June 2013 to £15.7 million at 30 June
2014. The main driver of this decrease is due to the static
loan outgoings during the period and the planned running
down of the loan book as the Company awaits the outcome
of the rate cap review in the UK. The Financial Conduct
Authority (FCA) has issued a discussion paper which calls
for industry participants to respond by 1 September 2014.
The online lending platform performed well, with 4,531
loans made totalling £3.1 million (2013:£2.8 million), up
10.7% on the previous period.
The UK personal loan book produced an EBITDA of £654K
(2013:£1.1 million), down 41.6%. The provision for doubtful
debt decreased to £3.5 million (2013:£10.2 million) as
the loan book was run down. The bad debt percentage
of net principal written off to principal advanced for the
UK business increased from 12.1% to 16.6% during the
period.
/ / w e b s h o p
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 by
82.5% in the UK operations and by 8.8% in the Australian
operations in the past 12 months.
The UK cash advance business has struggled to grow in
the period, generating an EBITDA of £430K (2013:£491K)
down 12.4% on the previous period.
Some key online statistics:
c a s h a d v a n c e
•
•
•
Total principal loaned decreased 8.9% to £34.8
million
Average loan amount increased from £134 to
£136
Total customer numbers increased by 31.6% to
154,987
p e r s o n a l l o a n s
•
•
•
Total number of loans approved increased by
4.6% to 27,288
Total number of active customers decreased by
23.1% to 18,345
Loan book increased by 22.7% to £15.7 million
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 the UK to be a significant contributor to the
Company’s earnings in the future. We are now responding
to the discussion paper released by the FCA in which they
propose a rate cap, set at 0.8% interest accruing on the
outstanding daily balance. Our early modelling suggests
that with a revamped product offering there is still potential
in the UK to sustain our financial service offering albeit on
a reduced margin.
Registered Users
Unique Visitors
Total Page Views
Retail Sales
u k
a u s t r a l i a
199,506
3,281,575
35,935,625
£2,338,194
70,344
3,248,979
29,479,434
$3,852,100
/ / c o r p o r a t e s t o r e s
a u s t r a l i a
The corporate store network in Australia produced an
EBITDA of $16.4 million (2013: $8.8 million) up 86.4% on
the previous period.
The strong EBITDA performance has resulted from the
acquisition of eight stores in South Australia in May 2013
and one store in Western Australia acquired in February
2013, delivering a full year result in the FY 2014. The
performance has also been helped by the acquisition of one
store in Western Australia in November 2013, five stores
in Victoria and New South Wales in January 2014 and to
a lesser extent the three stores acquired in Queensland
during June 2014.
With nine ex-franchised stores acquired during the period,
the total number of corporate store numbers in Australia as
at 30 June 2014 is 64.
8.
//cash converters international
/ / c o r p o r a t e s t o r e s
u n i t e d k i n g d o m
The UK corporate store network has struggled in tough
trading conditions. The EBITDA for the period was a loss
of £413K, down from the previous corresponding period
profit of £188K.
During the period five stores were closed due to poor
trading conditions which incurred closure and redundancy
costs. There are now 58 corporate stores trading in the
UK.
/ / g r e e n l i g h t a u t o
( t r a d i n g a s c a r b o o d l e )
/ / o u t l o o k
The Carboodle brand was established by Green Light Auto
Group Pty Ltd in 2010 (“GLA”). 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) for a
weekly payment.
GLA has been successful in securing $40 million of
funding to cover 80% of the purchase price of vehicles
with Fortress, a USA based lender.
Cash Converters acquired an 80% equity interest in GLA in
September 2013. GLA produced an EBITDA loss of $979K
after non-controlling interests for the period.
t r a d i n g h i g h l i g h t s
•
•
•
Active leases increased by 52.8% to 807 over
the twelve months to 30 June 2014 (FY2013:
528)
Forward contracted lease payments increased
to $25.6 million at 30 June 2014 (FY2013:
$21.2 million)
Total revenue for the twelve months to 30 June
2014 of $8.7 million (FY2013: $5.5 million)
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.
We are encouraged by the strong second half experienced
across the Australian business with the second half
EBITDA for the cash advance products of $5.1 million, up
13.3% on the first half result of $4.5 million and a second
half EBITDA result of $21.3 million, up 22.4% on the first
half of $17.4 million for the personal loan products. The
Australian personal loan book continued to grow and
finished FY14 at $109.2 million.
The Australian corporate stores performed very well in the
second half with an EBITDA contribution of $10.2 million,
up 64.5% on the first half result of $6.2 million. With the
recent acquisition, in late June, of three franchised stores
in Queensland, we expected to see further profit growth
next year.
Following the transition to the new micro credit regulatory
regime in Australia we are confident that we will see the
improvement we experienced in the second half continue
into the 2015 financial year.
In closing, we wish to thank the staff, management and
franchisees for their contribution during this difficult
transitionary period.
Reginald Webb
Chairman
Peter Cumins
Managing Director
21 August 2014
9.
//annual report 2014
c o r p o r a t e
s t r u c t u r e
10.
//cash converters international cash converters international limited (ccil)parent entityincorporated in australiapublic companymon-e pty ltd100% owned by ccilincorporated in australiasmall proprietary companycash converters personal finance pty ltdlarge proprietary companysafrock finance corporation qld pty ltdsafrock finance corporation wa pty ltdfinance administrators of australia pty ltdall small proprietary companiesall 100% owned by ccilall incorporated in australiacash converters (stores) pty ttd100% owned by ccilincorporated in australialarge proprietary companycash converters (cash advance) pty ltd (ccca)100% owned by ccilincorporated in australialarge proprietary companycash converters uk holdings plc (ccukh)100% owned by ccilincorporated in the ukoverseas entitycash converters pty ltd (ccpl)100% owned by ccilincorporated in australialarge proprietary companycash converters usa limited (ccusa)99.29% owned by ccilincorporated in australiasmall proprietary companycash converters usa inc100% owned by ccusaincorporated in the usaoverseas entitycash converters (uk) limited100% owned by ccukhincorporated in the ukoverseas entitycash converters financecorporation limited (ccfcl)57.31% owned by ccplincorporated in australiadisclosing entitybak properties pty ltd100% owned by ccca incorporated in australiasmall proprietary companygreen light auto group pty limited 80% owned by ccilincorporated in australiasmall proprietary companycash converters (nz) pty ltd100% owned by ccilincorporated in australiasmall proprietary company c a s h c o n v e r t e r s i n t e r n a t i o n a l l i m i t e d
h i s t o r y / /
The history of Cash Converters dates back to November
1984, when Brian Cumins, the Company’s founder, began
operating his first retail outlet in Perth, Western Australia.
During the next four years the merchandising formula and
trading style that has underwritten the Group’s success
were developed and tested in the market place. A total of
seven stores were open and trading profitably before the
franchising of Cash Converters began with the opening of
two franchised outlets in Perth in June 1988.
In 1990 the Group began to expand into other Australian
States and now has over 150 outlets throughout Australia.
The success of its Australian operations resulted in Cash
Converters seeking to expand into overseas markets.
The Company’s carefully planned entry
into Europe
was launched in 1991 when the first store in the United
Kingdom was opened at Gants Hill in Essex. Since then
further stores have opened in the UK taking the total to
over 220 stores.
first non-English speaking market,
The Company’s
commenced with the opening of its pilot store in Vitrolles,
near Marseilles in France in December 1994.
In 2005 the first corporate stores were opened in the
UK which have since grown to 58 stores – Australia
commenced corporate stores in 2007 and now have 64
stores.
The successful acquisitions of the Safrock personal loan
business and the MON-E cash advance business were
finalised in 2006.
EZCORP Inc acquired 30% of the Company share capital
through a share placement in 2009 which raised $54
million. Further share issues have taken their holding to
31.88%.
The following year saw the launch of the cash advance and
personal loan financial services in the UK.
Green Light Auto Group and the ‘Carboodle’ concept was
launched in 2011.
This year a strategic investment was made in Cash
Converters New Zealand to acquire 25% of the company
share capital. A joint venture was also formed with EZCORP
Inc, for the territories of Mexico and South America.
In 1998 the 500th store was opened in New South Wales,
Australia. A year later the cash advance financial service
concept was launched in Australia, which was followed by
personal loans in 2003.
Since launching the concept in 1984, Cash Converters has
grown enormously with representation in 18 countries and
over 750 stores worldwide.
11.
//annual report 2014 / / c a s h c o n v e r t e r s i n t e r n a t i o n a l
/ / c a s h c o n v e r t e r s i n t e r n a t i o n a l
c o r p o r a t e o b j e c t i v e s / /
The Directors see the following as the principal corporate objectives of the group:
>
>
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To achieve high profitability, enabling Cash Converters to meet its responsibilities to shareholders and
other stakeholders;
To offer opportunities for franchisees and employees to succeed both financially and in their careers;
To be recognised as a world leader in the retail of second hand goods and the provision of micro-
lending products ; and
To provide consumers with retail outlets that are distinguished by the quality of retail standards and
value of the merchandise on offer.
c o r e b u s i n e s s / /
The core business of Cash Converters is the ownership and
franchising of retail and financial services stores, which
operate as retailers of second hand goods and suppliers
of financial products. The Cash Converters business
has changed consumer perceptions of its industry by
the systematic application of modern retailing practices,
professional management techniques and high ethical
standards to the management of its stores. As a result,
Cash Converters has been able to position its corporate
and franchised outlets as alternative retail merchandise
and financial services stores and, in the process, created
a profitable market for the group.
Over 29 years, the Company has developed and refined
its franchise offering to the point where it has mature
and stable multi-store franchise chains in both Australia
and the United Kingdom. The Company also acts as the
international master franchisor of the franchising concept.
The Company grants trade mark licences to enable
independent entities to develop a matching franchise chain
in another country in return for a passive royalty income.
This minimises risk to the Company while allowing the
brand to flourish overseas.
12.
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d i r e c t o r s ’
p r o f i l e s
/ / r e g i n a l d w e b b
- n o n - e x e c u t i v e c h a i r m a n
Mr Webb was appointed Chairman in January 2005. Mr
Webb has been a non-executive director for many years
and has made a very significant contribution in helping
to guide the company towards the stable and successful
state that it now enjoys.
PricewaterhouseCoopers (previously Price Waterhouse).
In that position he worked in both North America and
Europe as well as Australia. He was a partner for 20 years
and served on the Policy Board of that firm. He is also a
Director of D’Orsogna Limited.
He is a Fellow of the Institute of Chartered Accountants
of Australia and was for many years a Partner of
p e t e r c u m i n s / /
- m a n a g i n g d i r e c t o r
Mr Cumins is an Australian national. He is the Managing
Director of Cash Converters
International Limited.
He joined the group in August 1990 as Finance and
Administration Manager when the Company had just 23
stores, becoming General Manager in March 1992. He
became Group Managing Director in April 1995.
Mr Cumins is a qualified accountant, and has overseen
the major growth in the number of franchisees in Australia
franchise system. His experience
as well as the international development of the Cash
Converters
the
management of large organisations has included senior
executive positions in the government health sector,
specifically with the Fremantle Hospital Group, where he
was Finance and Human Resources Manager
in
/ / l a c h l a n g i v e n
- n o n - e x e c u t i v e d i r e c t o r
Mr Given joined the board on 22 August 2014. He is
the executive vice chairman of EZCORP Inc (a major
shareholder in the Company) and also a director of The
Farm Journal Corporation, a 134 year old pre-eminent
US agricultural media company; Senetas Corporation
Limited (ASX: SEN), the world’s leading developer and
manufacturer of certified, defence‐grade encryption
leading Australian
solutions; CANSTAR Pty Ltd, the
financial services ratings and research firm; and RateCity.
com Pty Ltd, one of Australia’s largest Internet based
financial services comparison organisations.
Mr Given began his career working in the investment
banking and equity capital markets divisions of Merrill
Lynch in Hong Kong and Sydney where he specialised in
the origination and execution of a variety of M&A, equity
and equity-linked and fixed income transactions.
Mr Given graduated from the Queensland University
of Technology with a Bachelor of Business majoring in
Banking and Finance (with distinction).
13.
//annual report 2014
d i r e c t o r s ’
p r o f i l e s
/ / j o h n y e u d a l l ( c . e n g . , m . i . s t r u c t . e . )
- n o n - e x e c u t i v e d i r e c t o r
>
Mr Yeudall is a Chartered Engineer and member of the
Australian Institute of Company Directors. He was founder
of the IKEA franchise in Western Australia. Mr Yeudall was
previously Australia’s senior Trade Commissioner in the
Middle East and Consul General for Dubai. He joined the
board in 2002.
Mr Yeudall retired on 20 November 2013
w i l l i a m l o v e / /
- n o n - e x e c u t i v e d i r e c t o r
>
Mr Love has served as an independent director of EZCORP
since October 2008 and has served as chairman of the
Audit Committee of the EZCORP board of directors since
November 2009. He joined the board of Cash Converters
International Limited in 2009.
William C Love accounting firm. From 1972 to 1993,
Mr Love worked with the accounting firm of KPMG Peat
Marwick and its predecessors, including appointments as
Partner in Charge of Audit, Partner in Charge of Tax and
Managing Partner of its Austin, Texas office.
Mr Love is a licensed Certified Public Accountant and a
Certified Valuation Analyst, and since January 1993 has
practised public accounting in the Austin, Texas based
Mr Love retired as a director on 21 August 2014
/ / j o s e p h b e a l
- n o n - e x e c u t i v e d i r e c t o r
>
Mr Beal has served as an independent director of EZCORP
since August 2009 and serves on the Compensation
Committee.
the Cash Converters
joined
International Limited board in 2009.
Mr Beal
Until his retirement in January 2008, Mr Beal was the
General Manager and Chief Executive Officer of the Lower
Colorado River Authority (LCRA), a Texas conservation
and reclamation district with over $1 billion in annual
revenues, over $3 billion in assets and more than 2,200
employees. Mr Beal joined LCRA in 1995 to lead its Water
Services division, and was appointed by the LCRA board
in January 2000 to become its eighth General Manager
and Chief Executive Officer. Before joining LCRA, Mr Beal
was Senior Vice President and Chief Operating Officer at
Espey Huston & Associates, an international engineering
and environmental consulting firm based in Austin.
Mr Beal retired as a director on 21 August 2014
14.
//cash converters international
f i n a n c i a l r e p o r t c o n t e n t s
16
operating and financial review
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103
corporate governance
consolidated statement of profit and loss and other comprehensive income
consolidated statement of financial position
consolidated statement of changes in equity
consolidated statement of cash flows
notes to the consolidated financial statements:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
significant accounting policies
critical accounting judgements and key sources of estimation uncertainty
revenue and expenses
income tax
remuneration of auditors
cash and cash equivalents
trade and other receivables
inventories
other assets
plant and equipment
trade and other payables
borrowings
provisions
other intangible assets
goodwill
issued capital
reserves and retained earnings
financial instruments
leases
key management personnel remuneration
share-based payments
related party transactions
subsidiaries
non-controlling interests
contingent liabilities
events ater the reporting period
earnings per share
dividends
segmental information
parent entity disclosures
investment in associates
other financial assets
business combinations
company details
directors’ report
directors’ declaration
auditor’s independence declaration
independent auditor’s report to the members
shareholder information
15.
//annual report 2014
o p e r a t i n g a n d f i n a n c i a l r e v i e w
Although the year has been difficult with an interest rate cap commencing in Australia on 1 July 2013, which
impacted both margins and volumes, the Company has achieved earnings before tax, depreciation and amortisation
(EBITDA) of $48,541,360 (before minority interests), down 14.9% on the prior year. After adjusting for minority
interests the EBITDA increased to $51,601,404. This result has been derived from a 21.6% growth in revenue, up
$58,946,188 to $331,668,907. The majority of the revenue increase has been contributed by the corporate store
segment, increasing by $35,846,048 and the personal loan segment with revenue increasing by $24,396,109. The
vehicle leasing business contributed $8,740,241 in revenue this year following the acquisition of 80% of the equity
of Green Light Auto in September 2013.
The result generated earnings per share of 5.67 cents. The directors have declared a two cent per share final
dividend. This brings the full year dividend to four cents fully franked.
A summary of consolidated revenues and results by significant segment is set out below:
Intersegment elimination of revenues
(24,018,386)
(18,835,095)
-
s e g m e n t r e v e n u e s
s e g m e n t r e s u l t s
e b i t d a
2 0 1 4
2 0 1 3
2 0 1 4
2 0 1 3
18,452,587
21,673,773
6,633,516
6,387,128
171,972,788
136,126,740
15,615,352
9,100,109
14,320,025
17,696,354
10,410,310
14,196,639
138,005,492
113,609,383
39,835,270
42,460,724
8,740,241
-
(4,038,694)
-
-
327,472,747
270,271,155
68,455,754
72,144,600
4,196,160
2,451,564
(19,914,394)
(15,108,666)
331,668,907
272,722,719
48,541,360
57,035,934
(7,923,711)
(6,455,993)
(8,577,184)
(2,915,734)
(10,908,176)
(14,794,235)
21,132,289
32,869,972
3,060,046
-
24,192,335
32,869,972
Franchise operations
Store operations
Financial services – administration
Financial services – personal loans
Vehicle leasing
Totals
Head office – UK & Australia
Totals after head office
Depreciation and amortisation
Finance costs
Income tax expense
Profit after income tax
Loss attributable to non-controlling interest
Profit attributable to members of Cash Converters International Limited
16.
//cash converters international
Comments on the operations and the results of those operations are set out below:
/ / f r a n c h i s e o p e r a t i o n s
The EBITDA profit of the franchise operations increased by 3.9% during the 2014 financial year to $6,633,516 (2013:
$6,387,128). This financial year saw the acquisition, by the corporate store operations, of nine ex-franchised stores
in Australia and as a result, the Australian business contributed a reduced EBITDA of $3,867,712 (2013: $4,120,254).
The UK operation’s contribution was EBITDA of $2,299,041 (2013: $1,867,559). EBITDA from international franchise
operations increased to $466,763 (2013: $399,315).
The total number of franchised stores globally now stands at 646, with 166 stores in the UK, 87 in Australia and 393
throughout the rest of the world. The company continues to look for opportunities to expand its franchise network,
both in Australia and internationally. With EZCORP Inc. (a major shareholder in Cash Converters International
Limited (CCIL)) as a sub-franchisor in the USA and holding the trademark and licensing rights in Canada, we are
seeing an increase in the store footprint and brand profile across North America.
EZCORP Inc. has also signed a Joint Venture (JV) agreement with CCIL in March 2014 in relation to Mexico and
South America. Under this agreement CCIL will hold a 20% interest in the JV through a subsidiary company in
return for granting a master licence to the JV for Latin America and providing information technology, training and
management support. EZCORP, through a subsidiary company, will inject US$3.6 million into the JV in return for
its 80% interest.
In January 2014 CCIL, through a subsidiary company, acquired a 25% equity interest in all aspects of the New
Zealand Cash Converters Master Franchisor, including corporate stores, franchise contracts, financial services and
software. This interest was acquired for AUD$5 million which reflects the pro-rata share of the actual investment
cost incurred to date by the New Zealand Master Franchisor.
During the year new franchised stores were opened in France, South Africa and Spain.
/ / c o r p o r a t e s t o r e o p e r a t i o n s
Corporate stores generate their revenue through the operation of retail premises across Australia and the UK, and
also through online retail sales via the Cash Converters Webshop and through cash advance online lending. The
stores also receive commission from Cash Converters Personal Finance business for personal loans generated in
the stores. The stores offer a mixture of ‘buys and loans’ (traditional pawn broking and second hand goods buying),
personal finance (in the form of personal loans and cash advance) and the retailing of second hand goods.
During the year the company acquired nine ex-franchised stores; one store in Western Australia (November 2013)
four stores in Victoria (January 2014), one store in NSW (January 2014) and three stores in Queensland (June 2014).
These acquisitions took the total number of corporate stores to 122 (UK: 58, Australia: 64).
Corporate stores contributed EBITDA of $15,615,352 (2013:$9,100,109) to the group result, up $6,515,243 on the
previous year. The performance of the two regions, Australia and UK are detailed below:
/ a u s t r a l i a
The corporate store network in Australia performed strongly with an EBITDA contribution of $16,392,434
(2013:$8,818,216), up 85.9% on the prior year.
The strong EBITDA performance has resulted from the acquisition of eight stores in South Australia in May 2013
and one store in Western Australia acquired in February 2013, delivering a full year result in the FY 2014. The
performance has also been helped by the acquisition of five stores in Victoria and New South Wales in January 2014
and to a lesser extent the three stores acquired in Queensland during June 2014.
With nine ex-franchised stores acquired during the period, the total number of corporate store numbers in Australia
as at 30 June 2014 is 64.
Revenue from online sales via the Cash Converters Webshop increased over 42% to $3,245,717 (2013:$2,280,717)
as the site became more established and the stores became more efficient at listing items on the site.
17.
//annual report 2014
/ u n i t e d k i n g d o m
The UK corporate stores continued to face challenging market conditions during the year. EBITDA for the UK
corporate stores reported a loss of £412,691, down from a profit of £188,269 in the previous year. Revenues for the
UK stores increased slightly to £34,560,025 (2013:£34,312,390), however, expenses also increased with additional
support staff and higher wage costs in an endeavor to attract better quality staff to drive the business forward.
Central administrative overheads increased in 2014 by £168,000, contributed to by an increase in management
staff and a reduction in training costs of £60,000.
There were no ex-franchised or greenfield stores acquired or opened during the period, however, four stores were
closed due to poor performance and one store sold to an existing franchisee taking the total number of corporate
store numbers in the UK to 58 as at 30 June 2014.
We believe the continued investment made in the UK store operations position the business well for future growth
as the UK economy continues to strengthen.
/ w e b s h o p
The Cash Converters’ ‘Webshop’ was initially launched in early 2008 and expands Cash Converters online presence.
Not only generating revenue in its own right, the Webshop is proving to be an essential ingredient in introducing
people to the Cash Converters brand, with many ‘in-store’ experiences being borne from an initial search of the
online store.
The Webshop was initially only servicing the corporate store network, but has since been expanded to allow the
franchise network to utilise the platform and list their items for sale. The company receives a commission based on
an agreed percentage of retail sales for the provision of the site and payment services. Each store is responsible
for its own item listings and despatch.
Items listed for sale on the site can be purchased through auction or a fixed price ‘buy it now’ option. Online sales
have increased 65% over the last 12 months across both the Australian and UK operations.
Some key online statistics:
Registered users
Unique visitors
Total page views
Retail Sales
u n i t e d k i n g d o m
199,506
3,281,575
35,935,625
£2,338,194
a u s t r a l i a
70,344
3,248,979
29,479,434
$3,852,100
/ / f i n a n c i a l s e r v i c e s o p e r a t i o n s
These divisions incorporate the trading results of MON-E Pty Ltd (Australia), Cash Converters Personal Finance Pty
Ltd (CCPF)(Australia) 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 $413).
The cash advance principal loaned is financed by the corporate stores and the individual franchisees for the cash
advances provided by their stores. MON-E receives commission from the store network for each cash advance
processed through their systems.
CCPF provides small, largely unsecured loans through the franchise and corporate store networks in Australia and
online. The principal is funded by CCPF who pay a commission to the stores (both corporate and franchise) for the
generation of the lead and processing the application in store.
The UK Finance Division utilises the software developed in Australia, for both cash advances and personal loans,
and is continuing to roll-out the finance products across both the franchise and corporate store networks in the UK.
During the period under review the EBITDA for this division was $50,245,580 (2013: $56,657,363), down $6,411,783
on last year, largely resulting from the legislative change introduced initially on 1 March 2013 and with a rate cap
effective from 1 July 2013. CCPF contributed an EBITDA of $38,705,533 (2013:$40,655,261), MON-E $9,645,378
(2013:$13,447,343) and the UK Finance Division $1,894,669 (2013:$2,554,758).
18.
//cash converters international
/ p e r s o n a l l o a n s
a u s t r a l i a
The Australian personal loan book has grown by 19.3% from $91,526,152 at 30 June 2013 to $109,215,838 at
30 June 2014. A large part of this growth has been achieved through the increasing success of the company’s
online lending platform. During 2014, 43,728 (2013:16,471) online loans were advanced totalling $48,713,650
(2013:$26,918,170), representing an increase in value of 81% over the previous year. Online lending now represents
30.1% of the total principal advanced during the year.
For Australia, bad debt levels have increased to 6.6% (2013:5.3%) of the net principal written-off to the total
principal advanced during the year. The increase has mainly resulted from a higher level of bad debts associated
with customers classified under the protected earnings amount (PEA) of the new lending legislation. As a result,
of this CCPF have increased the review process for loan applications from PEA customers and are improving
company collection procedures to significantly reduce bad debts originating from this customer class.
The Christmas period is one of the busiest periods for the personal loan product and this year was no exception
with an amount of $18,339,396 (2012:$16,874,388) advanced in Australia during December. This is the highest
amount ever lent during a month and represents an 8.7% increase on the previous corresponding period.
Cash Converters is licensed to provide financial products pursuant to the National Consumer Protection Act and
has responsible lending processes and controls in place. Following the enactment of the amendments to the
responsible lending legislation on the 1st March 2013 (rate cap came into force on 1 July 2013), the financial
services operations took steps to review the nature of the personal loan products offered and commenced trialling
new loan types that fitted more appropriately with the new responsible lending requirements, whilst continuing to
meet the ever growing demands of the customer. Faced with increasing competition from other ‘online lenders’ it
became more pertinent to offer a point of difference when dealing with Cash Converters and the company continues
to emphasise its commitment to responsible lending through a more personal approach to the assessment and
approval of loan applications.
Some key operating statistics for the Australian personal finance division:
•
•
•
•
•
Total number of approved loans increased by 15.4% to 155,820
Total number of active customers increased by 53.7% to 124,853
Loan book increased by 19.3% to $109,215,838
Bad debts as a percentage of principal advanced increased to 6.6%
Personal loans EBITDA down 4.8% to $38,705,533
u n i t e d k i n g d o m
The UK personal loan book at 30 June was £15,739,299 (2013:£20,291,979). The reduction has primarily resulted
from the static loan outgoings and the write-off of bad debts that were provided for in the accounts at 30 June
2013. In total £16,013,550 (2013:£4,026,864) have been written-off as bad debts for the financial year ending 30
June 2014.
The EBITDA contributed by the UK personal loan book was £654,106 (2013: £1,120,391), down 41.6%. This result
has been impacted by poor collections, with existing staff resources previously struggling to maintain contact with
all customers in default. Renewed effort and resourcing have been applied to the collections operations, which is
now improving. The table below demonstrates the improvement in the ageing profile of the UK loan book arrears
from Jan 2013 to June 2014.
a g e b y d a y s
j a n u a r y 2 0 1 3
j u n e 2 0 1 3
j u n e 2 0 1 4
120
90
60
30
5.01%
6.41%
6.58%
5.04%
3.42%
3.33%
3.88%
4.00%
3.80%
3.22%
4.58%
4.03%
With these improved collections, combined with improvements to the loan underwriting policies, it is anticipated
that a proportion of the debts provided for will be recovered in the next financial year, and ultimately the bad debt
level should improve compared to historic experience.
19.
//annual report 2014 / c a s h a d v a n c e
a u s t r a l i a
The company derives income from the cash advance product in multiple ways. MON-E Pty Ltd receives a
commission from all stores (both franchise and corporate stores) for the provision of the online software platform
and administrative services. Secondly, the corporate store network generates interest income from the loans
provided to their customers. The company has also embarked on a major initiative to launch the cash advance
product online. A fully integrated online platform for the cash advance product went live in December 2012. The
online option has proved to be popular with over $7 million in principal advanced during the year and highlights
a section of the market that Cash Converters had previously not serviced, evidenced by an average of 54% new
customer take up month on month since the product was launched. The EBITDA for the Australian cash advance
business was $9,645,378 (2013:$13,447,343) a decrease of 28.3% over 2013. The main reason for the decrease
is the impact of the legislation change, first of all from 1 March 2013, which severely impacted cash advance
volumes, and secondly from 1 July 2013, when the rate cap was introduced.
What was previously a quick and convenient solution to a customer’s short term cash requirements is now a more
complicated and time consuming process.
The new legislation made the application process more onerous for both the customer and staff, with requirements
to:-
•
•
•
Provide the most recent 90 days of bank transactions. For most customers this is only available
through online banking services and hence those customers that do not have access to online banking
are unable to proceed with an application until they are registered with their bank;
Analyse the 90 days of statements to ensure that there are no other current SACC (Small Amount Credit
Contracts) loans with other lenders;
Complete an income and expenditure form for each loan application and then assess the customer’s
capacity to repay the loan.
However, as both the customer and staff have become more familiar with the requirements and procedure, volumes
have begun to increase back to pre-legislation change levels.
Key performance indicators for Cash Advance – Australia:
•
•
•
Total principal advanced up 1.3% to $238,836,904
Average loan amount up from $341 to $413
Total customer numbers increase by 15.2% to 535,738
u n i t e d k i n g d o m
The cash advance product for CCUK is struggling to gain good growth with EBITDA this year of £430,196 (2013:
£491,110) representing a decrease of 12.4% on the previous period.
In July 2014 the Financial Conduct Authority (FCA) published its paper on the proposed rate cap in the UK. This
consultation paper was open to comment until 1 September 2014, with the aim of finalising the legislation by mid-
November and introducing the rate cap on 2 January 2015.
Prior to this, the Office of Fair Trading (OFT) had completed its own in depth review of the leading 50 ‘payday
lenders’ who make up 90% of the market in the UK, of which Cash Converters UK is one. Each company was
issued with a report of the OFT’s findings and given 12 weeks to respond with proof that they had addressed all
areas of non-compliance identified during the review. As a result of the review:
•
•
19 of the 50 lenders informed the OFT that they are leaving the payday market. Four of these have
surrendered their licenses;
One business failed to provide an audit report by the OFT deadline. The business has informed the OFT
that it is no longer lending.
In addition to the 50 leading lenders, and since the OFT published their final payday review report in March 2013:
•
Three firms engaged in payday lending have had their licenses revoked;
20.
//cash converters international
/ c a s h a d v a n c e ( c o n t i n u e d )
u n i t e d k i n g d o m ( c o n t i n u e d )
•
Another three lenders have also surrendered their licenses.
CCUK is pleased to report that the findings of the OFT in respect to Cash Converters payday
lending activity were minor and had, in fact, already been addressed through internal management
improvement plans prior to the OFT’s report being issued. Cash Converters welcomes the OFT
involvement in the industry and is pleased to see those lenders who are unable to comply with the
requirements of the law leave the industry. This will provide a greater market share to those companies
who remain and comply with the legislation.
Following the assumption of regulatory responsibility by the FCA on the 1 April 2014 further companies have
announced their intention to restrict the level of services they currently offer under the high-cost short-term credit
industry in the UK.
Key Performance Indicators for the UK Cash Advance product are:
•
•
•
Total principal advanced down by 9% to £34,791,421
Average loan amount up from £134 to £136
Total customer numbers increase by 31.6% to 154,987
/ / c o r p o r a t e o f f i c e c o s t s
These costs represent the corporate office costs for both Australia and the UK and are shown separately because
it is difficult to allocate the 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.
The 2014 financial year saw an overall increase in these costs. The Australian corporate office incurred stamp
duty of $1,820,093 on the acquisition of the eight South Australian stores. The UK corporate office recorded costs
associated with the final closure of the administration office in Ware and relocating to Runcorn in Manchester,
and costs associated with store closures, including associated redundancy costs. These costs amounted to
$1,210,568 - similar costs were not included in the 2013 result. Corporate income on commercial loans to various
entities dropped by approximately $600K during the year.
Also impacting the 2014 profit for CCUK is a provision of $1,358,333 (2013:$841,455) towards the Ausgroup Pty
Ltd exit bonus. CCUK is currently utilising the knowledge and experience of Ausgroup Pty Ltd (Australian agent
experienced in financial services) to roll out the financial services products to corporate stores, franchisees and to
train staff – this agreement expires on 1 October 2014 at which point CCUK will take over the provision of these
services. Ausgroup will be eligible for either an exit bonus or a continuation of a commission payment (less agreed
costs) at the end of this agreement. If a decision is made by CCUK to pay an exit bonus the total bonus payable
will be calculated 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. 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 expiry of the contract will have a positive impact
on UK earnings from 2015 onwards.
/ / f i n a n c i n g a n d i n v e s t m e n t a c t i v i t i e s
/ s e c u r i t i s a t i o n f a c i l i t y
In the 2013 financial year, the Company completed negotiations to secure a new funding arrangement with Westpac
Institutional Bank. The facility arrangement is a securitisation warehouse facility secured against the Australian
personal loan book. The facility provides funding of up to $60 million. As at 30 June 2014 the facility was drawn
to $54.3 million. The structure of the facility is such that it provides funding up to 70% of eligible receivables
in the personal loan book. As the loan book grows, the capacity to draw down from the facility will increase.
The securitisation facility required the establishment of a new entity operating as a trust which Cash Converters
Personal Finance assigns the receivables to. Whilst the borrowings are shown in the financial statements as a
current liability (see note 12 to the financial statements), the facility is for a minimum of two years, with an option to
extend beyond this period. The Company has recently completed negotiations with Westpac to increase the facility
to $70 million and extend the facility, with new documentation currently being prepared.
21.
//annual report 2014
/ b o n d i s s u e
The Company finalised, in September 2013, additional funding under a bond issue though FIIG Securities Ltd. A bond
Issue for $60 million was made and took the form of senior unsecured and unsubordinated medium term notes. The
term is for a five year maturity period. The bond provides additional capital to continue the businesses objective of
reacquiring franchise stores, growing the personal loan book and pursuing other investment opportunities that are
synergistic with the Company growth model.
/ c a r b o o d l e
The Carboodle brand was established by Green Light Auto Group Pty Ltd (GLA) in 2010. Designed as a total motoring
solution, Carboodle provides customers who don’t have access to main stream credit (retail and commercial) with
a reliable, late model and well maintained vehicle. The leasing arrangement packages all running cost of the vehicle
(with the exception of fuel) into one easy payment, and runs for 48 months. Packaged running costs can include:
•
•
•
•
•
•
Annual registration
Comprehensive insurance
Extended warranty
Scheduled servicing
Tyres
Roadside assistance
GLA retains ownership of the vehicle and at the end of the lease term, the customer hands back the car and
may initiate a new lease on a new vehicle if they wish. Carboodle focusses on providing popular models of both
passenger and commercial vehicles to retail customers as well as tradesmen and small businesses.
GLA has an exclusive license with the Company that allows it to use all Australian Cash Converters stores as
its agent to promote the Carboodle product. Carboodle pays a royalty to the company and a commission to the
stores for each lead converted to a lease. Carboodle showrooms have been established in Perth, Melbourne, and
Brisbane.
At 30 June 2014, 807 active leases were in place with forward contracted lease payments of $25.6 million. Total
revenue for the 2014 financial year was $8.7 million. Due to a number of logistical issues in regard to the sourcing
and delivery of a high volume of vehicles the marketing of the Carboodle concept was reduced following the initial
launch. These issues are in the process of being resolved and the take up of new leases should increase going
forward in line with the GLA forecast.
During the 2013 financial year, GLA secured its own financing facility with Fortress Finance for up to $40 million in
funding. The facility is secured against the lease book receivables and covers 80% of the vehicle purchase price.
Under its loan agreement with GLA, the Company converted part of its loan to GLA to 80% equity in September
2013. There is a further warrant option to acquire the 20% balance from February 2015. As a result of its 80%
equity in GLA, the GLA business has been consolidated into the Cash Converters’ financial statements for the year
ended 30 June 2014.
Since taking control of the operations at GLA, significant improvements have been made to operating efficiencies,
policies and procedures which management believe will enhance the future growth and profitability of the business.
/ / s i g n i f i c a n t c h a n g e s i n t h e s t a t e o f a f f a i r s
During the financial year there were no significant changes in the state of affairs of the consolidated entity other
than referred to elsewhere in the report, the financial statements or notes thereto.
/ / s i g n i f i c a n t e v e n t s a f t e r t h e b a l a n c e d a t e
/ l e g i s l a t i v e c h a n g e
In July 2014, the Financial Conduct Authority (FCA) announced proposed changes to legislation in regard to the
high-cost short-term credit industry in the UK. The FCA have been regulating this industry since April 2014 and
have a clear remit to tackle poor conduct in the market and ensure that there is an appropriate degree of protection
for consumers.
22.
//cash converters international / / s i g n i f i c a n t e v e n t s a f t e r t h e b a l a n c e d a t e ( c o n t i n u e d )
/ l e g i s l a t i v e c h a n g e ( c o n t i n u e d )
In February 2014 the FCA published rules for consumer credit firms, setting out the standards they have to meet to
continue doing business, including rules reflecting the Office of Fair Trading (OFT) previous guidance, for example
on assessing if loans are affordable.
In January 2015, the FCA will introduce a price cap on what high-cost short-term credit lenders can charge with a
view to securing an appropriate degree of protection for borrowers against excessive charges.
The proposed price cap will ensure consumers will never pay back more than twice what they have borrowed,
and someone taking out a typical loan over 30 days and repaying on time will not pay more than £24 per £100
borrowed.
The consultation paper issued by the FCA was open for comments until 1 September 2014. Following a review of
these responses, the FCA will issue their final policy proposal.
Whilst it is evident that the new legislation will have an impact on margins, Cash Converters believe that the overall
impact will be positive as a significant proportion of our earnings are generated from the provision of short term
credit. These rate caps give us the clarity and comparability, supporting a sustainable business model that will
see earnings increase as our volume continues to grow. The legislation also provides a framework to regulate
the industry and therefore protect vulnerable members of society from unscrupulous operators. Cash Converters
continues to pride itself on the founding ethos of ‘helping people get on with their lives’, and believes by its
continued efforts to be the most responsible lender in the market and providing a diverse and accessible product
range, there are great opportunities to continue the success of the business.
/ / e n v i r o n m e n t a l r e g u l a t i o n a n d p e r f o r m a n c e
The Company has assessed whether there are any particular or significant environmental Regulations, which apply
to the Company, and has determined that there are none.
/ / o u t l o o k
Following several years of protracted lobbying, negotiation and uncertainty surrounding the short term lending
legislation, both in Australia and the UK, legislation has been introduced in Australia, and will shortly be finalised
and introduced in the UK by January 2015, the Group is looking forward to a period of certainty in the high-cost
short-term credit industry. With clear boundaries now set for the industry, both in the UK and Australia, Cash
Converters can now look ahead with confidence as it continues to secure its position in the market and provide an
exemplary product and service to its customers.
The coming year is anticipated to be a year of bedding in the new lending requirements in the UK and allowing the
recent store additions to establish themselves in the corporate store network. With the nine new stores acquired
in 2014, it is anticipated that increased revenues across all segments will off-set the capped margins of the short
term loan products.
Cash Converters is already seeing cash advance levels in Australia returning to ‘pre-legislation change’ levels and
the personal loan book continues to grow in Australia.
With the strong growth in online lending and the continued addition of new stores, it is strongly anticipated that
the FY 2015 will bring a significant growth in revenue.
The company prepares internal forecasts for up to five years in advance, however these forecast are extremely
subjective and are based on simple revenue and cost increases in-line with general market growth for the business
concerned and CPI. Any extra-ordinary growth in both revenue and profit will be driven by acquisitions and new
investments in potential opportunities, which at the date of this report are too speculative to give any meaningful
guidance.
23.
//annual report 2014
c o r p o r a t e g o v e r n a n c e
/ / b o a r d
The Board is responsible for setting the Company’s strategic direction and it strives to create shareholder value
and to ensure shareholders’ funds are adequately protected. Its functions include:
•
•
•
•
•
Approving corporate strategies, financial budgets and group policies;
Assessing actual performance against budgets in order to monitor the suitability of corporate strategy
and to assess the performance of the management team;
Review operational performance to ensure a clear understanding of the financial health of the Company;
Ensure the Company always acts with a high level of ethical standards and in a legal and responsible way;
Appointing, evaluating and rewarding the senior executives of the management team.
The non-executive directors, being Mr Reginald Webb, Mr John Yeudall, Mr William Love and Mr Joseph Beal,
are independent, having no business or other relationships, which could compromise their autonomy. Mr John
Yeudall resigned from the board on 20 November 2013, and was not replaced. Mr William Love and Mr Joseph Beal
resigned from the board on 21 August 2014, Mr Lachlan Given joined the board with effect of 22 August 2014. The
search for a further non-executive director is underway.
If a potential conflict of interest does arise, the director concerned does not receive the associated board papers
and leaves the board meeting while the issue is considered. Directors must keep the Board advised on any matters
that may lead to a conflict of interest. The Board has not conducted a performance evaluation in the current
reporting period. A formal Board Charter has been adopted by the Board.
/ / a u d i t c o m m i t t e e
The audit committee was established in 1995 and comprises of the four non-executive directors appointed by
the Board, being Mr John Yeudall (Chairman), Mr Reginald Webb, Mr William Love and Mr Joseph Beal, and with
regular attendance by the managing director at the request of the audit committee. Upon resignation of Mr John
Yeudall, Mr William Love took responsibility for the Chairman position, with the committee subsequently having
three members.
Meetings of the committee are usually held in February, July and August each year and at any other time as
requested by a member of the committee or the external auditors. The primary function of the committee is
to assist the Board in fulfilling its responsibilities for the Company’s financial reporting and external reporting
and ensuring all accounting reports are prepared in accordance with the appropriate accounting standards and
statutory requirements. In addition, it reviews the performance of the auditors and makes any recommendations
the committee feels necessary.
/ / i n d e p e n d e n t p r o f e s s i o n a l a d v i c e
In fulfilling their duties, the directors may obtain independent professional advice at the Company’s expense.
/ / s h a r e t r a d i n g
Included in the Board Charter is a share trading policy. This policy imposes restrictions on share dealings for
directors, officers and senior employees and prohibits them from dealing in Company’s securities while in
possession of inside information.
/ / r e m u n e r a t i o n c o m m i t t e e
The remuneration committee was established on 26 May 1997 and comprises of the four non-executive directors,
being Mr John Yeudall (Chairman), Mr Reginald Webb, Mr William Love and Mr Joseph Beal. Upon the resignation
of Mr John Yeudall, Mr Joseph Beal took over duties of Chairman, with the committee subsequently having three
members. The aims of the committee are to maintain a remuneration policy, which ensures the remuneration
package of senior executives properly reflects their duties and responsibilities, and to attract and motivate senior
executives of the quality required.
24.
//cash converters international
/ / n o m i n a t i o n c o m m i t t e e
The nomination committee comprises of the four non-executive directors, being Mr John Yeudall (Chairman), Mr
Reginald Webb, Mr William Love and Mr Joseph Beal, and the managing director Mr Peter Cumins. Upon the
resignation of Mr John Yeudall, Mr Reginald Webb took over duties of Chairman, with the committee subsequently
having three non-executive director members. The aim of the committee is to ensure that the board continues to
operate within the established guidelines.
/ / d i v e r s i t y
Cash Converters has a diversity policy and set measurable objectives for achieving gender diversity.
The nomination and remuneration committee is accountable to the Board for ensuring the diversity policy is
implemented in respect of the Board and the process for identifying and selecting new directors. The managing
director is accountable to the Board for ensuring the diversity policy is implemented throughout the Cash
Converters’ workforce. Senior executives and all personnel involved in recruitment are expected to ensure this
policy is implemented and integrated into all of Cash Converters’ activities.
Cash Converters recognises the value contributed to the company by employing people with varying skills, cultural
backgrounds, characteristics and experience. Cash Converters believes its diverse workforce is the key to its
continued growth, improved productivity and performance.
Cash Converters has adopted a diversity strategy in relation to gender diversity, and investigated the reporting
capacity of business units for the purposes of determining diversity targets.
The Board has set specific gender diversity targets as follows:
t a r g e t
d a t e f o r c o m p l e t i o n
The next Board appointments desirably should be female with
When it is appropriate to expand or refresh the Board
appropriate skills and attributes
To increase the number of women in senior management
When it is appropriate to expand or refresh the senior executive
positions* with appropriate skills and attributes
team
At least 35% of employees should be female with appropriate
Annually by 30 June each year
skills and attributes.
*Senior management is defined as senior executives of the Group as well as the senior executives’ direct reports
Cash Converters has achieved its targets in relation to full time and part time employees during the year. As the
Company decided not to replace the outgoing non-executive director, Mr John Yeudall, upon his resignation, there
were no vacancies for Board appointments and there were no senior management appointments during the year.
Since the end of the year, Mr. William Love and Mr. Joseph Beal have resigned from the board. Mr. Lachlan Given
was appointed as non-executive director to immediately replace one of the outgoing directors, at the date of this
report the search for a suitable additional non-executive director is underway.
Of the four remaining Board positions at 30 June 2014, all four (100%) were held by men. Of 18 senior management
positions, 15 (83.3%) were held by men and three (16.7%) were held by women. Of the 2114 full time and part time
employees, 1179 (56%) were men and 935 (44%) were women.
As at 30 June 2014, the proportion of women employed by the Cash Converters Group is set out in the table below:
f u l l t i m e
p a r t t i m e
c a s u a l / t e m p
t o t a l
s p l i t
Female
Male
Total
743
1022
1765
192
157
349
66
70
136
1001
1249
2250
44%
56%
100%
25.
//annual report 2014
a s x b e s t p r a c t i c e r e c o m m e n d a t i o n s
The table below contains each of the ASX Best Practice Recommendations. Where the Company has complied
with a recommendation during the reporting period, this is indicated with a tick (√) in the appropriate column. Where
the Company considered it was not appropriate to comply with a particular recommendation, this is indicated with
a cross (√) and the Company’s reasons are set out on the corresponding note appearing at the end of the table.
complied
n o t e
1.1
Formalise and disclose the functions reserved to the Board and those delegated to
management
1.2
Disclose the process for evaluating the performance of senior executives.
1.3
Provide the information indicated in the Guide to Reporting on Principle 1.
2.1
A majority of the Board should be independent directors
2.2
2.3
2.4
2.5
2.6
3.1
3.2
3.3
3.4
The Chairperson should be an independent director
The roles of the Chairperson and Chief Executive Officer should not be exercised
by the same individual
The Board should establish a nomination committee
Disclose the process for evaluating the performance of the board, its committees
and individual directors.
Provide the information indicated in Guide to Reporting on Principle 2
Establish a code of conduct to guide the Directors, the Chief Executive Officer(or
equivalent), the Chief Financial Officer (or equivalent) and any other key executives
as to:
3.1.1 the practices necessary to maintain confidence in the Company’s integrity
3.1.2 the practices necessary to take into account their legal obligations and the
reasonable expectations of their stakeholders
3.1.3 the responsibility and accountability of individuals for reporting and
investigating reports of unethical practices
Establish a policy concerning diversity and disclose the policy or a summary of
that policy. The policy should include requirements for the board to establish
measurable objectives of achieving gender diversity for the board to assess
annually both the objectives and progress in achieving them.
Disclose in each annual report the measurable objectives for achieving gender
diversity set by the board in accordance with the diversity policy and progress
towards achieving them.
Disclose in each annual report the proportion of women employees in the whole
organisation, women in senior management positions and women on the board.
3.5
Provide the information indicated in Guide to Reporting on Principle 3
4.1
The Board should establish an audit committee
4.2
Structure of the audit committee so that it consists of:
- only non-executive directors
- a majority of independent directors
- an independent chairperson, who is not chairperson of the Board
- at least three members
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
26.
//cash converters international
a s x b e s t p r a c t i c e r e c o m m e n d a t i o n s ( c o n t i n u e d )
complied
n o t e
4.3
The audit committee should have a formal charter
4.4
5.1
5.2
6.1
Provide the information indicated in Guide to Reporting on Principle 4
Establish written policies and procedures designed to ensure compliance with
ASX Listing Rule disclose requirements to ensure accountability at a senior
management level for that compliance
Provide the information indicated in Guide to Reporting on Principle 5
Design and disclose a communications strategy to promote effective
communication with shareholders and encourage effective participation at general
meetings
6. 2
Provide the information indicated in Guide to Reporting on Principle 6
7.1
7.2
7.3
The Board or appropriate board committee should establish policies on risk
oversight and management
The board should require management to design and implement the risk
management and internal control system to manage the company’s material
business risks and report to it on whether those risks are being managed
effectively. The board should disclose that management has reported to it as to the
effectiveness of the company’s management of its material business risks.
The board should disclose whether it has received assurance from the chief
executive officer (or equivalent) and the chief financial officer (or equivalent) that
the declaration provided in accordance with section 295A of the Corporations Act
is founded on a sound system of risk management and internal control and that
the system is operating effectively in all material respects in relation to financial
reporting risks.
7.4
Provide the information indicated in Guide to Reporting on Principle 7
8.1
The Board should establish a remuneration committee
8.2
The Remuneration Committee should be structured so that it:-
- consist of a majority of independent directors
- is chaired by an independent director
- has at least three members
8.3
Clearly distinguish the structure of non-executive directors remuneration from that
of executives
8.4
Provide the information indicated in Guide to Reporting on Principle 8
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
27.
//annual report 2014 c o n s o l i d a t e d s t a t e m e n t o f p r o f i t o r l o s s a n d o t h e r c o m p r e h e n s i v e i n c o m e
f o r t h e y e a r e n d e d 3 0 j u n e 2 0 1 4
Franchise fees
Financial services interest revenue
Sale of goods
Other revenues
Revenue
Cost of Sales
Gross Profit
Administrative expenses
Advertising expenses
Occupancy expenses
Other expenses
Finance costs
Share of net loss of equity accounted investment
Profit before income tax
Income tax expense
Profit for the year
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 year
Total comprehensive income for the year
Profit attributable to:
Owners of the Company
Non-controlling interest
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interest
Earnings per share
Basic (cents per share)
Diluted (cents per share)
notes
3.1
3.2
3.3
3.4
2014
$
2013
$
10,814,182
10,306,090
202,932,785
168,882,887
112,218,737
93,018,548
5,703,203
515,194
331,668,907
272,722,719
3.5
(118,868,721)
(94,157,676)
212,800,186
178,565,043
(80,545,397)
(64,372,146)
(7,691,909)
(5,117,850)
(19,520,946)
(15,038,017)
(64,382,820)
(43,457,089)
(8,577,184)
(2,915,734)
(41,465)
-
32,040,465
47,664,207
(10,908,176)
(14,794,235)
21,132,289
32,869,972
5,692,747
5,692,747
3,398,557
3,398,557
26,825,036
36,268,529
24,192,335
(3,060,046)
21,132,289
29,885,082
(3,060,046)
26,825,036
5.67
5.56
32,869,972
-
32,869,972
36,268,529
-
36,268,529
8.09
7.92
3.6
3.7
3.8
3.9
31
4
27
27
The accompanying notes form an integral part of the consolidated statement of profit or loss and other comprehensive income
28.
//cash converters international
c o n s o l i d a t e d s t a t e m e n t o f f i n a n c i a l p o s i t i o n
f o r t h e y e a r e n d e d 3 0 j u n e 2 0 1 4
notes
2014
$
2013
$
Current assets
Cash and cash equivalents
Trade receivables
Personal loan receivables
Inventories
Other assets
Total current assets
Non-current assets
Trade and other receivables
Plant and equipment
Deferred tax assets
Goodwill
Other intangible assets
Investments in associates
Other financial assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Current tax payables
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Equity attributable to owners of the Company
Non-controlling interests
Total equity
6
7
7
8
9
7
10
4
15
14
31
32
11
12
13
12
13
16
17
17
24
26,843,072
33,542,353
20,729,330
13,031,595
123,677,192
109,279,232
25,561,710
10,578,199
21,783,101
8,587,646
220,202,526
173,410,904
14,814,904
22,586,763
13,543,414
110,726,057
21,899,866
6,213,926
14,476,490
22,534,872
5,627,598
98,771,899
22,423,074
-
-
4,000,000
189,784,930
167,833,933
409,987,456
341,244,837
26,794,208
59,942,763
9,737,589
4,638,888
20,048,464
70,538,531
4,662,548
3,870,515
101,113,448
99,120,058
64,019,148
148,539
64,167,687
389,521
104,474
493,995
165,281,135
99,614,053
244,706,321
241,630,784
156,679,067
151,708,656
(6,503,189)
98,025,142
(914,097)
90,835,176
248,201,020
241,629,735
(3,494,699)
1,049
244,706,321
241,630,784
The accompanying notes form an integral part of the consolidated statement of financial position
29.
//annual report 2014
c o n s o l i d a t e d s t a t e m e n t o f c h a n g e s i n e q u i t y
f o r t h e y e a r e n d e d 3 0 j u n e 2 0 1 4
non-
foreign
controlling
share-
currency
interest
based
attributable
non-
issued
translation
acquisition
payment
retained
to owners of
controlling
capital
reserve
reserve
reserve
earnings
the parent
interest
total
$
$
$
$
$
$
$
$
Balance as at 1 July 2012
116,812,467
(6,028,429)
Payment of dividends
-
Balance at 30 June 2013
151,708,656
(2,629,872)
Profit for the year
Exchange differences arising
on translation of foreign
operations
Total comprehensive income
for the year
Issue of shares
Share issue costs (net of tax)
Share-based payments
Shares issued on exercise of
performance rights
Profit for the year
Exchange differences arising
on translation of foreign
operations
Total comprehensive income
for the year
Non-controlling interest
arising from contractual
arrangement
Issue of shares (DRP)
Share-based payments
Shares issued on exercise of
performance rights
Payment of dividends
Acquisition of non-controlling
interests
Balance at 30 June 2014
-
-
-
-
3,398,557
3,398,557
32,725,011
(775,582)
-
2,946,760
-
-
-
-
-
-
-
-
-
4,602,017
-
368,394
-
-
-
5,692,747
5,692,747
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(11,662,250)
2,661,625
73,186,248
186,631,911
1,049
186,632,960
-
-
-
-
-
2,000,910
(2,946,760)
32,869,972
32,869,972
-
3,398,557
32,869,972
36,268,529
-
-
-
-
32,725,011
(775,582)
2,000,910
-
-
(15,221,044)
(15,221,044)
-
-
-
-
-
-
-
-
32,869,972
3,398,557
36,268,529
32,725,011
(775,582)
2,000,910
-
(15,221,044)
1,715,775
90,835,176
241,629,735
1,049
241,630,784
24,192,335
24,192,335
(3,060,046)
21,132,289
-
5,692,747
-
5,692,747
24,192,335
29,885,082
(3,060,046)
26,825,036
-
(4,602,017)
-
-
748,805
(368,394)
-
-
748,805
-
(12,097,952)
(12,097,952)
-
-
-
-
-
748,805
-
(12,400,352)
(12,400,352)
(12,400,352)
-
(11,662,250)
11,662,250
-
-
-
-
-
-
-
-
156,679,067
3,062,875
(11,662,250)
2,096,186
98,025,142
248,201,020
(3,494,699)
244,706,321
The accompanying notes form an integral part of the consolidated statement of changes in equity
30.
//cash converters international
c o n s o l i d a t e d s t a t e m e n t o f c a s h f l o w s
f o r t h e y e a r e n d e d 3 0 j u n e 2 0 1 4
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
Net cash flows provided by operating activities
Cash flows from investing activities
Net cash paid for acquisitions of controlled entities
Acquisition of investment
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
Net cash flows used in investing activities
Cash flows from financing activities
notes
2014
$
2013
$
202,319,838
219,344,268
(233,614,563)
(215,209,109)
597,450
375,894
87,713,601
60,554,860
(30,753,427)
(32,909,734)
(8,577,184)
(2,915,734)
(13,344,332)
(17,244,620)
4,341,383
11,995,825
(10,654,215)
(35,867,903)
(5,491,059)
(2,159,211)
76,273
(4,191,059)
(15,000,000)
394,270
-
(1,992,127)
37,000
(5,617,686)
(9,150,000)
1,127,495
(37,025,001)
(51,463,221)
6
33
14
Dividends paid – members of parent entity
28
(12,400,351)
(17,398,357)
Proceeds from borrowings
Repayment of borrowings
Borrowing Costs
Capital element of finance lease and hire purchase payments
Proceeds from issue of shares
Share issue costs
Net cash flows provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on the balance of cash held
in foreign currencies
76,252,631
82,384,338
(26,323,211)
(53,740,317)
(1,265,170)
(487,196)
-
-
35,776,703
3,093,085
20,729,330
3,020,657
-
(456,354)
32,725,011
(1,107,975)
42,406,346
2,938,950
16,415,161
1,375,219
Cash and cash equivalents at the end of the year
6
26,843,072
20,729,330
The accompanying notes form an integral part of the consolidated statement of cash flows
31.
//annual report 2014 n o t e s t o t h e f i n a n c i a l s t a t e m e n t s
f o r t h e y e a r e n d e d 3 0 j u n e 2 0 1 4
/ / 1 . s i g n i f i c a n t a c c o u n t i n g p o l i c i e s
Accounting policies are selected and applied in a manner which ensures that the resulting financial information
satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions
or other events is reported. 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 reporting period. In the current year, the Group has applied for the first time AASB 10, AASB 11, AASB 12,
AASB 13, AASB 119 and AASB 128 (as revised in 2011) together with the amendments to AASB 10, AASB 11 and
AASB 12 regarding the transitional guidance.
The adoption of these amendments has not resulted in any significant changes to the Group’s accounting policies
nor any significant effect on the measurement or disclosure of the amounts reported for the current or prior periods.
The following significant accounting policies have been adopted in the preparation and presentation of the financial
report:
1 . 1 s t a t e m e n t o f c o m p l i a n c e
The financial report is a general purpose financial report which has been prepared in accordance with the
Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the
law.
The financial report comprises the consolidated financial report of the Group. For the purposes of preparing the
consolidated financial statements, the Company is a for-profit entity.
Accounting Standards include Australian Accounting Standards. Compliance with the Australian Accounting
Standards ensures that the financial statements and notes of the consolidated entity comply with International
Financial Reporting Standards (‘IFRS’).
The financial statements were authorised for issue by the directors on 11 September 2014.
1 . 2 b a s i s o f p r e p a r a t i o n
The consolidated financial statements have been prepared on the basis of historical cost, except for certain
properties and financial instruments that are measured at revalued amounts or fair values at the end of each
reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair values
of the consideration given in exchange for goods and services. All amounts are presented in Australian dollars,
unless otherwise noted.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes
into account the characteristics of the asset or liability if market participants would take those characteristics
into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or
disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-
based payment transactions that are within the scope of AASB 2, leasing transactions that are within the scope of
AASB 117, and measurements that have some similarities to fair value but are not fair value, such as net realisable
value in AASB 2 or value in use in AASB 136.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on
the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to
the fair value measurement in its entirety, which are described as follows:
•
•
•
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the
entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the
asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
32.
//cash converters international
/ / 1 . s i g n i f i c a n t a c c o u n t i n g p o l i c i e s ( c o n t i n u e d )
1 . 3 b a s i s o f c o n s o l i d a t i o n
The consolidated financial statements incorporate the financial statements of the Company and entities (including
structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:
•
•
•
has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control listed above. When the Company has less than a majority
of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it
the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant
facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to
give it power, including:
•
•
•
•
the size of the Company’s holding of voting rights relative to the size and dispersion of
holdings of the other vote holders;
potential voting rights held by the Company, other vote holders or other parties;
rights arising from other contractual arrangements; and
any additional facts and circumstances that indicate that the Company has, or does not have, the current ability
to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous
shareholders’ meetings.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the
Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed
of during the year are included in the consolidated statement of profit or loss and other comprehensive income
from the date the Company gains control until the date when the Company ceases to control the subsidiary. Profit
or loss and each component of other comprehensive income are attributed to the owners of the Company and
to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the
Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit
balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies
into line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and
cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
1 . 4 b u s i n e s s c o m b i n a t i o n s
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for
each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities
incurred or assumed, and equity instruments issued by the consolidated entity in exchange for control of the
acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent
consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values
are adjusted against the cost of acquisition where they qualify as measurement period adjustments (refer below).
All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are
accounted for in accordance with relevant Standards. Changes in the fair value of contingent consideration
classified as equity are not recognised.
Where a business combination is achieved in stages, the consolidated entity’s previously held interests in the
acquired entity are re-measured to fair value at the acquisition date (i.e. the date the consolidated entity attains
control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the
acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are
reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.
33.
//annual report 2014 / / 1 . s i g n i f i c a n t a c c o u n t i n g p o l i c i e s ( c o n t i n u e d )
1 . 4 b u s i n e s s c o m b i n a t i o n s ( c o n t i n u e d )
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under
AASB 3(2008) are recognised at their fair value at the acquisition date, except that:
•
•
•
deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements
are recognised and measured in accordance with AASB 112 Income Taxes and AASB 119 Employee
Benefits respectively;
liabilities or equity instruments related to the replacement by the consolidated entity of an
acquiree’s share-based payment awards are measured in accordance with AASB 2 Share-based
Payment; and
assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 Non-current
Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the
combination occurs, the consolidated entity reports provisional amounts for the items for which the accounting
is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional
assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that
existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date. The
measurement period is the period from the date of acquisition to the date the consolidated entity obtains complete
information about facts and circumstances that existed as of the acquisition date – and is subject to a maximum
of one year.
1 . 5 g o o d w i l l
Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the
acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount
of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest
in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the
liabilities assumed.
If, after reassessment, the consolidated entity’s interest in the fair value of the acquiree’s identifiable net assets
exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and
the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognised
immediately in profit or loss as a bargain purchase gain.
Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing,
goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the
combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or
more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-
generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount
of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying
amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent
period.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or
loss on disposal.
1 . 6 i n v e s t m e n t s i n a s s o c i a t e s a n d j o i n t v e n t u r e s
An associate is an entity over which the Group has significant influence. Significant influence is the power to
participate in the financial and operating policy decisions of the investee but is not control or joint control over
those policies.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights
to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities require unanimous consent of the
parties sharing control.
34.
//cash converters international
/ / 1 . s i g n i f i c a n t a c c o u n t i n g p o l i c i e s ( c o n t i n u e d )
1 . 6 i n v e s t m e n t s i n a s s o c i a t e s a n d j o i n t v e n t u r e s ( c o n t i n u e d )
The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial
statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as
held for sale, in which case it is accounted for in accordance with AASB 5. Under the equity method, an investment
in an associate or a joint venture is initially recognised in the consolidated statement of financial position at cost
and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of
the associate or joint venture. When the Group’s share of losses of an associate or a joint venture exceeds the
Group’s interest in that associate or joint venture (which includes any long-term interests that, in substance, form
part of the Group’s net investment in the associate or joint venture), the Group discontinues recognising its share of
further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of the associate or joint venture.
An investment in an associate or a joint venture is accounted for using the equity method from the date on which
the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint
venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable
assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the
investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the
cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the
investment is acquired.
The requirements of AASB 139 are applied to determine whether it is necessary to recognise any impairment loss
with respect to the Group’s investment in an associate or a joint venture. When necessary, the entire carrying
amount of the investment (including goodwill) is tested for impairment in accordance with AASB 136 Impairment
of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to
sell) with its carrying amount, Any impairment loss recognised forms part of the carrying amount of the investment.
Any reversal of that impairment loss is recognised in accordance with AASB 136 to the extent that the recoverable
amount of the investment subsequently increases.
1 . 7 r e v e n u e r e c o g n i t i o n
1 . 7 . 1.
f r a n c h i s e s a l e / r e n e w a l s
Fees in respect of the initial sale of a franchise licence and fees from the renewal of a franchise licence are
recognised on an accruals basis. Income is recognised in full upon the sale’s completion or upon the renewal of
the licence as all material services and/or conditions relating to the sale or renewal have been fully performed or
satisfied by the economic entity.
1 . 7 . 2 .
c o n t i n u i n g f r a n c h i s e f e e s / l e v i e s
Continuing franchise fees/levies in respect of particular services, are recognised as income when they become due
and receivable and the costs in relation to the income are recognised as expenses when incurred.
1 . 7 . 3 .
i n s t a l m e n t c r e d i t l o a n i n t e r e s t
Interest received from franchisees in respect of instalment credit loans is recognised as income when earned. The
effective interest rate method has been used to allocate fixed interest to accounting periods.
1 . 7 . 4 .
p e r s o n a l l o a n / v e h i c l e l e a s e i n t e r e s t
Interest revenue in relation to personal loans and vehicles leases is accrued on a time basis by reference to the
principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset to that asset net carrying amount.
35.
//annual report 2014
/ / 1 . s i g n i f i c a n t a c c o u n t i n g p o l i c i e s ( c o n t i n u e d )
1 . 7 r e v e n u e r e c o g n i t i o n ( c o n t i n u e d )
1 . 7 . 5 .
l o a n e s t a b l i s h m e n t f e e r e v e n u e
Establishment fees are deferred and recognised over the life of the loans at the effective interest rate applicable so
as to recognise revenue at a constant rate to the underlying principal over the expected life of the loan.
1 . 7 . 6 .
o t h e r v e h i c l e r e v e n u e
Charges relating to the vehicle leases such as vehicle maintenance, warranty, registration and insurance, are
recognised over the life of the lease in equal periodic amounts.
1 . 7 . 7 .
o t h e r c a t e g o r i e s o f r e v e n u e
Other categories of revenue, such as retail wholesale sales, corporate store revenue, cheque cashing commission
and financial services commission, are recognised when the consolidated entity has transferred the risks and
rewards of the goods to the buyer or when the services are provided. Bank interest and rent are recognised as
earned on an accruals basis.
1 . 8 l e a s i n g
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.
1 . 8 . 1 .
c o n s o l i d a t e d e n t i t y a s l e s s o r
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Group’s net
investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant
periodic rate of return on the Group’s net investment outstanding in respect of the leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.
Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the
leased asset and recognised on a straight-line basis over the lease term.
1 . 8 . 2 .
c o n s o l i d a t e d e n t i t y a s l e s s e e
Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal to the
present value of the minimum lease payments, each determined at the inception of the lease. The corresponding
liability to the lessor is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve
a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against
income.
Finance leased assets are amortised on a straight line basis over the estimated useful life of the asset.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased
asset are consumed.
1 . 9 f o r e i g n c u r r e n c y
1 . 9 . 1 .
f o r e i g n c u r r e n c y t r a n s a c t i o n s
All foreign currency transactions during the financial year are brought to account using the exchange rate in effect
at the date of the transaction. Foreign currency monetary items at reporting date are translated at the exchange
rate existing at reporting date. Non-monetary assets and liabilities carried at fair value that are denominated in
foreign currencies are translated at the rates prevailing at the date when the fair value was determined.
36.
//cash converters international
/ / 1 . s i g n i f i c a n t a c c o u n t i n g p o l i c i e s ( c o n t i n u e d )
1 . 9 f o r e i g n c u r r e n c y ( c o n t i n u e d )
1 . 9 . 1 .
f o r e i g n c u r r e n c y t r a n s a c t i o n s ( c o n t i n u e d )
Exchange differences are recognised in profit or loss in the period in which they arise except for exchange
differences on monetary items receivable from or payable to a foreign operation for which settlement is neither
planned or likely to occur, which form part of the net investment in a foreign operation, are recognised in the foreign
currency translation reserve and recognised in profit or loss on disposal of the net investment.
1 . 9 . 2 .
f o r e i g n o p e r a t i o n s
On consolidation, the assets and liabilities of the consolidated entity’s overseas operations are translated at
exchange rates prevailing at the reporting date. Income and expense items are translated at the average exchange
rates for the period unless exchange rates fluctuate significantly. Exchange differences arising, if any, are recognised
in the foreign currency translation reserve, and recognised in profit or loss on disposal of the foreign operation.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity on or after the date of transition
to A-IFRS are treated as assets and liabilities of the foreign entity and translated at exchange rates prevailing at
the reporting date.
1 . 1 0 b o r r o w i n g s
Borrowings are recorded initially at fair value, net of transaction costs.
Subsequent to initial recognition, borrowings are measured at amortised cost with any difference between the
initial recognised amount and the redemption value being recognised in profit and loss over the period of the
borrowing using the effective interest rate method.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
1 . 1 1 e m p l o y e e b e n e f i t s
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long
service leave, and sick leave when it is probable that settlement will be required and they are capable of being
measured reliably.
Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using the
remuneration rate expected to apply at the time of settlement.
Liabilities recognised in respect of long term employee benefits are measured as the present value of the estimated
future cash outflows to be made by the Group in respect of services provided by employees up to reporting date.
1 . 1 2 s h a r e - b a s e d p a y m e n t s
The consolidated entity provides benefits to executives of the consolidated entity in the form of share-based
payment transactions, whereby key management personnel render services in exchange for options (equity-based
transactions).
The current plan to provide these benefits is the Executive Performance Rights Plan. The cost of the equity-settled
transactions with employees is measured by reference to the fair value of the equity instruments at the date at
which they are granted. The fair value is determined by using an appropriate valuation methodology.
The cost of equity-based transactions is recognised, together with a corresponding increase in equity, over the
period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on
which the relevant employees become fully entitled to the award (vesting date).
37.
//annual report 2014
/ / 1 . s i g n i f i c a n t a c c o u n t i n g p o l i c i e s ( c o n t i n u e d )
1 . 1 2 s h a r e - b a s e d p a y m e n t s ( c o n t i n u e d )
At each subsequent reporting date until vesting, the cumulative charge to the profit or loss is the product of:
•
•
•
The grant date fair value of the award.
The current best estimate of the number of the awards that will vest, taking into account such factors
as the likelihood of non-market performance conditions being met.
The expired portion of the vesting period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional
upon a market condition.
Where the terms of an equity-settled award are modified, as a minimum, an expense is recognised as if the terms
had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a
result of the modification, as measured at the date of modification.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of
earnings per share.
1 . 1 3 t a x a t i o n
1 . 1 3 . 1 .
c u r r e n t t a x
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the
taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or
substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or
asset) to the extent that it is unpaid (or refundable).
1 . 1 3 . 2 .
d e f e r r e d t a x
Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary
differences arising from differences between the carrying amount of assets and liabilities in the financial statements
and the corresponding tax base of those items.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are
recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible
temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and
liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of
assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor
accounting profit. Furthermore a deferred tax liability is not recognised in relation to the temporary differences
arising from the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries,
branches, associates and joint ventures except where the consolidated entity is able to control the reversal of the
temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with these investments and interests
are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to
utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when
the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects
the tax consequences that would follow from the manner in which the consolidated entity expects, at the reporting
date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority
and the company/consolidated entity intends to settle its current tax assets and liabilities on a net basis.
38.
//cash converters international
/ / 1 . s i g n i f i c a n t a c c o u n t i n g p o l i c i e s ( c o n t i n u e d )
1 . 1 3 . 3 .
c u r r e n t a n d d e f e r r e d t a x f o r t h e p e r i o d
Current and deferred tax is recognised as an expense or income in the statement of comprehensive income, except
when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised
directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken
into account in the determination of goodwill or excess.
1 . 1 3 . 4 .
t a x c o n s o l i d a t i o n
The company and its wholly-owned Australian resident entities are part of a tax-consolidated group under Australian
taxation law. Cash Converters International Limited is the head entity in the tax consolidated group. Tax expense/
income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the
tax consolidated group are recognised in the separate financial statements of the members of the tax-consolidated
group using the ‘separate taxpayer within group’ approach. Current tax liabilities and assets and deferred tax
assets arising from unused tax losses and tax credits of the members of the tax-consolidated group are recognised
by the Company (as head entity in the tax-consolidated group).
Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts
are recognised as payable to or receivable by the Company and each member of the group in relation to the tax
contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated
group in accordance with the arrangement. Where the tax contribution amount recognised by each member of the
tax-consolidated group for a particular period is different to the aggregate of the current tax liability or asset and
any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is
recognised as a contribution from (or distribution to) equity participants.
1 . 1 4 p l a n t a n d e q u i p m e n t
Plant and equipment, leasehold improvements and equipment under finance lease are stated at cost less
accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition
of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined
by discounting the amounts payable in the future to their present value as at the date of acquisition.
Depreciation is provided on plant and equipment. Depreciation is calculated on a straight line basis so as to write
off the net cost or other re-valued amount of each asset over its expected useful life to its estimated residual value.
Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the
shorter, using the straight line method. The estimated useful lives, residual values and depreciation method are
reviewed at the end of each annual reporting period. The following estimated useful lives are used in the calculation
of depreciation:
Leasehold improvements
Plant and equipment
Equipment under finance lease
Fixtures & fittings
1 . 1 5 i n t a n g i b l e a s s e t s
1 . 1 5 . 1.
t r a d e n a m e s
8 years
5 years
5 years
8 years
Trade names are recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a
straight line basis over the assets estimated useful lives of 100 years. The estimated useful life and amortisation
method is reviewed at the end of each annual reporting period.
39.
//annual report 2014
/ / 1 . s i g n i f i c a n t a c c o u n t i n g p o l i c i e s ( c o n t i n u e d )
1 . 1 5 i n t a n g i b l e a s s e t s ( c o n t i n u e d )
1 . 1 5 . 2 .
c u s t o m e r r e l a t i o n s h i p s
Customer relationships are recorded at fair value at acquisition date less accumulated amortisation and impairment.
Customer relationships are recognised when franchise operations are acquired by the consolidated entity as
required under AASB 3 Business Combinations and AASB 138 Intangible Assets and are amortised over 5 years.
1 . 1 5 . 3.
r e a c q u i r e d r i g h t s
Reacquired rights are recorded at fair value at acquisition date less accumulated amortisation and impairment.
Reacquired rights are recognised when franchise operations are acquired by the consolidated entity as required
under AASB 3 Business Combinations and AASB 138 Intangible Assets, and are amortised over the remaining life
of the right concerned or the useful economic life of the asset where the reacquired right is indefinite.
1 . 1 5 . 4 .
i n t a n g i b l e a s s e t s a c q u i r e d i n a b u s i n e s s c o m b i n a t i o n
All potential intangible assets including software and reacquired rights, acquired in a business combination are
identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their
fair value can be measured reliably.
1 . 1 5 . 5 .
s o f t w a r e
Software development expenditure incurred is recognised when it is possible that future economic benefits that
are attributable to the asset will flow to the entity. Following initial recognition of the development expenditure, the
cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated
impairment losses.
Any expenditure carried forward is amortised on a straight line basis over the estimated useful life of 10 years.
1 . 1 6 i m p a i r m e n t o f o t h e r t a n g i b l e a n d i n t a n g i b l e a s s e t s
At each reporting date, the consolidated entity reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if
any). Where the asset does not generate cash flows that are independent from other assets, the consolidated entity
estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future
cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised in profit or loss immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is
increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying
amount does not exceed the carrying amount that would have been determined had no impairment loss been
recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in
profit or loss immediately.
1 . 1 7 i n v e n t o r i e s
Inventories are valued at the lower of cost and net realisable value. Costs, including purchase cost on a first in first
out basis are assigned to inventory on hand by the method most appropriate to each particular class of inventory,
with the majority being valued on a first in first out basis. Net realisable value represents the estimated selling price
less all estimated costs of completion and costs necessary to make the sale.
40.
//cash converters international
/ / 1 . s i g n i f i c a n t a c c o u n t i n g p o l i c i e s ( c o n t i n u e d )
1 . 1 8 p r o v i s i o n s
Provisions are recognised when the consolidated entity has a present obligation, the future sacrifice of economic
benefits is probable, and the amount of the provision can be measured reliably.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a
provision is measured using the cashflows estimated to settle the present obligation, its carrying amount is the
present value of those cashflows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount
of the receivable can be measured reliably.
1 . 1 9 f i n a n c i a l i n s t r u m e n t s
Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual
provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately
in profit or loss.
1 . 1 9 . 1 .
f i n a n c i a l a s s e t s
Investments are recognised and derecognised on trade date where purchase or sale of an investment is under a
contract whose terms require delivery of the investment within the timeframe established by the market concerned,
and are initially measured at fair value, net of transaction costs. Subsequent to initial recognition, investments in
subsidiaries are measured at cost in the company’s separate accounts.
Other financial assets are classified as ‘loans and receivables’.
e f f e c t i v e i n t e r e s t m e t h o d
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset, or where appropriate, a shorter period.
l o a n s a n d r e c i v a b l e s
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in
an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost
using the effective interest method, less any impairment. Interest income is recognised by applying the effective
interest rate, except for short-term receivables when the effect of discounting is immaterial.
i m p a i r m e n t o f f i n a n c i a l a s s e t s
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at
the end of each reporting period. Financial assets are impaired where there is objective evidence that as a result
of one or more events that occurred after the initial recognition of the financial asset the estimated future cash
flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the
impairment is the difference between the asset’s carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate.
41.
//annual report 2014 / / 1 . s i g n i f i c a n t a c c o u n t i n g p o l i c i e s ( c o n t i n u e d )
1 . 1 9 f i n a n c i a l i n s t r u m e n t s ( c o n t i n u e d )
1 . 1 9 . 1 .
f i n a n c i a l a s s e t s ( c o n t i n u e d )
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with
the exception of trade receivables and personal loans where the carrying amount is reduced through the use of
an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in
the carrying amount of the allowance account are recognised in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively
to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed
through profit or loss to the extent the carrying amount of the investment at the date the impairment is reversed
does not exceed what the amortised cost would have been had the impairment not been recognised.
1 . 1 9 . 2 .
f i n a n c i a l l i a b i l i t i e s a n d e q u i t y i n s t r u m e n t s
c l a s s i f i c a t i o n a s d e b t a n d e q u i t y i n s t r u m e n t s
Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the
contractual arrangement.
e q u i t y i n s t r u m e n t s
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all
of its liabilities. Equity instruments issued by a group entity are recognised at the proceeds received, net of direct
issue costs.
i n t e r e s t a n d d i v i d e n d s
Interest and dividends are classified as expenses or as distributions of profit consistent with the statement
of financial position classification of the related debt or equity instruments or component parts of compound
instruments.
f i n a n c i a l g u a r a n t e e c o n t r a c t l i a b i l i t i e s
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the
holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the
terms of a debt instrument.
Financial guarantee contract issued by a group entity are initially measured at their fair values and are subsequently
measured at the higher of:
•
•
•
the amount of the obligation under the contract, as determined in accordance with AASB 137
‘Provisions, Contingent Liabilities and Contingent Assets’; and
the amount initially recognised less, where appropriate, cumulative amortisation recognised.
o t h e r f i n a n c i a l l i a b i l i t i e s
Other financial liabilities, including borrowings and trade and other payables, are initially measured at fair value,
net of transaction costs.
Trade payables and other accounts payable are recognised when the consolidated entity becomes obliged to make
future payments resulting from the purchase of goods and services.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with
interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to
the net carrying amount on initial recognition.
42.
//cash converters international / / 1 . s i g n i f i c a n t a c c o u n t i n g p o l i c i e s ( c o n t i n u e d )
1 . 2 0 g o o d s a n d s e r v c e s t a x
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
i.
ii.
where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as
part of the cost of acquisition of an asset or as part of an item of expense; or
for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables
or payables.
Cash flows are included in the cash flow statement on a net basis. The GST component of cash flows arising from
investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as
operating cash flows
1 . 2 1 c o m p a r a t i v e f i n a n c i a l i n f o r m a t i o n
Certain comparative information within the statement of financial position has been reclassified to allow
comparability with current period presentation.
1 . 2 2 s t a n d a r d s a n d i n t e r p r e t a t i o n s i n i s s u e n o t y e t a d o p t e d
At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in
issue but not yet effective.
standard/interpretation
AASB 9 ‘Financial Instruments’, and the relevant amending
standards*
AASB 1031 ‘Materiality’ (2013)
AASB 2012-3 ‘Amendments to Australian Accounting
Standards – Offsetting Financial Assets and Financial
Liabilities’
AASB 2013-3 ‘Amendments to AASB 136 – Recoverable
Amount Disclosures for Non-Financial Assets’
AASB 2013-4 ‘Amendments to Australian Accounting
Standards – Novation of Derivatives and Continuation of
Hedge Accounting’
AASB 2013-9 ‘Amendments to Australian Accounting
Standards – Conceptual Framework, Materiality and
Financial Instruments’
AASB 2014-1 ‘Amendments to Australian Accounting
Standards’
- Part A: ‘Annual Improvements 2010–2012 and 2011–
2013 Cycles’
- Part B: ‘Defined Benefit Plans: Employee Contributions
(Amendments to AASB 119)’
- Part C: ‘Materiality’
AASB 2014-1 ‘Amendments to Australian Accounting
Standards’ – Part D: ‘Consequential Amendments arising
from AASB 14’
AASB 2014-1 ‘Amendments to Australian Accounting
Standards’ – Part E: ‘Financial Instruments’
effective for annual
reporting periods
beginning on or after
expected to be
initially applied in
the financial year
ending
1-Jan-18
1-Jan-14
1-Jan-14
1-Jan-14
1-Jan-14
30-Jun-19
30-Jun-15
30-Jun-15
30-Jun-15
30-Jun-15
1-Jan-14
30-Jun-15
1-Jul-14
30-Jun-15
1-Jan-16
30-Jun-17
1-Jan-15
30-Jun-16
43.
//annual report 2014
/ / 1 . s i g n i f i c a n t a c c o u n t i n g p o l i c i e s ( c o n t i n u e d )
1 . 2 2 s t a n d a r d s a n d i n t e r p r e t a t i o n s i n i s s u e n o t y e t a d o p t e d (cont i n u e d )
AASB 14 ‘Regulatory Deferral Accounts’
1-Jan-16
30-Jun-17
At the date of authorisation of the financial statements, the following IASB Standards and IFRIC Interpretations
were in issue but not yet effective, although Australian equivalent Standards and Interpretations have not yet been
issued.
Accounting for Acquisitions of Interests in Joint Operations
(Amendments to IFRS 11)
Clarification of Acceptable Methods of Depreciation and
Amortisation (Amendments to IAS 16 and IAS 38)
IFRS 15 ‘Revenue from Contracts with Customers’
1-Jan-16
1-Jan-16
1-Jan-17
30-Jun-17
30-Jun-17
30-Jun-18
*The AASB has issued the following versions of AASB 9 and the relevant amending standards;
•
•
•
AASB 9 ‘Financial Instruments’ (December 2009), AASB 2009-11 ‘Amendments to Australian
Accounting Standards arising from AASB 9’, AASB 2012-6 ‘Amendments to Australian Accounting
Standards – Mandatory Effective Date of AASB 9 and Transition Disclosures’
AASB 9 ‘Financial Instruments’ (December 2010), AASB 2010-7 ‘Amendments to Australian Accounting
Standards arising from AASB 9 (December 2010)’, AASB 2012-6 ‘Amendments to Australian Accounting
Standards – Mandatory Effective Date of AASB 9 and Transition Disclosure’.
In December 2013 the AASB issued AASB 2013-9 ‘Amendment to Australian Accounting Standards –
Conceptual Framework, Materiality and Financial Instruments’, Part C – Financial Instruments.
This amending standard has amended the mandatory effective date of AASB 9 to 1 January 2017. For
annual reporting periods beginning before 1 January 2017, an entity may early adopt either AASB 9
(December 2009) or AASB 9 (December 2010) and the relevant amending standards.
/ / 2 . critical accounting judgments and key sources of estimation uncertainty
In the application of the consolidated entity’s accounting policies, management is required to make judgments,
estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on historical experience and various other factors
that are believed to be reasonable under the circumstance, the results of which form the basis of making the
judgments. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and future periods.
2 . 1 c r i t i c a l j u d g e m e n t s i n a p p l y i n g a c c o u n t i n g p o l i c i e s
2 . 1 . 1 .
a c q u i s i t i o n b y c o n t r a c t
During the year the Group acquired an 80% interest in Green Light Auto Group Pty Ltd (“GLA”) as a result of
the exercise of a convertible note, which was exercisable from 1 July 2013. The legal acquisition date was 23
September 2013, being the date that CCIL exercised its conversion option.
After analysis of the substance of the conversion option it was concluded that as at 1 July 2013, the Group did
have the ability to control GLA, however it did not have an in-substance ownership interest, in that it could not
share in economic returns until legal exercise.
44.
//cash converters international
/ / 2 . c r i t i c a l a c c o u n t i n g j u d g m e n t s a n d k e y s o u r c e s o f e s t i m a t i o n
u n c e r t a i n t y ( c o n t i n u e d )
2 . 1 c r i t i c a l j u d g e m e n t s i n a p p l y i n g a c c o u n t i n g p o l i c i e s ( c o n t i n u e d )
2 . 1 . 1 .
a c q u i s i t i o n b y c o n t r a c t ( c o n t i n u e d )
As at 1 July 2013 CCIL had the ability to control the business, although did not have the right to share in the
economic returns during the period prior to actual exercise, therefore resulting in the fact that no “in-substance”
ownership interest was held prior to legal acquisition on 23 September, consequently a 100% non-controlling
interest was recognised as at 1 July 2013, and until the legal acquisition date.
As at 23 September 2013, legal ownership was established, and the financial statements of the Group reflect the
acquisition of the 80% interest in GLA. A proportion of the non-controlling interest was recognised for the 20% of
GLA not acquired as at 23 September 2013.
2 . 2 k e y s o u r c e s o f e s t i m a i o n u n c e r t a i n t y
The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the
reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year:
2 . 2 . 1 .
i m p a i r m e n t o f g o o d w i l l
Determining whether goodwill is impaired requires an estimation of recoverable value of the cash-generating units
to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash
flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present
value.
The carrying amount of goodwill at the reporting date was $110,726,057 (2013: $98,771,899) refer to note 15.
2 . 2 . 2 .
u s e f u l l i v e s o f o t h e r i n t a n g i b l e a s s e t s
The consolidated entity reviews the estimated useful lives of other intangible assets at the end of each annual
reporting period. The estimation of the remaining useful lives of the other intangible assets requires the entity to
make significant estimates based on both past performance and expectations of future performance.
The carrying amount of other intangible assets at the balance sheet date was $21,899,866 (2013: $22,423,074)
refer to note 14.
The impairment of personal loans requires the consolidated entity to assess impairment regularly. The credit
provisions raised (specific and collective) represent management’s best estimate of the losses incurred in the loan
portfolio at reporting date based on their experienced judgment. The collective provision is estimated on the basis
of historical loss experience for assets with similar credit characteristics. The historical loss experience is adjusted
based on current observable data and events. The use of such judgments and reasonable estimates is considered.
The presentation and related classification of amounts included in the consolidated statement of profit or loss and
other comprehensive income complies with the changes of AASB 2011 – 09 in respect to the classification of other
comprehensive income and its characteristics as to whether the items are likely or not to be reflected in the Profit
or Loss statement in future periods. This amended classification has had no effect on the profit before or after tax
in either year presented.
45.
//annual report 2014
/ / 3 . r e v e n u e s a n d e x p e n s e s
3.1 franchise fees
Weekly franchise fees
Initial Fees
Advertising levies
Training levies
Computer levies
2014
$
2013
$
7,803,908
7,365,820
80,434
486,750
391,890
186,137
446,900
377,700
2,051,200
1,929,533
10,814,182
10,306,090
3.2 financial services interest revenue
Instalment credit loan interest
616,258
2,170,566
Personal loan interest
Loan establishment fees
Licence fees
Pawn broking fees
Cheque cashing commission
Financial services commission
Vehicle lease interest
3.3 sale of goods
Retail sales
Retail wholesales
Vehicle trade sales
3.4 other revenue
Bank Interest
Other vehicle revenue (note 1.7.6)
Other
3.5 cost of sales
Sale of goods
Personal loan bad debts
Cash advance bad debts
Franchise fees bad debts
Recovery of bad debts
Vehicles
46.
108,057,901
32,595,291
12,678
23,452,903
1,201,069
78,535,625
25,072,013
13,122,324
15,951,171
1,255,810
33,300,838
32,775,378
3,695,847
-
202,932,785
168,882,887
110,489,531
90,642,383
919,609
809,597
2,376,165
-
112,218,737
93,018,548
597,450
4,193,879
911,874
5,703,203
65,438,152
48,148,982
3,031,721
91,852
375,894
-
139,300
515,194
55,677,215
38,780,413
2,391,105
104,065
(4,218,968)
(2,795,122)
6,376,982
-
118,868,721
94,157,676
//cash converters international / / 3 . r e v e n u e s a n d e x p e n s e s ( c o n t i n u e d )
3.6 a d m i n i s t r a t i o n e x p e n s e s
Employee benefits
Share based payments
Superannuation expense
Motor vehicle/travel costs
3.7 o c c u p a n c y e x p e n s e s
Rent
Outgoings
Other
3.8 o t h e r e x p e n s e s
Legal fees
Area agent fees/commission
Professional and registry costs
Auditing and accounting services
Bank charges
Loss on disposal of assets
Other expenses from ordinary activities
Depreciation
Amortisation
3.9 f i n a n c e c o s t s
Interest
Finance lease charge
2014
$
2013
$
73,473,603
57,249,326
748,805
3,881,252
2,441,737
2,000,910
2,950,225
2,171,685
80,545,397
64,372,146
12,236,494
5,756,829
1,527,623
9,174,017
4,267,998
1,596,002
19,520,946
15,038,017
1,928,184
1,285,036
28,849,586
18,265,895
4,141,354
942,978
4,701,359
484,418
2,741,183
686,969
3,979,328
6,219
15,411,230
10,036,466
5,217,044
2,706,667
4,332,038
2,123,955
64,382,820
43,457,089
8,514,455
62,729
8,577,184
2,869,137
46,597
2,915,734
47.
//annual report 2014 / / 4 . i n c o m e t a x
4 . 1 c o n s o l i d a t e d i n c o m e s t a t e m e n t
The major components of income tax expense for the years ended 30 June 2014 and 2013 are:
Tax expense comprises:
Current tax expense
2014
$
2013
$
17,865,206
15,866,871
Adjustments in respect of current income tax of previous year
-
Deferred tax expense relating to the origination and reversal of temporary differences
(6,957,030)
(257,168)
(815,468)
Total income tax expense reported in income statement
10,908,176
14,794,235
A reconciliation between tax expense and the product of accounting profit multiplied by Australia’s domestic tax
rate for the years ended 30 June 2014 and 2013 is as follows:
Accounting profit before tax from continuing operations
At Australia’s statutory income tax rate of 30% (2013: 30%)
Adjustments in respect to current income tax of previous years
Income tax rate differential
Non-deductible expenses for tax purposes
Tax effect of share based payment expense
Other
32,040,465
47,664,207
9,612,141
14,299,262
-
(257,168)
559,079
765,518
(28,562)
107,749
504,505
-
-
139,887
Income tax expense reported in the consolidated income statement
10,908,176
14,794,235
4 . 2 d e f e r r e d t a x
Deferred tax relates to the following:
Deferred Tax Assets
Allowance for doubtful debts
Accruals
Provision for employee entitlements
Other provisions
Deferred income
Other
Carried Forward Losses
Deferred Tax Liabilities
Prepayments
Fixed assets
Intangible assets
Net deferred tax assets
48.
7,635,785
4,610,772
86,765
169,712
1,429,335
1,178,759
849,498
513,890
-
1,328,730
2,425,506
3,863,832
517,654
-
16,290,721
8,319,517
-
(236)
(629,636)
(557,283)
(2,117,671)
(2,134,400)
(2,747,307)
(2,691,919)
13,543,414
5,627,598
//cash converters international / / 4 . i n c o m e t a x ( c o n t i n u e d )
4 . 3 r e c o n c i l i a t i o n o f d e f e r r e d t a x a s s e t s n e t
Opening balance as of 1 July
Tax income/(expense) during the period recognised in profit or loss
Other
Closing balance as at 30 June 2014
4 . 4 u n r e c o g n i s e d d e f e r r e d t a x b a l a n c e s
Tax losses - revenue
4 . 5 t a x c o n s o l i d a t i o n
2014
$
5,627,598
6,957,030
958,786
2013
$
4,812,132
815,466
-
13,543,414
5,627,598
166,511
166,511
166,511
166,511
4.5.1 relevance of tax consolidation to the consolidated entity
The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group with
effect from 1 July 2003 and are therefore taxed as a single entity from that date. The head entity within the tax-
consolidated group is Cash Converters International Limited. The members of the tax-consolidated group are
identified in note 23.
4.5.2 nature of tax funding arrangements and tax sharing agreements
Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax-sharing agreement
with the head entity. Under the terms of the tax funding arrangement, Cash Converters International Limited and
each of the entities in the tax-consolidated group has agreed to pay a tax equivalent payment to or from the head
entity, based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts
receivable from or payable to other entities in the tax-consolidated group.
The tax sharing agreement entered into between members of the tax-consolidated group provides for the
determination of the allocation of income tax liabilities between the entities should the head entity default on its tax
payment obligations. No amounts have been recognized in the financial statements in respect of this agreement
as payment of any amounts under the tax sharing agreement is considered remote.
/ / 5 . r e m u n e r a t i o n o f a u d i t o r s
Auditor of the parent entity
Audit or review of the financial report
Taxation services
Other non-audit services*
Related practice of the parent entity auditor
Audit
Taxation services
* Relates to accounting assistance for employee share trust and securitisation facilities
The auditor of Cash Converters International Ltd is Deloitte Touche Tohmatsu
445,200
137,078
24,300
91,200
245,200
942,978
329,082
184,001
36,000
67,570
70,316
686,969
49.
//annual report 2014 / / 6 . c a s h a n d c a s h e q u i v a l e n t s
6 . 1 c a s h a t b a n k a n d o n h a n d
On hand
In bank *
2014
$
3,004,903
23,838,169
26,843,072
2013
$
2,026,002
18,703,328
20,729,330
* Cash In bank of $23,838,169 (2013 $18,703,328) includes restricted cash of $5,183,191 (2013
$4,644,970) that is held in accounts controlled by the CCPF Warehouse Trust No.1 that was established to operate
the company’s Securitisation facility with Westpac bank. The facility prescribes that cash deposited in this account
can only be used to fund new principal loan advances. Surplus funds at the end of the period are redistributed in
keeping with the terms of the Securitisation facility.
For the purpose of the statement of cash flows, cash and cash equivalents comprise the following at 30 June:
Cash and cash equivalents
26,843,072
20,729,330
26,843,072
20,729,330
6 . 2 reconciliation of profit for the year to net cash flows from operating activities
Profit after tax
21,132,289
32,869,972
Non-cash adjustment to reconcile profit after tax to net cash flows:
Amortisation
Depreciation
Share based payment transaction expense
Bad debts written off
Loss on sale of plant and equipment
Share of net loss of equity accounted investment
Change in assets and liabilities:
(Increase)/Decrease in inventories
(Increase)/Decrease in prepayments
(Increase)/Decrease in trade and loan receivables
Increase/(Decrease) in trade payables and accruals
Increase/(Decrease) in employee and other provisions
(Increase)/Decrease in income tax payable
Increase/(Decrease) in deferred tax
Net Cash generated by operating activities
2,706,667
5,217,044
748,805
2,123,955
4,332,038
2,000,910
47,053,587
38,480,461
484,418
41,465
6,219
-
(754,324)
(1,878,184)
(2,225,303)
(4,323,176)
(75,045,743)
(63,837,892)
6,259,078
812,438
5,222,939
(7,659,096)
4,341,383
3,764,750
1,254,276
(1,960,163)
(490,222)
11,995,825
50.
//cash converters international
/ / 7 . t r a d e a n d o t h e r r e c e i v a b l e s
7 . 1 c u r r e n t
Trade receivables (i)
Allowance for impairment losses
Instalment credit loans (ii)
Allowance for impairment losses
Total trade receivables (net)
Other receivables (iii)
2014
$
5,696,476
(2,343,601)
3,352,875
420,906
-
420,906
2013
$
7,150,967
(2,763,030)
4,387,937
630,889
-
630,889
3,773,781
5,018,826
29,768,572
8,012,769
Total trade and other receivables
33,542,353
13,031,595
Personal short term loans (iv)
Allowance for impairment losses
Deferred establishment fees (v)
Total personal loan receivables (net)
Total current
7 . 2 n o n - c u r r e n t
Instalment credit loans (ii)
Loans - Green Light Auto (vi)
- Cash Converters Holdings LP (New Zealand) (vii)
Total non-current
166,944,852
145,716,872
(31,135,507)
(30,707,355)
(12,132,153)
(5,730,285)
123,677,192
109,279,232
157,219,545
122,310,827
92,423
-
14,722,481
14,814,904
276,710
14,199,780
-
14,476,490
i.
ii.
Trade debtors include weekly franchise fees, wholesale sales, pawn broking fees; cash advance fees,
default fees and OTC fees. Where the collection of the debtor is doubtful an allowance for impairment
losses is recognised. The average credit period on sales is 30 days. No interest is charged for the first
30 days from the date of the invoice. Thereafter, interest is charged at 2% per month on the
outstanding balance.
The instalment credit loans relate to Cash Converters Pty Ltd and have a maximum maturity of 5 years.
Interest rates are fixed at the time of entering into the contract at the rate of 12% or 13% depending
on the repayment options agreed with each franchisee. To secure the instalment credit loans, a fixed
and floating charge is held over the franchisee’s store. Where collection of the debtor is doubtful and the
assessed value of the property is less than the amount outstanding, an allowance for impairment losses
is recognised for the shortfall.
iii.
Other receivables include GST receivable, development agent fees outstanding, sub-master license
sales,Mon-E fees, financial commission and the present value of vehicle lease receivables
51.
//annual report 2014
/ / 7 . t r a d e a n d o t h e r r e c e i v a b l e s ( c o n t i n u e d )
7 . 2 n o n- c u r r e n t ( c o n t i n u e d )
iv.
v.
vi.
vii.
The credit period provided in relation to personal short term loans varies from 30 days to 12 months
Interest is charged on these loans at a fixed rate which varies dependent on the state or country
of origin. An allowance has been made for estimated unrecoverable amounts arising from loans already
issued, which has been determined by reference to past default experience. Before accepting any new
customers, the consolidated entity uses an external scoring system to assess the potential customer’s
credit quality and define credit limits by customer. There is no concentration of credit risk within
the personal loan book.
Deferred establishment fees relate to establishment fees charged on personal loans. The full amount of
the fee is deferred at the commencement of the loan and is the recognised through the income
statement at an effective interest rate over the life of the loan. The balance shown above reflects
the amount of the fees still to be recognised at the end of the reporting period.
Unsecured loan advanced to Greenlight Auto Group Pty Ltd
Commercial loan advanced to Cash Converters Holdings LP (New Zealand master franchisee) with a
maturity date of 15 September 2018, interest is charged quarterly at a rate of 8% per annum.
7 . 3 a l l o w a n c e f o r i m p a i r m e n t l o s s e s - p e r s o n a l l o a n r e c e i v a b l e s
As at 30 June 2014, personal loan receivables of $31,135,507 (2013: $30,707,355) were impaired and fully provided
for.
See below for the movements in the provision for impairment of personal loan receivables.
Balance at beginning of the year
Impairment losses recognised on receivables
Amounts written off as uncollectible
Balance at end of the year
2014
$
2013
$
30,707,355
30,298,620
14,576,721
34,942,190
(29,870,468)
(18,811,556)
31,135,507
30,707,355
In determining the recoverability of a personal loan, the consolidated entity considers any change in the credit
quality of the receivable from the date credit was initially granted up to the reporting date. The concentration of
credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe that
there is no further credit provision required in excess of the allowance for doubtful debts.
As at 30 June 2014, the ageing analysis of personal loan receivables is as follows:
0-30 days
31-60 days
61-90 days
+ 90 days
+ 90 days
total
$
$
pdni
$
pdni
$
2014
2013
166,944,852
129,747,995
3,562,261
1,693,217
145,716,872
109,981,183
3,016,498
1,087,400
pdni
$
805,872
924,436
ci
$
31,135,507
30,707,355
*PDNI: past due not impaired
CI: considered impaired
52.
//cash converters international
/ / 7 . t r a d e a n d o t h e r r e c e i v a b l e s ( c o n t i n u e d )
7 . 4 a l l o w a n c e f o r i m p a i r m e n t l o s s e s - t r a d e r e c e i v a b l e s
As at 30 June 2014, trade receivables and instalment credit loans of $2,343,601 (2013: $2,763,030) were impaired
and fully provided for. See below the movements in the provision for impairment of trade receivables.
Balance at beginning of the year
Impairment losses recognised on receivables
Amounts written off as uncollectible
Balance at end of the year
2014
$
2,763,030
180,012
(599,441)
2,343,601
2013
$
2,356,036
581,771
(174,777)
2,763,030
As at 30 June 2014, the ageing analysis of trade receivables is as follows:
0-30 days
31-60 days
61-90 days
+ 90 days
+ 90 days
total
$
$
pdni
$
2014
2013
6,209,805
3,346,797
2,036
8,058,566
4,004,262
363,023
pdni
$
4,042
20,654
pdni
$
513,329
907,597
ci
$
2,343,601
2,763,030
*PDNI: past due not impaired
CI: considered impaired
/ / 8 . i n v e n t o r i e s
New and pre-owned goods at cost
New and used motor vehicles at cost
/ / 9 . o t h e r a s s e t s
Prepayments
2014
$
2013
$
23,357,104
21,783,101
2,204,606
-
25,561,710
21,783,101
2014
$
2013
$
10,578,199
8,587,646
53.
//annual report 2014 / / 1 0 . p l a n t a n d e q u i p m e n t
leasehold
improvements
at cost
$
plant and
equipment at
equipment
under finance
lease at
leaseholds
improvements
under finance
lease at
cost
$
cost
$
cost
$
total
$
7,524,608
19,482,081
81,670
1,049,277
28,137,636
-
969,204
2,304,030
3,313,656
-
-
-
172,192
(15,309)
861,163
(62,700)
-
-
-
-
-
969,204
5,617,686
(78,009)
1,033,355
10,000,830
24,610,795
18,970
1,049,277
35,679,872
220,917
652,996
1,017,295
3,173,764
(245,239)
(662,538)
257,760
1,317,885
-
-
-
-
-
-
-
-
873,913
4,191,059
(907,777)
1,575,645
cost
Balance as at 1 July 2012
Acquisition through business
combinations
Additions
Disposals
Net foreign currency exchange
differences
Balance as at 30 June 2013
Acquisition through business
combinations
Additions
Disposals
Net foreign currency exchange
differences
Balance as at 30 June 2014
11,251,563
29,092,902
18,970
1,049,277
41,412,712
depreciation
Balance as at 1 July 2012
1,314,182
6,763,683
39,455
438,953
8,556,273
Disposals
Depreciation expense
Net foreign currency exchange
differences
-
(11,666)
(23,126)
-
(34,792)
1,142,411
3,055,628
2,641
131,358
4,332,038
34,468
257,013
-
-
291,481
Balance as at 30 June 2013
2,491,061
10,064,658
18,970
570,311
13,145,000
Acquisition through business
combinations
Disposals
Depreciation expense
Net foreign currency exchange
differences
20,688
150,655
(83,775)
(300,385)
1,311,712
3,774,149
81,409
595,313
-
-
-
-
-
-
171,343
(384,160)
131,183
5,217,044
-
676,722
Balance as at 30 June 2014
3,821,095
14,284,390
18,970
701,494
18,825,949
Net book value
As at 30 June 2013
As at 30 June 2014
7,509,769
14,546,137
7,430,468
14,808,512
-
-
478,966
22,534,872
347,783
22,586,763
54.
//cash converters international / / 1 1 . t r a d e a n d o t h e r p a y a b l e s
current
Trade payables
Accruals
2014
$
6,482,322
20,311,886
26,794,208
2013
$
5,451,759
14,596,705
20,048,464
The consolidated entity has financial risk management policies in place to ensure that all payables are paid within
the allowed credit period in order to avoid the payment of interest on outstanding accounts.
/ / 1 2 . b o r r o w i n g s
12.1 current
Loans (i)
Securitisation/warehousing facilities (ii)
Hire purchase and lease liabilities (note 19) (iii)
12.2 non-current
Loans (i)
Bond
Hire purchase and lease liabilities (note 19) (iii)
2014
$
-
59,613,840
328,923
2013
$
18,000,000
52,061,163
477,368
59,942,763
70,538,531
5,000,000
58,945,692
73,456
64,019,148
-
-
389,521
389,521
i.
ii.
The bank overdraft and the loans payable (which includes term loans and a variable rate bill facility) are
secured by a fixed and floating charge over the total assets of the entity and a cross guarantee from the
parent entity. There have been no breaches of loan covenants during the current or prior period.
The Securitisation/warehousing facilities represents two amounts:
1) A Class A note liability relating to notes issued by the CCPF Warehouse Trust No.1, a consolidated
subsidiary established as part of the borrowing arrangement with Westpac Banking Corporation. The notes
fund eligible personal loan receivables originated by CCPF which generally have a maturity of less than
twelve months and are secured on those receivables. Collections received in relation to these receivables
are used to repay the notes on a monthly basis as they are received and additional Class A notes may be
issued under the terms of the funding arrangement. The notes have been presented as a current liability
because the trust does not have the unconditional right to defer settlement of the liability for at least
twelve months after the reporting period. The note subscriber is obligated to subscribe for additional
notes up to 26 March 2015, if required, up to a prescribed facility limit. Therefore in the ordinary course of
business the consolidated entity currently expects to draw additional notes in accordance with the funding
arrangement through to 26 March 2015. All amounts outstanding under the funding arrangement must be
repaid in full on or before 26 March 2016. The company is currently negotiating a 12 month extension to
the facility and an increase of $10m. to the facility limit.
2) A senior note liability relating to GLA Receivable Trust No.1, a consolidated subsidiary established in
conjunction with Fortress Finance securitisation facility. The notes fund eligible leases originated by Green
Light Auto Group Pty Ltd (GLA).
iii.
Hire purchase and lease liabilities are effectively secured as the rights to the leased asset revert to the
lessor in the event of default.
55.
//annual report 2014
/ / 1 2 . b o r r o w i n g s ( c o n t i n u e d )
1 2 . 3 f i n a n c i n g a r r a n g e m e n t s
Unrestricted access was available at balance date to the following lines of credit:
12.3.1. total facilities
Bank overdrafts
Variable rate bill facility
Securitisation Facilities
Bond
Term loans
12.3.2. used at balance date
Bank overdrafts
Variable rate bill facility
Securitisation Facilities
Bond
Term loans
12.3.3. un-used at balance date
Bank overdrafts
Variable rate bill facility
Securitisation Facilities
Bond
Term loans
2014
$
2013
$
480,799
-
80,000,000
60,000,000
10,000,000
464,690
18,000,000
60,000,000
-
-
150,480,799
78,464,690
-
-
59,990,583
60,000,000
5,000,000
-
18,000,000
52,061,163
-
-
124,990,583
70,061,163
480,799
-
464,690
-
20,009,417
7,938,837
-
5,000,000
25,490,216
-
-
8,403,527
The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. Interest
rates are variable and are currently between two and two and three quarter percentage points above the bank base
rate. Refer to note 18 for further information in relation to financial instruments
1 2 . 4 l o a n c o n v e n a n t s a n d r e v i e w e v e n t s
The consolidated entity has borrowing facilities with Westpac Banking Corporation in Australia. All facilities are
subject to various loan covenants and review events.
/ / 1 3 . p r o v i s i o n s
13.1 current
Employee benefits
Fringe benefits tax
13.2 non-current
Employee benefits
56.
4,600,899
37,989
4,638,888
3,824,722
45,793
3,870,515
148,539
148,539
104,474
104,474
//cash converters international / / 1 4 . o t h e r i n t a n g i b l e a s s e t s
1 4 . 1 a l l o c a t i o n o f o t h e r i n t a n g i b l e a s s e t s t o c a s h- g e n e r a t i n g u n i t s
Other intangible assets are allocated to their respective cash-generating unit and tested for impairment annually.
The carrying amount of reacquired rights, and trade names / customer relationships allocated to cash generating
units that are significant individually or in aggregate is as follows:
Franchise operations
Financial services – administration (MON-E)
Financial services – personal loans (CCPF)
Corporate stores (Australia)
Corporate stores (UK)
Vehicle leasing
2014
$
2013
$
14,816,900
13,871,483
-
718,146
2,595,561
3,751,583
17,672
-
595,822
4,044,828
3,910,941
-
21,899,862
22,423,074
1 4 . 2 c a t e g o r i e s o f o t h e r i n t a n g i b l e a s s e t s
cost
reacquired
rights (i)
$
trade names/
customer
relationship
(ii)
$
software
under
finance
lease
software
$
$
total
$
Balance as at 1 July 2012
3,242,932
13,194,835
5,996,122
446,588
22,880,477
Acquisition through business combinations*
5,048,000
2,156,000
Additions
Disposals
Net foreign currency exchange differences
99,408
-
55,363
-
-
-
-
1,892,719
-
3,620
-
-
-
-
7,204,000
1,992,127
-
58,983
Balance as at 30 June 2013
8,445,703
15,350,835
7,892,461
446,588
32,135,587
Acquisition through business combinations*
Additions
Disposals
Adjustments**
-
-
-
-
-
-
(106,000)
71,000
2,174
2,159,211
-
-
Net foreign currency exchange differences
82,205
-
5,058
-
-
-
-
-
2,174
2,159,211
-
(35,000)
87,263
Balance as at 30 June 2014
8,421,908
15,421,835
10,058,904
446,588
34,349,235
amortisation
Balance as at 1 July 2012
Amortisation charge
Disposals
Net foreign currency exchange differences
897,950
4,535,346
1,744,272
224,730
7,402,298
1,184,961
178,755
694,921
65,318
2,123,955
-
182,640
-
-
-
3,620
-
-
-
186,260
Balance as at 30 June 2013
2,265,551
4,714,101
2,442,813
290,048
9,712,513
Acquisition through business combinations*
-
-
52
-
52
Amortisation charge
Disposals
Net foreign currency exchange differences
1,048,400
684,744
910,315
63,208
2,706,667
-
25,079
-
-
-
5,058
-
-
-
30,137
Balance as at 30 June 2014
3,339,030
5,398,845
3,358,238
353,256
12,449,369
57.
//annual report 2014 / / 1 4 . o t h e r i n t a n g i b l e a s s e t s ( c o n t i n u e d )
1 4 . 2 c a t e g o r i e s o f o t h e r i n t a n g i b l e a s s e t s ( c o n t i n u e d )
reacquired
rights (i)
$
trade names/
customer
relationship
(ii)
$
software
under
finance
lease
software
$
$
total
$
6,180,152
10,636,734
5,449,648
156,540
22,423,074
5,082,878
10,022,990
6,700,666
93,332
21,899,866
cost
Net book value
At 30 June 2013
At 30 June 2014
* refer to note 33.1
** refer to note 33.2
i.
ii.
iii.
The useful economic life of reacquired rights is assessed on an individual asset basis in accordance
with AASB 3 Business Combination and AASB 138 Intangible Assets, where the useful economic life
is equal to the remaining life of each stores franchise agreement with the consolidated entity, in place at
the acquisition date.
The useful economic life of reacquired rights is assessed on an individual asset basis, but is not more
100 years from the date of acquisition. The directors review the economic useful life annually.
The useful economic life of customer relationships is assessed on an individual asset basis, and is
currently amortised over five years from the date of acquisition. The directors review the economic
useful life annually.
Trade names are stated at cost to the consolidated entity and relates to amounts recognised either
through the buy-back of overseas sub-master license rights, or through direct acquisition of regional
sub-master rights in Australia by Cash Converters Pty Ltd. The depreciable amount of all trade names
is amortised on a straight-line basis over their economic useful life, where material. The economic
useful life of the trade names has been assessed on an individual asset basis but not more than 100
years from the date of acquisition. The directors review the economic useful life annually.
/ / 1 5 . g o o d w i l l
1 5 . 1 g r o s s c a r r y i n g a m o u n t
Balance at beginning of financial year
Additional amounts recognised from business combinations occurring
during the year (refer Note 33.1)
Disposal *
Adjustments arising on the finalisation of acquisition accounting
Foreign exchange movement
Balance at the end of the financial year
2014
$
98,771,899
10,581,976
(37,039)
236,764
1,172,457
110,726,057
2013
$
77,249,320
20,664,643
-
-
857,936
98,771,899
* Disposals relate to Goodwill associated with the sale and closure of UK corporate stores
58.
//cash converters international
/ / 1 5 . g o o d w i l l ( c o n t i n u e d )
1 5 . 2 a c c u m u l a t e d i m p a i r m e n t l o s s e s
Balance at the beginning of the financial year
Impairment losses for the year
Balance at end of financial year
1 5 . 3 n e t b o o k v a l u e
At the beginning of the financial year
At the end of the financial year
2014
$
-
-
-
2013
$
-
-
-
98,771,899
110,726,057
77,249,320
98,771,899
1 5 . 4 a l l o c a t i o n o f g o o d w i l l t o c a s h- g e n e r a t i n g u n i t s
Goodwill has been allocated for impairment testing purposes to the following cash-generating units:
•
•
•
•
Financial services - administration (MON-E)
Financial services – personal loans (CCPF)
Corporate stores (Australia)
Corporate stores (UK)
The carrying amount of goodwill allocated to cash-generating units that are significant individually or in aggregate
is as follows
Financial services – administration (MON-E)
Financial services – personal loans (CCPF)
Corporate stores (Australia)
Corporate stores (UK)
17,292,967
18,972,344
64,800,037
9,660,709
110,726,057
17,292,967
16,780,683
56,317,599
8,380,650
98,771,899
15.4.1 financial services - adminstration (mon-e)
The recoverable amount for MON-E is determined based on a value in use calculation which uses cash flow
projections based on financial budgets approved by management covering a five-year period, and a discount
rate of 14.7% per annum (2013: 15% per annum). Terminal value has been calculated using a 2.5% growth rate.
Cash flows beyond the one-year period have been extrapolated using a steady 5% per annum growth rate.
Management believes that any reasonably possible change in the key assumptions in which the recoverable
amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount
of the cash-generating unit.
59.
//annual report 2014 / / 1 5 . g o o d w i l l ( c o n t i n u e d )
1 5 . 4 a l l o c a t i o n o f g o o d w i l l t o c a s h- g e n e r a t i n g u n i t s ( c o n t i n u e d )
15.4.2 financial services - personal loans (ccpf)
The recoverable amount for Cash Converters Personal Finance is determined based on a value in use calculation
which uses cash flow projections based on financial budgets approved by management covering a five-year
period, and a discount rate of 13.1% per annum (2013: 15% per annum). Terminal value has been calculated
using a 2.5% growth rate.
Management believes that any reasonably possible change in the key assumptions in which the recoverable
amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount
of the cash-generating unit.
15.4.3 corporate stores (uk & australia)
The recoverable amount for corporate stores is determined based on a value in use calculation which uses cash
flow projections based on financial budgets approved by management covering a five-year period, and a discount
rate of 17.6% per annum for Australia (2013: 15% per annum), 14% for the UK (2013: 15% per annum). Separate
cash flow projections have been prepared for both the UK and Australia. Terminal value has been calculated using
a 2.5% growth rate.
Cash flows beyond the one-year period, for Australian corporate stores, have been extrapolated using a
steady 3% per annum growth rate based on performance levels for the last 3 months of the first year forecast.
Management believes that any reasonably possible change in the key assumptions in which the recoverable
amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount
of the cash-generating unit.
Impairment modelling for each cash-generating unit (CGU) has been prepared separately. Working capital
requirements have been based in line with revenue growth. Capital investment, required to run the business (i.e.
replacement and non-expansionary capital expenditure), has been included based on detailed estimates for the
next financial year and incremental growth in subsequent years consistent with increasing revenues.
/ / 1 6 . i s s u e d c a p i t a l
1 6 . 1 f u l l y p a i d o r d i n a r y s h a r e s (n u m b e r)
Balance at beginning of financial year
Shares issued during the year
Balance at end of financial year
2014
2013
no of shares
no of shares
423,861,025
379,761,025
5,025,099
44,100,000
428,886,124
423,861,025
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Changes to the Corporations Act abolished the authorised capital and per value concept in relation to the share
capital from 1 July 1998. Therefore, the Company does not have a limited amount of authorised capital and issued
shares do not have a par value.
1 6 . 1 f u l l y p a i d o r d i n a r y s h a r e s (v a l u e)
Balance at the beginning of the year
New shares issued (net of issue costs)
Balance at the end of the financial year
2014
$
2013
$
151,708,656
116,812,467
4,970,411
34,896,189
156,679,067
151,708,656
There are no securities stapled to the Cash Converters International Limited shares.
60.
//cash converters international / / 1 7 . r e s e r v e s a n d r e t a i n e d e a r n i n g s
1 7 . 1 r e s e r v e s
Foreign currency translation reserve
Share-based payment reserve
Non-controlling interest acquisition reserve
Balance at the end of the financial year
17.1.1 foreign currency translation reserve
Balance at the beginning of the financial year
Translation of foreign operations
Balance at the end of the financial year
2014
$
3,062,875
2,096,186
(11,662,250)
(6,503,189)
2013
$
(2,629,872)
1,715,775
-
(914,097)
(2,629,872)
5,692,747
3,062,875
(6,028,429)
3,398,557
(2,629,872)
Exchange differences relating to the translation from the functional currencies of the Group’s foreign controlled
entities into Australian Dollars are brought to account by entries made directly to the foreign currency translation
reserve.
17.1.2 share-based payment reserve
Balance at the beginning of the financial year
Arising from share-based payment
Shares issued on exercise of performance rights
Balance at the end of the financial year
1,715,775
748,805
(368,394)
2,096,186
2,661,625
2,000,910
(2,946,760)
1,715,775
The share-based payment reserve arises due to the grant of share-based payments by the Company under the
executive performance rights plan.
17.1.3 non-controlling interest reserve
Balance at the beginning of the financial year
Arising from acquisition of non-controlling interest
Balance at the end of the financial year
-
(11,662,250)
(11,662,250)
-
-
-
The non-controlling interest acquisition reserve records the acquisition of non-controlling interest in Green Light
Auto Group Pty Ltd
1 7 . 2 r e t a i n e d e a r n i n g s
Balance at the beginning of the financial year
Net profit attributable to members of the parent entity
Issue of shares (dividend reinvestment plan)
Dividends provided for or paid
Balance at the end of the financial year
90,835,176
24,192,335
(4,602,017)
73,186,248
32,869,972
-
(12,400,352)
(15,221,044)
98,025,142
90,835,176
61.
//annual report 2014 / / 1 8 . f i n a n c i a l i n s t r u m e n t s
1 8 . 1 c a p i t a l r i s k m a n a g e m e n t
The consolidated entity manages its capital to maximise the return to stakeholders through the optimisation of
the debt and equity balance whilst ensuring that the consolidated entity is able to continue as a going concern.
The consolidated entity’s overall strategy remains unchanged from prior year.
The capital structure of the consolidated entity consists of debt, which includes the borrowings disclosed in note
12, cash and cash equivalents and equity attributable to holders of the parent, comprising issued capital, reserves
and retained earnings as disclosed in notes 16 and 17 respectively.
The consolidated entity operates globally, primarily through subsidiary companies established in the markets
in which the consolidated entity trades. None of the consolidated entity’s operations are subject to externally
imposed capital requirements.
The consolidated entity’s policy is to borrow both centrally and locally, using a variety of borrowing facilities, to
meet anticipated funding requirements.
1 8 . 2 c a t e g o r i e s o f f i n a n c i a l i n s t r u m e n t s
18.2.1 financial assets
Cash and cash equivalents
Trade and other receivables
Personal loans receivable
Investment in associates
Other financial assets (GLA convertible note)
18.2.2 financial liabilities
Trade and other payables
Borrowings
2014
$
2013
$
26,843,072
48,357,257
20,729,330
27,508,085
123,677,192
115,009,517
6,213,926
-
-
4,000,000
26,794,208
123,961,911
20,048,464
70,928,052
The consolidated entity has no material financial assets or liabilities that are held at fair value.
1 8 . 3 f i n a n c i a l r i s k m a n a g e m e n t o b j e c t i v e s
The consolidated entity’s treasury function provides services to the business, co-ordinates access to domestic
and international financial markets, and manages the financial risks relating to the operations of the consolidated
entity. The consolidated entity does not enter into or trade financial instruments, including derivative financial
instruments, for speculative purposes. The consolidated entity’s activities expose it primarily to the financial risks
of changes in foreign currency exchange rates and interest rates.
18.3.1 market risk
The consolidated entity’s activities expose it primarily to the financial risks of changes in foreign currency
exchange rates (refer note 18.3.2) and interest rates (refer note 18.3.3).
There has been no change to the consolidated entity’s exposure to market risks or the manner in which it manages
and measures the risk from the previous period.
62.
//cash converters international / / 1 8 . f i n a n c i a l i n s t r u m e n t s ( c o n t i n u e d )
1 8 . 3 f i n a n c i a l r i s k m a n a g e m e n t o b j e c t i v e s ( c o n t i n u e d )
18.3.2 foreign currency risk management
The consolidated entity undertakes certain transactions denominated in foreign currencies, hence exposures to
exchange rate fluctuations arise. Exchange rate exposures are relatively small and spot rates are normally used.
There are no foreign currency denominated monetary assets or monetary liabilities in the consolidated entity at
the reporting date.
18.3.3 interest rate risk management
The Company and the consolidated entity are exposed to interest rate risk as entities in the consolidated
group borrow funds at variable rates and place funds on deposit at variable rates. Personal loans issues by the
consolidated entity are at fixed rates. The risk is managed by the consolidated entity by monitoring interest rates.
The Company and the consolidated entity’s exposures to interest rates on financial assets and financial liabilities
are detailed in the liquidity risk management section of this note.
1 8 . 4 i n t e r e s t r a t e s e n s i t i v i t y a n a l y s i s
The sensitivity analyses below have been determined based on the exposure to interest rates at the reporting date
and the stipulated change taking place at the beginning of the financial year and held constant throughout the
reporting period. A 50 basis point increase or decrease is used because this represents management’s assessment
of the possible change in interest rates.
At reporting date, if interest rates had been 50 basis points higher or lower and all other variables were held
constant, the Group’s net profit would increase/decrease by approximately $324,953 (2013: increase/decrease by
approximately $350,306).
The Group’s sensitivity to interest rates has decreased during the current period mainly due to repaying variable
rate borrowings and increasing its fixed rate borrowings.
1 8 . 5 c r e d i t r i s k m a n a g e m e n t
Credit risk refers to the risk that counter-party will default on its contractual obligations resulting in financial
loss to the consolidated entity. The consolidated entity has adopted the policy of only dealing with creditworthy
counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating
the risk of financial loss from defaults. The consolidated entity measures credit risk on a fair value basis. The
consolidated entity does not have any significant credit risk exposure to any single counterparty or any group of
counterparties having similar characteristics, other than its franchisees. The consolidated entity has a policy of
obtaining sufficient collateral or other securities from these franchisees. The majority of loans within the financing
division relate to loans made by Cash Converters Personal Finance which makes both secured and unsecured
personal loans. Credit risk is present in relation to all unsecured loans made which is managed within an agreed
corporate policy on customer acceptance and on-going review of recoverability.
1 8 . 6 l i q u i d i t y r i s k m a n a g e m e n t
Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate
liquidity risk management framework for the management of the consolidated entity’s short, medium and long-term
funding and liquidity management requirements. The consolidated entity manages liquidity risk by maintaining
adequate cash reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast
and actual cash flows and matching maturity profiles of financial assets and liabilities. Included in note 12 is a
listing of additional undrawn facilities that the company/consolidated entity has at its disposal to further reduce
liquidity risk.
63.
//annual report 2014 / / 1 8 . f i n a n c i a l i n s t r u m e n t s ( c o n t i n u e d )
1 8 . 7 l i q u i d i t y a n d i n t e r e s t r i s k t a b l e s
18.7.1 financial liabilities
The following table detail the consolidated entity’s remaining contractual maturity for its financial liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date
on which the consolidated entity can be required to pay. The table includes both interest and principal cash flows.
To the extent that interest flows are at floating rate, the undiscounted amount is derived from interest rate curves
at the end of the reporting period. The contractual maturity is based on the earliest date on which the consolidated
entity may be required to pay.
weighted average
effective
interest rate
1 year or
less
1 to 5
years
more than 5
years
2014
Non-interest bearing
Finance lease liability - fixed rate
Fixed interest rate instruments
Variable interest rate instruments
2013
Non-interest bearing
Finance lease liability - fixed rate
Fixed interest rate instruments
Variable interest rate instruments
%
$
0.00
26,794,208
$
-
356,099
74,844
-
70,732,500
63,756,187
5,579,375
90,906,494
76,386,719
20,048,464
-
505,317
401,784
8.50
7.95
6.19
0.00
8.50
n/a
-
5.70
74,021,280
-
-
94,575,061
401,784
total
$
$
-
26,794,208
-
-
-
-
-
-
-
-
-
430,943
70,732,500
69,335,562
167,293,213
20,048,464
907,101
-
74,021,280
94,976,845
At the year-end it was not probable that the counterparty to the financial guarantee contract will claim under the
contract. Consequently, the amount included above is nil.
18.7.2 financial assets
The following table details the consolidated entity’s expected maturity for its financial assets. The tables below
have been drawn up based on the undiscounted contractual maturities of the financial assets including interest
that will be earned on those assets except where the company/consolidated entity anticipates that the cash flow
will occur in a different period.
2014
Non-interest bearing
Variable interest rate instruments
Fixed interest rate instruments
2013
Non-interest bearing
Variable interest rate instruments
Fixed interest rate instruments
64.
0.00
16,815,639
1.83
27,334,307
-
-
126.42
232,133,793
18,211,524
276,283,739
18,211,524
0.00
2.30
13,553,774
21,206,105
-
-
126.20
189,544,585
17,082,258
224,304,463
17,082,258
-
-
-
-
-
-
-
-
16,815,639
27,334,307
250,345,317
294,495,263
13,553,774
21,206,105
206,626,843
241,386,721
//cash converters international
/ / 1 8 . f i n a n c i a l i n s t r u m e n t s ( c o n t i n u e d )
The amounts included above for variable interest rate instruments for both assets and liabilities is subject to
change if actual rates differ to from those applied in the above a calculations.
1 8 . 8 f a i r v a l u e o f f i n a n c i a l i n s t r u m e n t s
The fair value of the Group’s financial assets and liabilities are determined on the following basis.
18.8.1 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 30 June 2014 and 30 June 2013 the group has no material financial assets and liabilities that are
measured on a recurring basis.
18.8.2 financial assets and financial liabilities that are not measured at fair value on
a recurring basis (but where fair value discolosures are required)
At 30 June 2014 and 30 June 2013, the carrying amount of financial assets and financial liabilities for the Group is
considered to approximate their fair values.
The fair value of the monetary financial assets and financial liabilities is based upon market prices where a market
price exists or by discounting the expected future cash flows by the current interest rates for assets and liabilities
with similar risk profiles.
/ / 1 9 . l e a s e s
1 9 . 1 f i n a n c e l e a s e s
Finance leases relate to computer equipment and motor vehicles with lease terms of up to 5 years. The consolidated
entity has options to purchase the equipment for a nominal amount at the conclusion of the lease agreements.
minimum future lease payments
present value of minimum future
lease payments
2014
$
2013
$
2014
$
2013
$
Finance lease and hire purchase expenditure contracted for at balance sheet date, payable:
Within one year
Later than one, not later than five years
Less future finance charges
356,099
74,844
430,943
(28,564)
402,379
546,880
416,845
963,725
(96,837)
866,888
328,923
73,457
402,380
-
477,368
389,520
866,888
-
402,380
866,888
65.
//annual report 2014
/ / 1 9 . l e a s e s ( c o n t i n u e d )
1 9 . 1 f i n a n c e l e a s e s ( c o n t i n u e d )
Included in the financial statement as:
Current borrowings (note 12)
Non-current borrowings (note 12)
1 9 . 2 o p e r a t i n g l e a s e s
present value of minimum
future lease payments
2014
$
2013
$
328,923
73,456
402,379
477,368
389,520
866,888
Operating leases relate to office accommodation and retail premises with lease terms of between 5 to 10 years,
with an option to extend for a further 5 years. All operating lease contracts contain market review clauses in the
event that the consolidated entity exercises its option to renew. The consolidated entity does not have an option
to purchase the leased assets at the expiry of the lease period.
Non-cancellable operating lease commitments payable:
Within one year
Later than one, not later than five years
Later than five years
2014
$
2013
$
10,767,858
30,148,417
9,212,642
50,128,917
8,725,888
22,633,929
11,780,461
43,140,278
Operating lease commitments relate to head office premises in Australia, the regional offices in the UK and
around Australia and the corporate stores in the UK and Australia. Cash Converters hold an option to renew on
the Australian premises.
1 9 . 3 c o m m i t m e n t f o r c a p i t a l e x p e n d i t u r e
At 30 June 2014 capital expenditure commitments were $1,650,000 (2013: $1,150,000).
/ / 2 0 . k e y m a n a g e m e n t p e r s o n n e l r e m u n e r a t i o n
Details of directors and other members of key management personnel of Cash Converters International Limited
during the year are:
•
•
•
•
•
•
•
•
•
•
•
R. Webb (Chairman, non-executive director)
P. Cumins (Managing director, executive)
J. Yeudall (Non-executive director) – resigned 11 November 2013
W. Love (Non-executive director) – resigned 21 August 2014
J Beal (Non-executive director) – resigned 21 August 2014
M. Cooke (Legal counsel)
D. Patrick (Chief executive officer - UK)
I. Day (General manager – Australia)
R. Groom (Company secretary / chief financial officer)
G. Fee (Chief information officer)
M. Osborne (Company secretary / chief financial officer – UK) – resigned 31 July 2014
66.
//cash converters international / / 2 0 . k e y m a n a g e m e n t p e r s o n n e l r e m u n e r a t i o n ( c o n t i n u e d )
The aggregate compensation of the key management personnel of the consolidated entity is set out below:
Short-term employee benefits
Long-term employee benefits
Post-employee benefits
Share-based payment (i)
Total compensation
2014
$
2013
$
3,548,303
3,392,825
-
156,247
672,645
4,377,195
-
145,418
1,964,987
5,503,230
(i) Please refer to note 21 and the remuneration report for further information
/ / 2 1 . s h a r e - b a s e d p a y m e n t s
2 1 . 1 t h e e x e c u t i v e p e r f o r m a n c e r i g h t s p l a n
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. As at 30 June 2014, the shareholders had approved
the issue of 15,334,000 performance rights under the plan to the managing director and the Company’s senior
management team in various tranches with each tranche containing 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. During the reporting period, a total of 683,000 performance rights were granted in Tranches 7, 8 and 9 to
senior executives of the Company.
The following arrangements were in existence during the current and prior reporting periods:
performance rights
tranche
grant date
grant date fair
value
no. granted
exercise price
managing director
1
2
other executives
1
2
3
4
5
6
7
8
9
30/11/2010
30/11/2010
19/09/2011
19/09/2011
19/09/2011
25/09/2012
25/09/2012
25/09/2012
25/09/2013
25/09/2013
25/09/2013
$0.57
$0.43
$0.42
$0.39
$0.31
$0.75
$0.71
$0.68
$1.21
$1.15
$1.09
4,000,000
6,000,000
1,600,000
400,000
1,800,000
283,668
283,667
283,665
215,668
215,668
215,664
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
expiry date
of options /
performance
rights
14/10/2012
14/10/2016
22/08/2012
4/10/2013
15/09/2016
4/10/2013
1/07/2014
1/07/2015
1/07/2014
1/07/2015
1/07/2016
2 1 . 2 f a i r v a l u e o f s h a r e o p t i o n s g r a n t e d i n t h e y e a r
The weighted average fair value of the share options granted during the financial year is $1.15 (2013: $0.70).
Options were priced using a binomial option pricing model. Where relevant, the expected life used in the model is
based on the earliest vesting date possible for each tranche, based on the vesting conditions.
67.
//annual report 2014 / / 2 1 . s h a r e - b a s e d p a y m e n t s ( c o n t i n u e d )
2 1 . 2 fair value of share options granted in the year ( c o n t i n u e d )
Grant Date share price
Exercise Price
Expected volatility
Option life
Dividend Yield
Risk-free interest rate
tranche 7
tranche 8
tranche 9
$1.26
nil
40%
0.8 Years
5%
2.56%
$1.26
nil
40%
1.8 Years
5%
2.56%
$1.26
nil
40%
2.8 Years
5%
2.86%
2 1 . 3 movement in share options during the year
The following table illustrates the number of, and movements in, performance rights during the year. The
performance rights were issued free of charge, weighted average exercise price is nil. No shares were exercisable
at the end of the current year.
Outstanding 1 July
Granted during the year
Forfeited/Lapsed during the year
Exercised during the year
Expired during the year
Outstanding at end of the year
2014
number
2013
number
9,051,000
13,800,000
647,000
(206,667)
(683,668)
-
851,000
-
(5,600,000)
-
8,807,665
9,051,000
21.3.1 share options exercised during the year
performance rights
grant date
no. exercised
exercise date
share price at
exercise date
19/09/2011
25/09/2012
400,000
283,668
683,668
4/10/2013
4/10/2013
$1.26
$1.26
tranche
other executives
2
4
21.3.2 expense recognised
The cumulative expense recognised for employee services received by the Company is shown in the table below.
Balance as at 1 July
Expense arising from equity-settled share-based payment transactions
Total expenses arising from share-based payment transactions
68.
30 june 2014
30 june 2013
$
$
4,662,535
748,805
5,411,340
2,661,625
2,000,910
4,662,535
//cash converters international / / 2 1 . s h a r e - b a s e d p a y m e n t s ( c o n t i n u e d )
21.3.3 share options lapsed during the year
performance rights tranche
grant date
no. lapsed
other executives
5
6
7
8
9
25/09/2012
25/09/2012
24/09/2013
24/09/2013
24/09/2013
106,667
50,000
16,667
16,667
16,666
206,667
21.3.4 share options outstanding at year end
The total number of options outstanding at the year-end were 8,607,665
performance rights
tranche
managing director
1
other executives
3
5
6
7
8
9
grant date
no. outstanding
expiry date of options/
performance rights
30/11/2010
6,000,000
14/10/2016
19/09/2011
25/09/2012
25/09/2012
25/09/2013
25/09/2013
25/09/2013
1,800,000
177,001
233,664
132,334
132,334
132,332
8,607,665
15/09/2016
1/07/2014
1/07/2015
1/07/2014
1/07/2015
1/07/2016
The weighted average remaining contractual life for the performance rights outstanding as at 30 June 2014 is 2.1
years. (2013: 2.9 years)
/ / 2 2 . r e l a t e d p a r t y t r a n s a c t i o n s
The immediate parent and ultimate controlling party of the Group is Cash Converters International Ltd.
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company,
have been eliminated on consolidation and are not disclosed in this note.
Other than share based payments (as disclosed in note 21) and shareholdings of key management personnel (as
disclosed in the remuneration report); the parent; its subsidiaries, associates and key management personnel
made no related party transactions during the reporting period.
69.
//annual report 2014
/ / 2 3 . s u b s i d i a r i e s
2 3 . 1 composition of the group
The financial statements include the financial statements of the Group and the subsidiaries listed in the following
table:
name of entity
Parent entity
Cash Converters International Limited (i)
Directly controlled by Cash Converters International Limited
Cash Converters Pty Ltd (ii) (iii)
Cash Converters UK Holdings PLC
Cash Converters USA Limited (note 24)
Mon-e Pty Ltd (ii) (iii)
Cash Converters Personal Finance Pty Ltd (ii) (iii)
Safrock Finance Corporation (QLD) Pty Ltd (ii) (iii)
Safrock Finance Corporation (WA) Pty Ltd (ii) (iii)
Finance Administrators of Australia Pty Ltd (ii) (iii)
Cash Converters (Stores) Pty Ltd (ii) (iii)
Cash Converters (Cash Advance) Pty Ltd (ii) (iii)
Green Light Auto Group Pty Ltd
Cash Converters (NZ) Pty Ltd
ownership interest
country of
incorporation
2014
2013
Australia
Australia
UK
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
99.285%
99.285%
100%
100%
100%
100%
100%
100%
100%
80%
100%
100%
100%
100%
100%
100%
100%
100%
0%
n/a
Directly Controlled by Cash Converters Personal Finance Pty Ltd
CCPF Warehouse Trust No.1
Australia
100%
100%
Directly controlled by Cash Converters (Stores) Pty Ltd
BAK Property Pty Ltd
Australia
100%
100%
Directly controlled by Cash Converters Pty Ltd
Cash Converters Finance Corporation Ltd
Australia
57.31%
50.85%
Directly controlled by Green Light Auto Group Pty Ltd
GLA Receivables Trust No. 1
Australia
100%
100%
Directly controlled by Cash Converters USA Limited
Cash Converters USA Inc.
USA
100%
100%
i.
ii.
iii.
Cash Converters International Limited is the head entity within the tax consolidated group.
These companies are members of the tax consolidated group.
These wholly owned subsidiaries have entered into a deed of cross guarantee with Cash Converters
International Limited pursuant to ASIC Class Order 98/1418 and are relieved from the requirement to
prepare and lodge an audited financial report.
70.
//cash converters international
/ / 2 3 . s u b s i d i a r i e s ( c o n t i n u e d )
2 3 . 2 f i n a n c i a l s u p p o r t
The Company Cash Converters International Limited has entered into a ‘Deed of Cross Guarantee’ under which
each company guarantees the debts of the others.
By entering into the Deed of Cross Guarantee, the wholly-owned entities have been relieved from the requirement
to prepare a financial report and directors’ report under Class Order 98/1418 (as amended) issued by the Australian
Securities and Investments Commission.
The consolidated statement of comprehensive income and statement of financial position of the entities party to
the cross guarantee are:
23.2.1 statement of comprehensive income
Franchise fees
Financial services interest revenue
Sale of goods
Other revenues
Revenue
Cost of sales
Gross profit
Administrative expenses
Advertising expenses
Occupancy expenses
Other expenses
Finance costs
Share of net loss of equity accounted investment
Profit before income tax
Income tax expense
Profit for the year
2014
$
2013
$
5,824,052
7,539,049
162,159,254
133,796,352
55,768,890
2,365,881
226,118,077
(59,474,691)
166,643,386
(60,811,592)
(5,897,403)
(11,260,972)
(35,233,439)
(7,459,224)
(41,465)
45,939,291
(14,518,745)
31,420,546
43,366,687
1,091,603
185,793,691
(43,006,234)
142,787,457
(50,898,887)
(4,908,799)
(9,256,886)
(23,816,124)
(2,841,338)
-
51,065,423
(15,497,733)
35,567,690
Other comprehensive income for the year
Total comprehensive income for the year
-
-
31,420,546
35,567,690
71.
//annual report 2014 / / 2 3 . s u b s i d i a r i e s ( c o n t i n u e d )
23.2.2 statement of financial position
Current assets
Cash and cash equivalents
Trade receivables
Personal loans receivable
Inventories
Other assets
Total current assets
Non-current assets
Trade and other receivables
Plant and equipment
Deferred tax assets
Goodwill
Other intangible assets
Investments in associates
Other financial assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Current tax payables
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings *
Parent entity interest
* Retained earnings
Retained earnings as at the beginning of the financial year
Net profit
Issue of shares (DRP)
Dividends provided for or paid
Retained earnings as at the end of the financial year
72.
2014
2013
$
$
22,072,012
18,797,907
20,401,278
10,592,408
98,729,828
89,162,073
11,458,200
10,306,581
7,229,068
4,148,742
159,890,386
133,007,711
64,829,895
69,533,728
14,084,468
12,987,894
7,640,923
5,729,706
100,968,171
90,494,072
16,348,495
16,511,352
6,213,926
-
34,250,137
4,463,481
244,336,015
199,720,233
404,226,401
332,727,944
15,369,848
13,779,871
54,140,459
70,438,043
7,810,080
4,594,068
5,889,701
3,870,515
81,914,455
93,978,130
64,007,130
148,539
64,155,669
258,058
104,474
362,532
146,070,124
94,340,662
258,156,277
238,387,282
156,679,067
151,708,657
2,013,492
1,633,084
99,463,718
85,045,541
258,156,277
238,387,282
85,045,541
64,698,895
31,420,546
35,567,690
(4,602,017)
-
(12,400,352)
(15,221,044)
99,463,718
85,045,541
//cash converters international / / 2 4 . n o n - c o n t r o l l i n g i n t e r e s t s
2 4 . 1 n o n- c o n t r o l l i n g i n t e r e s t s i n c o n t r o l l e d e n t i t i e s
Balance at beginning of year
Non-controlling interest arising from contractual arrangement (Green Light Auto
Group Pty Ltd)
Acquisition of non-controlling interests (Green Light Auto Group Pty Ltd)
Share of loss for the year
2014
2013
$
$
1,049
1,049
(12,097,952)
11,662,250
(3,060,046)
(3,494,699)
-
-
1,049
24.1.1 cash converters usa ltd
Non-controlling interests hold 83,936 - one cent ordinary units in Cash Converters USA Limited, being 0.715%
of the total equity of the company.
24.1.2 green light auto group pty ltd
Non-controlling interest hold 800,000 – one dollar ordinary shares in Green Light Auto Group Pty Ltd, being
20% of the total equity of the company.
/ / 2 5 . c o n t i n g e n t l i a b i l i t i e s
In the course of its normal business the consolidated entity occasionally receives claims and writs for damages
and other matters arising from its operations. Where in the opinion of the directors it is deemed appropriate a
specific provision is made, otherwise the directors deem such matters are either without merit or of such kind or
involved such amounts that would not have a material adverse effect on the operating results or financial position
of the economic entity if disposed of unfavourably.
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.
The directors are not aware of any other material contingent liabilities in existence at 30 June 2014 requiring
disclosure in the financial statements.
/ / 2 6 . e v e n t s a f t e r t h e r e p o r t i n g p e r i o d
2 6 . 1 u k l e g i s l a t i v e c h a n g e s
In July 2014, the Financial Conduct Authority (FCA) released its consultation paper CP14/10 – ‘Proposals for a
price cap on high-cost short-term credit’. The FCA have been regulating this industry in the UK since April 2014
and have a clear remit to tackle poor conduct in the market and ensure that there is an appropriate degree of
protection for consumers.
The paper proposes changes to take effect from 2 January 2015, included are an initial cost of credit cap (proposed
at 0.8% per day), a total cost of credit cap (proposed at 100% of the amount advanced) and a fixed charge cap on
default fees (proposed at £15 per loan). The FCA were accepting comments on the paper until 1 September 2014.
Following a review of these responses the FCA will issue their final policy proposal in late October 2014.
73.
//annual report 2014 / / 2 6 . e v e n t s a f t e r t h e r e p o r t i n g p e r i o d ( c o n t i n u e d )
2 6 . 1 u k l e g i s l a t i v e c h a n g e s ( c o n t i n u e d )
Whilst it is evident that the new legislation will have an impact on margins, Cash Converters believe that the
overall impact will be positive. These rate caps give us the clarity and comparability, supporting a sustainable
business model that will see earnings increase as our volume continues to grow. The legislation also provides
a framework to regulate the industry and therefore protect vulnerable members of society from unscrupulous
operators. Cash Converters continues to pride itself on the founding ethos of ‘helping people get on with their
lives’, and believes by its continued efforts to be the most responsible lender in the market and providing a
diverse and accessible product range, there are great opportunities to continue the success of the business.
2 6 . 2 w e s t p a c s e c u r i t i s a t i o n f a c i l i t y
In September 2014, Cash Converters successfully completed negotiations to increase their facility limit with
Westpac Institutional bank from $60m to $70m. The additional $10m facility will help to continue funding the
growing personal loan book and can be drawn down in the same manner as the existing facility. In conjunction
with the increase facility limit the scheduled availability period and termination date for the facility has been
extended by one year to March 2016 and March 2017 respectively.
/ / 2 7 . e a r n i n g s p e r s h a r e
2014
2013
Earnings used in the calculation of basic earnings per share (net profit)
$24,192,335
$32,869,972
Weighted average ordinary shares outstanding—basic
Dilutive effect of performance rights (note 21)
Weighted average ordinary shares outstanding—diluted
Basic earnings per common share
Diluted earnings per common share
426,320,267
406,344,313
8,543,325
8,850,491
434,863,592
415,194,804
$5.67
$5.56
$8.09
$7.92
The number of potential ordinary shares not included in the above calculation is Nil.
/ / 2 8 . d i v i d e n d s
On the 21 August 2014 the directors of the Company declared a final fully franked dividend of 2.0 (two)
cents per share, in respect of the financial year ended 30 June 2014, to be paid on 30 September 2014.
The Company Dividend Reinvestment Plan (DRP) will apply to this dividend, providing shareholders with the
option to reinvest all or part of their eligible dividends at a discount of 2.5% of the price established by the
5 day VWAP up to and including the record date. This dividend has not been included as a liability in these
consolidated financial statements. The total estimated dividend to be paid is $8,577,722. The Company has
Australian franking credits available of $48,293,422 on a tax paid basis (2013: $41,686,758).
Recognised amounts
Final dividend Prior Year: Franked to 100% at 30%
Interim dividend current year: Franked to 100% at 30%
2014
cents
per share
total
$
2013
cents
per share
total
$
2.00
2.00
8,477,221
8,525,148
17,002,369
1.75
6,743,823
2.00
8,477,221
15,221,044
Unrecognised amounts
Final dividend: Franked to 100% at 30%
2.00
8,577,722
2.00
8,477,221
74.
//cash converters international / / 2 9 . s e g m e n t a l i n f o r m a t i o n
Information reported to the consolidated entity’s managing director for the purposes of resource assessment and
assessment of performance is focused on the nature of the service and category of customer. The consolidated
entity’s reportable segments under AASB 8 Operating Segments are therefore as follows:
2 9 . 1 f r a n c h i s e o p e r a t i o n s
This involves the sale of franchises for the retail sale of second had goods and the sale of master licenses for the
development of franchises in countries around the world.
2 9 . 2 s t o r e o p e r a t i o n s
This involves the retail sale of second hand goods at corporate owned stores in Australia and the UK.
2 9 . 3 f i n a n c i a l s e r v i c e s - p e r s o n a l l o a n s
This segment includes the Cash Converters Personal Finance personal loans business.
2 9 . 4 f i n a n c i a l s e r v i c e s - a d m i n i s t r a t i o n
This segment includes Mon-E which 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 .
2 9 . 5 v e h i c l e l e a s i n g
This segment includes Green Light Auto Group Pty Ltd which provides fully maintained vehicles through a lease
product to customer over 4 years. Revenue is split between lease interest and additional service income (warranty,
insurance and maintenance), also the sale of end of lease vehicle stock.
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.
75.
//annual report 2014 / / 2 9 . s e g m e n t a l i n f o r m a t i o n ( c o n t i n u e d )
for the year ended
30 june 2014
franchise
operations
store
operations
financial
services-
administration
financial
services-
personal
loans
vehicle
leasing
corporate
head
office
total
Interest revenue (i)
853,851
50,715,277
9,975,616
137,692,194
3,695,847
-
202,932,785
Other revenue
Gross revenue
17,598,736
121,208,375
4,340,267
481
5,013,278
3,995,921
152,157,058
18,452,587
171,923,652
14,315,883
137,692,675
8,709,125
3,995,921
355,089,843
Less intercompany sales
(6,189,157)
(11,096,393)
(4,340,267)
-
-
(2,392,569)
(24,018,386)
Segment revenue
External Interest
revenue (ii)
Total revenue
EBITDA
Depreciation and
amortisation
EBIT
Interest expense
12,263,430
160,827,259
9,975,616
137,692,675
8,709,125
1,603,352
331,071,457
-
49,136
4,142
312,817
31,116
200,239
597,450
12,263,430
160,876,395
9,979,758
138,005,492
8,740,241
1,803,591
331,668,907
6,633,516
15,615,352
10,410,310
39,835,270
(4,038,694)
(19,914,394)
48,541,360
(260,518)
(5,234,532)
(4,242)
(828,594)
(179,179)
(1,416,646)
(7,923,711)
6,372,998
10,380,820
10,406,068
39,006,676
(4,217,873)
(21,331,040)
40,617,649
-
(27,638)
-
(2,971,665)
(1,076,393)
(4,501,488)
(8,577,184)
Profit/(Loss) before tax
6,372,998
10,353,182
10,406,068
36,035,011
(5,294,266)
(25,832,528)
32,040,465
Income tax expense
Operating profit after tax
Loss attributable to non-controlling interest
Profit attributable to members of CCIL
for the year ended
30 june 2013
Interest revenue (i)
348,586
39,697,768
13,440,134
113,433,653
Other revenue
21,325,187
96,367,349
4,249,388
18,457
Gross revenue
21,673,773
136,065,117
17,689,522
113,452,110
Less intercompany
sales
Segment revenue
External Interest
revenue (ii)
Total revenue
EBITDA
Depreciation and
amortisation
EBIT
(8,418,809)
(6,166,898)
(4,249,388)
-
13,254,964
129,898,219
13,440,134
113,452,110
-
61,623
6,832
157,273
13,254,964
129,959,842
13,446,966
113,609,383
6,387,128
9,100,109
14,196,639
42,460,724
(256,030)
(4,499,995)
(10,759)
(611,964)
6,131,098
4,600,114
14,185,880
41,848,760
Interest expense
-
(25,266)
-
(744,333)
Profit/(Loss) before tax
6,131,098
4,574,848
14,185,880
41,104,427
-
-
-
-
-
-
-
-
-
-
-
Income tax expense
Operating profit after tax
(Profit)/Loss attributable to non-controlling interest
Profit attributable to members of CCIL
(10,908,176)
21,132,289
3,060,046
24,192,335
1,962,746
168,882,887
338,652
122,299,033
2,301,398
291,181,920
-
(18,835,095)
2,301,398
272,346,825
150,166
375,894
2,451,564
272,722,719
(15,108,666)
57,035,934
(1,077,245)
(6,455,993)
(16,185,911)
50,579,941
(2,146,135)
(2,915,734)
(18,332,046)
47,664,207
(14,794,235)
32,869,972
-
32,869,`972
(i) Interest Revenue comprises of personal loan interest, cash advance fee income, pawn broking interest from customers
and commercial loan interest from 3rd parties
(ii) External interest revenue is interest received on bank deposits
76.
//cash converters international
/ / 2 9 . s e g m e n t a l i n f o r m a t i o n ( c o n t i n u e d )
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.
2 9 . 6 c o n s o l i d a t e d e n t i t y a s s e t s b y r e p o r t a b l e s e g m e n t
Franchise operations
Store operations
Financial services – administration
Financial services - personal loans
Vehicle leasing
Total of all segments
Unallocated assets
Total assets
30 june 2014
30 june 2013
$
$
22,086,355
21,437,821
155,957,914
136,281,822
18,171,602
18,071,113
159,336,472
134,200,107
15,759,263
-
371,311,606
309,990,863
38,675,850
31,253,974
409,987,456
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.
2 9 . 7 c o n s o l i d a t e d e n t i t y l i a b i l i t i e s b y r e p o r t a b l e s e g m e n t
Franchise operations
Store operations
Financial services - administration
Financial services – personal loans
Vehicle leasing
Total of all segments
Unallocated liabilities
Total liabilities
2,591,445
12,841,108
4,866,524
93,003,169
6,492,422
119,794,668
45,486,467
165,281,135
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.
77.
//annual report 2014 / / 2 9 . s e g m e n t a l i n f o r m a t i o n ( c o n t i n u e d )
2 9 . 8 o t h e r s e g m e n t i n f o r m a t i o n
depreciation and amortisation
year ended
additions to non-current
assets
year ended
30 june 2014
$
30 june 2013
$
30 june 2014
$
30 june 2013
$
1,570,934
1,459,845
3,956,297
3,525,693
5,119,065
4,206,748
10,536,384
31,778,569
225,939
828,594
179,179
177,435
611,965
-
-
2,557,323
1,143,398
-
995,092
-
7,923,711
6,455,993
18,045,096
36,447,660
-
-
-
-
7,923,711
6,455,993
18,045,096
36,447,660
Franchise operations
Store operations
Financial services - administration
Financial services - personal loans
Vehicle leasing
Total of all segments
Unallocated
Total
2 9 . 9 g e o g r a p h i c a l i n f o r m a t i o n
The consolidated entity operates in two principal geographical areas – Australia (country of domicile) and the United
Kingdom. The consolidated entity’s revenue from continuing operations from external customers and information
about its non-current assets by geographical location are detailed below.
Australia
United Kingdom
Rest of world
revenue from external
customers
year ended
non-current assets*
year ended
30 june 2014
$
30 june 2013
$
30 june 2014
$
30 june 2013
$
230,984,335
183,190,376
132,307,425
120,258,101
100,147,536
89,109,573
22,905,261
23,471,744
537,036
422,770
-
-
331,668,907
272,722,719
155,212,686
143,729,845
*Non-current assets excluding those relating to deferred tax assets, trade and other receivables and other financial
assets. Includes property, plant and equipment; goodwill and other intangible assets.
/ / 3 0 . p a r e n t e n t i t y d i s c l o s u r e s
The accounting policies of the parent entity, which have been applied in determining the financial information
shown below, are the same as those applied in the consolidated financial statements. Refer to note 1 for a
summary of the significant accounting policies relating to the Group
78.
//cash converters international / / 3 0 . p a r e n t e n t i t y d i s c l o s u r e s ( c o n t i n u e d )
3 0 . 1 f i n a n c i a l p o s i t i o n
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Issues capital
Reserves
Retained earnings
Total equity
3 0 . 2 f i n a n c i a l p e r f o r m a n c e
Profit for the year
Other comprehensive income
Total comprehensive income
30 june 2014
30 june 2013
$
82
$
-
225,843,060
176,930,529
225,843,142
176,930,529
7,805,090
65,000,000
72,805,090
23,892,475
-
23,892,475
153,038,052
153,038,054
148,761,887
148,761,887
-
-
4,276,165
4,276,167
153,038,052
153,038,054
-
-
-
-
-
-
3 0 . 3 g u a r a n t e e s e n t e r e d i n t o b y p a r e n t e n t i t y i n r e l a t i o n t o t h e
d e b t s o f i t s s u b s i d i a r i e s
Cross guarantees have been provided by the parent entity and its controlled entities as listed on note 23. The fair
value of the cross guarantee has been assessed as $Nil based on the underlying performance of the entities in
2014
2013
Guarantee provided under the deed of cross guarantee (i)
2,140,975
2,140,975
(i) Cash Converters International Limited has provided a cross guarantee to HSBC for a BACS facility provided to
CCUK.
79.
//annual report 2014
/ / 3 1 . i n v e s t m e n t i n a s s o c i a t e s
During the period, the Group invested in the New Zealand Cash Converters Master Franchisor. The Group
acquired a 25% equity interest in all aspects of the New Zealand enterprise, including corporate stores, franchise
contracts, financial services and software. Cash consideration of AUD$5.5m. was paid on 23rd January 2014. The
Group’s share of the loss of $41,465 is reflected in the financial result for the year.
Also during the year, the Group entered into a joint venture with EZCORP Inc. to launch Cash Converters in South
America and Mexico. As consideration, valued at US$720k, for its 20% interest in the joint venture, the Group
granted a master license to the joint venture for Latin America and provided information technology services,
training and management support. As at the reporting date there has been no trading activity by the joint venture.
The value of the consideration has been determined as being 20% of the Net tangible assets of the joint venture
(US$3.6m) at the reporting date.
Balances of the investments in associates and joint ventures are shown below
Balance at the beginning of the financial year
Investment in Cash Converters New Zealand
Net Loss for year
EZCorp JV - Mexico & South America
Balance at the end of the financial year
/ / 3 2 . o t h e r f i n a n c i a l a s s e t s
2014
$
-
5,491,059
(41,465)
764,332
6,213,926
2013
$
-
-
-
-
-
Cash Converters International Limited invested in ‘Green Light Auto Group Pty Limited’ in the form of a convertible
note, carrying a 10% coupon rate, paid six monthly in arrears and was secured.
The convertible note was exercised by Cash Converters International Limited on 23 September 2014. See note
33 for details
Balance at the beginning of the financial year
Conversion of note
Balance at the end of the financial year
4,000,000
(4,000,000)
4,000,000
-
-
4,000,000
/ / 3 3 . b u s i n e s s c o m b i n a t i o n s
3 3 . 1 b u s i n e s s c o m b i n a t i o n s d u r i n g t h e c u r r e n t y e a r
During the period the Group acquired; the trade and assets of nine Cash Converters franchised stores in Australia;
the trade and assets of Ribhurst Pty Ltd, (an entity previously engaged in providing administrative support and
personal loan processing services to the personal loan business of the Group) and 80% of the equity in Green Light
Auto Group Pty Ltd (GLA).
33.1.1 corporate stores/ribhurst
These transactions have been accounted for using the acquisition method of accounting. The net assets acquired
in the business combinations, and the goodwill arising, are shown below:
80.
//cash converters international / / 3 3 . b u s i n e s s c o m b i n a t i o n s ( c o n t i n u e d )
33.1.1 corporate stores/ribhurst ( c o n t i n u e d )
Net assets acquired:
Cash and cash equivalents
Trade and other receivables
Plant and equipment
Inventories
Trade and other payables
Fair value of net identifiable assets acquired
Consideration:
Consideration satisfied by cash
Goodwill arising on acquisition
The cash outflow on acquisition is as follows:
Net cash acquired with the stores
Cash paid
Net consolidated cash outflow
fair value recognised
on acquisition
$
129,634
3,181,899
128,497
879,181
(283,927)
4,035,284
14,617,260
10,581,976
129,634
(14,617,260)
(14,487,626)
At the time the financial statements were authorised for issue, the Group had not yet completed the accounting for
the acquisitions. In particular, the independent valuations of separately identifiable intangible assets have not been
finalised. The business combination above is therefore prepared provisionally subject to these valuations being
completed.
Goodwill arose in the business combination because the cost of the combination included a control premium paid
to acquire the stores. 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 stores. These benefits are not recognised separately from goodwill as the future economic benefits arising from
them cannot be reliably measured.
For tax purposes the tax values of the assets are required to be reset based on market values and other factors.
Any adjustments to the fair value of these assets has been reflected in the plant, property & equipment figure of
$128,497
Included in the net profit for the period is $427,360 attributable to the additional business generated by the nine
stores and $130,294 from cost savings realised through the acquisition of Ribhurst Pty Ltd.
Had these business combinations been effected at 1 July 2013, the revenue of the Group from continuing
operations would have been $343,483,720, and the profit for the year from continuing operations would have been
$26,246,213. The directors of the Group consider these ‘pro-forma’ numbers to represent an approximate measure
of the performance of the combined group on an annualised basis and to provide a reference point for comparison
in future periods.
81.
//annual report 2014 / / 3 3 . b u s i n e s s c o m b i n a t i o n s ( c o n t i n u e d )
33.1.2. green light auto group pty ltd
During the year the Group acquired an 80% interest in Green Light Auto Group Pty Ltd (“GLA”) as a result of the
exercise of a convertible note, which was exercisable from 1 July 2013. The net assets acquired in the business
combinations are shown below.
fair value recognised
on acquisition
Net assets acquired:
Cash and cash equivalents
Trade and other receivables
Deferred tax asset
Inventories
Plant and equipment
Trade and other payables
Fair value of 100% net identifiable liabilities acquired
Non-controlling interest - at date of control
Non-controlling interest - at date of legal acquisition
Consideration:
Consideration satisfied by Cash
Deemed consideration
Goodwill arising on acquisition
Recognised amount of non-controlling interest
The cash inflow on acquisition is as follows:
Net cash acquired with the business
Cash paid
Net consolidated cash inflow
$
3,833,411
6,275,349
266,708
2,109,064
582,876
(25,165,359)
(12,097,951)
(12,097,951)
(2,419,590)
-
-
-
12,097,951
3,833,411
-
3,833,411
The legal acquisition date was 23 September 2013, being the date that Cash Converters International Limited
(CCIL) exercised its conversion option.
After analysis of the substance of the conversion option it was concluded that as at 1 July 2013, the Group did
have the ability to control GLA, however it did not have an in-substance ownership interest, in that it could not
share in economic returns until legal exercise.
As at 1 July 2013 CCIL had the ability to control the business, although did not have the right to share in the
economic returns during the period prior to actual exercise, therefore resulting in the fact that no “in-substance”
ownership interest was held prior to legal acquisition on 23 September, consequently a 100% non-controlling
interest was recognised as at 1 July 2013, and until the legal acquisition date.
As at 23 September 2013, legal ownership was established, and the financial statements of the Group reflect the
acquisition of the 80% interest in GLA. A proportion of the non-controlling interest was recognised for the 20% of
GLA not acquired as at 23 September 2013.
82.
//cash converters international
/ / 3 3 . b u s i n e s s c o m b i n a t i o n s ( c o n t i n u e d )
At the time the financial statements were authorised for use, the Group had not yet completed the accounting
for the acquisitions. In particular, the independent valuations of separately identifiable intangible assets have not
been finalised. The business combination above is therefore prepared provisionally subject to these valuations
being completed.
Had these business combinations been effected at 1 July 2013, the revenue of the Group from continuing
operations would have been $331,668,907 and the profit for the year from continuing operations attributable
to shareholders would have been $21,132,289. The directors of the Group consider these ‘pro-forma’ numbers
to represent an approximate measure of the performance of the combined group on an annualised basis and to
provide a reference point for comparison in future periods.
3 3 . 2 f i n a l i s a t i o n o f p r i o r y e a r b u s i n e s s c o m b i n a t i o n s
During the year, the valuations of the stores acquisition business combinations that took place during the previous
financial year, were finalised. As a result of these valuations, the following changes were reflected in the current
year financial statements;-
Goodwill
Reacquired rights intangible asset
Customer relationships intangible asset
Trade & other receivables
Net debit/credit
debit / (credit)
$
236,764
(106,000)
71,000
(201,764)
-
Included in the net profit for the year is additional amortisation of $241,516 in relation to the changes made to the
separately identifiable intangibles valuation and their useful life.
/ / 3 4 . c o m p a n y d e t a i l s
Cash Converters International Limited is a listed public company, incorporated in Australia.
Registered office & principal place of business:
Level 18, 37 St Georges Terrace, PERTH WA 6000, Telephone: +61 8 9221 9111
83.
//annual report 2014 d i r e c t o r s ’ r e p o r t
The directors of Cash Converters International Limited submit the following report for the year ended 30 June 2013.
/ / d i r e c t o r s
The following persons held office as directors of the Company during the financial year and until the date of this
report (directors were in office for this entire period unless otherwise stated):
•
•
•
•
•
•
Mr Reginald Webb (non-executive director, chairman)
Mr Peter Cumins (managing director)
Mr John Yeudall (non-executive director) – resigned 20 November 2013
Mr William Love (non-executive director) – resigned 21 August 2014
Mr Joseph Beal (non-executive director) – resigned 21 August 2014
Mr Lachlan Given (non-executive director) – appointed 22 August 2014
/ / p r i n c i p a l a c t i v i t e s
The consolidated entity’s principal activity is that of a franchisor of second hand goods and financial services
stores, a provider of secured and unsecured loans and the operator of a growing number of corporate stores, all of
which trade under the Cash Converters name.
Country franchise licences are also sold to licensees to allow the development of the Cash Converters brand but
without the need for support from Cash Converters International Limited.
/ / o p e r a t i n g r e s u l t s f o r t h e y e a r
The consolidated entity’s net profit attributable to members of the parent entity for the year ended 30 June 2014 was
$21,132,289 (2013: $32,869,972) after a charge for income tax of $10,908,176 (2013: $14,794,235).
/ / d i v i d e n d s
The directors of the Company paid a fully franked interim dividend of two cents per share on 28 March 2014. The
directors have also declared a final fully franked dividend of two cents per share to be paid on 30 September 2014
to those shareholders on the register at the close of business on 16 September 2014. The final dividend is subject
to the Company’s Dividend Reinvestment Plan (DRP), which allows eligible shareholders to use all or part of their
dividend payment to acquire additional shares at a discount of 2.5% of the weighted average price of the shares in
the preceding five days of the record date. In addition, a fully franked dividend of two cents per share declared in
relation to the prior year was paid on 27 September 2013.
/ / o p e r a t i n g a n d f i n a n c i a l r e v i e w
A review of the consolidated entities’ operations and financial performance has been provided for on pages 16 to
23.
84.
//cash converters international / / i n f o r m a t i o n o n d i r e c t o r s / c o m p a n y s e c r e t a r y
d i r e c t o r/
c o m p a n y
s e c r e t a r y
Peter Cumins
Reginald Webb
John Yeudall
William Love
Joseph Beal
Lachlan Given
q u a l i f i c a t i o n s a n d e x p e r i e n c e
p o s i t i o n h e l d
t h e i n t e r e s t s o f t h e d i r e c t o r s i n
t h e s h a r e s a n d o p t i o n s o f c a s h
c o n v e r t e r s i n t e r n a t i o n a l l i m i t e d
a t t h e d a t e o f t h i s r e p o r t
n u m b e r o f
o r d i n a r y
s h a r e s
n u m b e r o f
o p t i o n s o v e r
o r d i n a r y
s h a r e s*
Managing director
10,253,030
6,000,000
Non-executive
chairman
1,012,500
Nil
Non-executive
director
Nil
Nil
Non-executive
director
Nil
Nil
Non-executive
director
Nil
Nil
Non-executive
director
Nil
Nil
Former General Manager of Cash Converters
Pty Ltd.
A qualified accountant. Joined the board in
1995. Mr Cumins joined the board of EZCorp
Inc. as a non-executive director.
FCA. Fellow of the Institute of Chartered
Accountants and a former partner of
PricewaterhouseCoopers. Mr Webb joined
the board in 1997. He is also a director of
Dorsogna Limited since 1996.
A Chartered Engineer and member of the
Australian Institute of Company Directors.
Founder of the IKEA franchise in Western
Australia. Previously Australia’s senior Trade
Commissioner Middle East and Consul
General Dubai. Joined the board in 2002.
A licensed Certified Public Accountant and a
Certified Valuation Analyst. Former partner of
KPMG Peat Marwick and its predecessors.
Mr Love joined the board in 2009 and he is
also a board member of EZCORP Inc.
Former CEO of the Lower Colorado River
Authority, a Texas conservation and
reclamation district with over US$1 billion
in annual revenues, over $3 billion in assets
and over 2,200 employees. Mr Beal joined
the board in 2009 and he is also a board
member of EZCORP Inc.
Executive vice chairman of EZCORP Inc.
Holds directorships at The Farm Journal
Corporation, a 134 year old pre-eminent
US agricultural media company; Senetas
Corporation Ltd (ASX:SEN); CANSTAR Pty
Ltd and RateCity.com Pty Ltd. Graduate of
the Queensland University of Technology in
Banking and Finance. Joined the board on
22 August 2014.
Ralph Groom
FCPA, FCIS, CGMA. Qualified as a
Chartered Management Accountant in
the UK before joining the group in 1995.
Undertook further studies in Australia to
qualify as a CPA and Chartered Secretary.
Company
secretary /
Chief financial
officer
* Please refer note 21 for further information.
Nil
383,333
The particulars of directors’ interests in shares are as at the date of this directors’ report, or date of resignation
if applicable.
85.
//annual report 2014 / / d i r e c t o r s ’ m e e t i n g s
The number of meetings of directors and meetings of committees of directors held during the year and the number
of meetings attended by each director were as follows:
board of directors
meetings
audit committee meetings
remuneration/nomination
committee meetings
directors
number held
number
attended
number held
number
attended
number held
number
attended
P. Cumins
R. Webb
J. Yeudall
W. Love
J. Beal
L. Given
13
13
6
13
13
0
12
13
6
13
13
0
2
2
1
2
2
0
2
2
1
2
2
0
5
5
3
5
5
0
5
5
3
5
5
0
/ / c o m m i t t e e m e m b e r s h i p
As at the date of this report, the company had an audit committee, a remuneration committee and a nomination
committee of the board of directors.
Members acting on the committees of the board during the year were:
Audit
J. Yeudall (c)*
W. Love (c)
J. Beal
R. Webb
Remuneration
J. Yeudall (c)*
W. Love
J. Beal (c)
R. Webb
Notes:
* resigned during the year
(c) Designates the chairman of committee
Nomination
J. Yeudall (c)*
W. Love
J. Beal
R. Webb (c)
P. Cumins
/ / i n d e m n i f i c a t i o n a n d i n s u r a n c e o f d i r e c t o r s a n d o f f i c e r s
During the financial year, the company paid a premium in respect of a contract insuring the directors of the company
(as named above), the company secretary, Ralph Groom, and all executive officers of the company and of any related
body corporate against a liability incurred as such a director, secretary or executive officer to the extent permitted by
the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount
of the premium.
The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law,
indemnified or agreed to indemnify an officer or auditor of the company or of any related body corporate against a
liability incurred as such an officer or auditor.
86.
//cash converters international
/ / s h a r e o p t i o n s
The 2014 financial year saw the vesting of Tranche 2 and 4 of the senior executives (excluding the managing
director) of performance rights granted under the executive performance rights plan (approved by shareholders on
30 November 2010). On vesting, each of 683,668 performance rights in the tranches equated to one ordinary share.
During the year additional options were granted under the plan to senior executives. A total of 683,000 options
were granted in three tranches. This brings the total number of performance rights still outstanding as at 30 June
2014 to 8,474,330 (2013: 9,051,000). Refer to the remuneration report for further details of the performance rights
outstanding.
/ / s h a r e s u n d e r o p t i o n o r i s s u e d o n e x e r c i s e o f o p t i o n s
Details of unissued shares or interests under option as at the date of this report are:
issuing entity
Cash Converters International Limited
Cash Converters International Limited
Cash Converters International Limited
Cash Converters International Limited
Cash Converters International Limited
number of shares
under option/
performance right
class of share
exercise price
performance rights
expiry date
of options/
242,667
293,331
132,332
1,800,000
6,000,000
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Nil
Nil
Nil
Nil
Nil
15 September 2014
15 September 2015
15 September 2016
15 September 2016
14 October 2016
The performance rights noted above are in substance share options with an exercise price of $nil, which vest and
are immediately exercised into ordinary shares once certain performance / vesting conditions are met.
The holders of these performance rights do not have the right, by virtue of the performance right, to participate in
any share issue or interest issue of the Company or of any other body corporate.
Shares issued as a result of the exercise of share options or performance rights during or since the end of the
financial year are:
issuing entity
number of shares
under option/
performance right
class of share
exercise price
exercise date
Cash Converters International Limited
400,000
Cash Converters International Limted
283,668
Ordinary
Ordinary
Nil
Nil
21 October 2013
21 October 2013
87.
//annual report 2014 r e m u n e r a t i o n r e p o r t ( a u d i t e d )
/ / d i r e c t o r s ’ a n d e x e c u t i v e s ’ r e m u n e r a t i o n
This remuneration report, which forms part of the directors’ report, sets out information about the remuneration of
Cash Converters International Limited directors and its senior management in accordance with the requirements
of the Corporation Act 2001 (the Act) and its regulations for the financial year ended 30 June 2014. The prescribed
details for each person covered by this report are detailed below under the following headings:
•
•
•
•
•
•
Director and senior management details
Remuneration policy
Relationship between the remuneration policy and company performance
Remuneration of directors and senior management
Share-based payment plan
Key terms of employment contracts.
/ / d i r e c t o r a n d s e n i o r m a n a g e m e n t d e t a i l s
The following persons acted as directors of the company during or since the end of the financial year:
•
•
•
•
•
•
Mr Reginald Webb (non-executive director, chairman)
Mr Peter Cumins (managing director)
Mr John Yeudall (non-executive director) 1
Mr William Love (non-executive director) 2
Mr Joseph Beal (non-executive director) 2
Mr Lachlan Given (non-executive director) 3
1 Resigned 20 November 2013
2 Resigned 21 August 2014
3 Appointed 22 August 2014
The term ‘senior management’ is used in this remuneration report to refer to the following persons. Except as noted,
the named persons held their current position for the whole of the financial year and since the end of the financial
year:
•
•
•
•
•
•
Mr Michael Cooke (group legal counsel)
Mr Ian Day (general manager, Australia)
Mr Ralph Groom (company secretary / chief financial officer)
Mr Glen Fee (chief information officer)
Mr David Patrick (chief executive officer, UK)
Mr Mike Osborne (company secretary / chief financial officer, UK) 4
4 Resigned 31 July 2014
Senior management as used within this remuneration report are officers who are involved in, concerned in, or
who take part in, the management of the affairs of Cash Converters International Limited and / or related bodies
corporate.
/ / r e m u n e r a t i o n p o l i c y
The remuneration committee, consisting of the four non-executive directors, advises the Board on remuneration
policies and practices generally, and makes specific recommendations on remuneration packages and other terms
of employment for executive directors and other senior executives.
Executive remuneration and other terms of employment are reviewed by the committee having regard to performance
against goals set, relevant comparative information and independent expert advice. As well as a base salary,
remuneration packages include superannuation, performance-related bonuses and fringe benefits.
88.
//cash converters international / / r e m u n e r a t i o n p o l i c y ( c o n t i n u e d )
Remuneration packages are set at levels that are intended to attract and retain executives capable of managing the
consolidated entity’s operations.
Remuneration and other terms of employment for the managing director and certain other senior executives are
formalised in service agreements (refer to the key terms of employment contracts section within the remuneration
report for further information).
Remuneration of non-executive directors is determined by the remuneration committee and approved by the Board
within the maximum amount approved by the shareholders from time to time. Bonuses are not payable to non-
executive directors.
Remuneration packages contain the following key elements:
a.
b.
c.
Short-term employee benefits – salary/fees, bonuses and non-monetary benefits including the provision
of motor vehicles;
Post-employment benefits – include superannuation and prescribed retirement benefits; and
Share-based payments – include share options/performance rights.
Since the year end, the committee have appointed KPMG as advisors to assist in a compressive review of the
directors’ and senior executives’ remuneration policy. The review will encompass fixed remuneration, short term
and long term incentives.
/ / r e l a t i o n s h i p b e t w e e n t h e r e m u n e r a t i o n p o l i c y a n d c o m p a n y p e r f o r m a n c e
The tables below set out summary information about the consolidated entity’s earnings and movements in
shareholder wealth for the five years to June 2014:
Revenue
Net profit before tax
Net profit after tax
Share price at start of year
Share price at end of year
Interim dividend (i)
Final dividend (i) (ii)
Basic earnings per share
Diluted earnings per share
$
$
$
¢
¢
¢
¢
¢
¢
30 june 2014
30 june 2013
30 june 2012
30 june 2011
(iii)
30 june 2010
(iii)
331,668,907
272,722,719
234,354,795
186,384,204
126,070,428
32,040,465
47,664,207
41,425,274
39,270,559
25,462,577
21,132,289
32,869,972
29,416,024
27,692,433
15,926,163
107.0
108.0
2.00
2.00
5.67
5.56
64.5
107.0
2.00
2.00
8.09
7.92
72.5
64.5
1.75
1.75
7.75
7.63
55.0
72.5
1.75
1.75
7.28
7.23
42.0
55.0
1.50
1.50
6.60
6.58
(i)
(ii)
(iii)
Franked to 100% at 30% corporate income tax rate.
Declared after the balance date and not reflected in the financial statements.
Restated for the impact of the prior year adjustment related to Quickdraw Financial Solutions Pty Ltd.
Other than with respect to share-based payments which are disclosed below, there is no relationship between
shareholder wealth and remuneration, however certain bonuses are paid based on performance targets set for the
individual concerned as discussed further in the following section.
During the year ended 30 June 2014, no additional performance rights were granted.
On vesting each performance right equates to one ordinary share. The performance rights are split into multiple
tranches and are subject to various vesting conditions. One such vesting condition is the consolidated entity
achieving budgeted profit after tax for various periods, should any of the vesting conditions fail to be achieved the
performance rights will not vest, consequently there is a direct link between the creation of shareholder wealth and
share based payment remuneration.
89.
//annual report 2014
/ / r e m u n e r a t i o n o f d i r e c t o r s a n d s e n i o r m a n a g e m e n t
Details of the nature and amount of each element of the remuneration of each director of the Company and member
of senior management of the consolidated entity are set out in the following tables:
post
employment
other
long-
term
share
based
short-term employee benefits
benefits
benefits
payments
salary
& fees
$
cash
bonus
$
non-monetary
benefits
$
other
$
superannuation
$
long service
leave
$
options
& rights
$
total
$
2014
Non-executive directors
R. Webb
J. Yeudall
W. Love
J. Beal
125,000
36,944
90,833
90,833
-
-
-
-
-
-
-
-
Executive director
P. Cumins
Other executives
643,291
200,000
53,953
520,739
-
301,341
233,979
-
-
299,840
162,443
23,316
238,254
23,736
259,825
233,002
-
-
-
4,332
-
2,839,902
620,158
81,601
M. Cooke
I. Day
R. Groom
G. Fee
D. Patrick
M. Osborne
Total
2013
Non-executive directors
R. Webb
J. Yeudall
W. Love
J. Beal
120,000
95,000
85,833
85,833
-
-
-
-
-
-
-
-
Executive director
P. Cumins
Other executives
M. Cooke
I. Day
R. Groom
G. Fee
D. Patrick
R. Pilgrim*
643,291
200,000
77,528
508,038
-
283,100
95,114
-
-
281,170
56,600
21,454
231,000
-
212,456
36,056
103,391
-
-
15,810
11,858
15,810
M. Osborne
189,969
23,514
Total
2,839,082
411,284
142,460
-
-
-
-
-
-
-
-
-
3,623
3,019
6,642
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17,775
-
17,775
17,775
17,775
62,983
22,164
156,247
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
125,000
36,944
90,833
90,833
439,817 1,354,836
118,350
639,089
47,600
600,695
54,740
558,114
12,138
291,903
-
-
330,763
258,185
672,645 4,377,195
-
-
-
-
120,000
95,000
85,833
85,833
16,464
- 1,489,683 2,426,966
-
16,464
16,565
20,790
56,601
-
18,534
145,418
-
-
-
-
-
-
-
211,085
719,123
71,843
466,521
82,620
458,409
12,767
264,557
61,067
381,990
-
115,249
35,922
283,749
- 1,964,987 5,503,230
* ceased to be a KMP from 1 July 2013
No director or senior management person appointed during the period received a payment as part of his or her
consideration for agreeing to hold the position.
90.
//cash converters international
/ / r e m u n e r a t i o n o f d i r e c t o r s a n d s e n i o r m a n a g e m e n t ( c o n t i n u e d )
bonuses and share-based payments granted as compensation for the current financial year
The Company pays short term incentives (STI’s) to its senior management team based on meeting short term
targets (12 months) in regard to the various operating divisions the Company reports under. There are four main
reporting divisions: franchise operations; store operations; financial services – administration; and financial services
– personal loans. The Board approves a forward 12 month budget for each division and it is against this budget that
each senior manager is assessed against. The Board has discretion to award the STI to a manager, which is only
granted after a review of the manager’s performance over the full 12 month period of the STI.
Each manager has an STI target that may earn him/her an incentive which represents a range of 25% to a maximum
of 75% of base salary, depending on what percentage the actual result is above the budget. The budget is approved
by the Board for each division. If the actual result is only 95% of the budget for a division then no STI will be paid.
The managing director’s STI is based on the Group actual performance against the Group Board budget. The STI
target may earn the managing director an STI of $200K if the actual profit exceeds the budgeted profit.
cash bonus as a percentage of total compensation
executive
P Cumins
D Patrick
M Osborne
R Groom
G Fee
I Day
2014
14.6%
0.0%
0.0%
28.8%
8.1%
39.0%
2013
8.2%
17.2%
15.3%
12.3%
0.0%
20.4%
/ / s h a r e - b a s e d p a y m e n t p l a n
At the annual general meeting held on 30 November, 2010, the shareholders approved the establishment of the
executive performance rights plan (“EPRP”). At the same time, the shareholders passed a resolution authorising
and directing the Board to issue to the managing director, Mr Peter Cumins, 10,000,000 performance rights. The
conditions attaching to those rights were set out in the shareholder resolution and the Board and the remuneration
committee had no discretion concerning the issue of those rights.
The shareholders also authorised the issue of a further 10,000,000 performance rights to senior executives at the
discretion of the Board. It is only the issue of performance rights out of this further 10,000,000 that is within the
Board’s power. The rights vest into ordinary shares in the Company upon achievement of certain vesting conditions
which are described fully on page 93. Insofar as the vesting conditions relate to Mr Cumins, these were set by the
shareholders as explained above.
Under the EPRP, the Company will issue performance rights to employees as part of their total remuneration
package. The rights were issued free of charge.
91.
//annual report 2014
/ / s h a r e - b a s e d p a y m e n t p l a n ( c o n t i n u e d )
Terms and conditions of share-based payment arrangements affecting remuneration of key management personnel
in the current or future financial years is set out below:-
name
P Cumins
I Day
R Groom
M Cooke
D Patrick
M Osborne
G Fee
performance
rights
series
year
grant date
vesting date
no. of
rights
granted
grant
date fair
value
exercise
price
vesting
conditions
Tranche 2
2011
30/11/2010
14/10/2016
6,000,000
$0.43
Tranche 2
Tranche 4
Tranche 5
Tranche 6
Tranche 7
Tranche 8
Tranche 9
Tranche 2
Tranche 4
Tranche 5
Tranche 6
Tranche 7
Tranche 8
Tranche 9
2012
2013
2013
2013
2014
2014
2014
2012
2013
2013
2013
2014
2014
2014
19/09/2011
4/10/2013
100,000
25/09/2012
4/10/2013
25/09/2012
1/07/2014
25/09/2012
1/07/2015
25/09/2013
1/07/2014
25/09/2013
1/07/2015
25/09/2013
1/07/2016
66,667
66,667
66,666
66,667
66,667
66,666
19/09/2011
4/10/2013
115,000
25/09/2012
4/10/2013
25/09/2012
1/07/2014
25/09/2012
1/07/2015
25/09/2013
1/07/2014
25/09/2013
1/07/2015
25/09/2013
1/07/2016
76,667
76,667
76,666
76,667
76,667
76,666
$0.39
$0.75
$0.71
$0.68
$1.21
$1.15
$1.09
$0.39
$0.75
$0.71
$0.68
$1.21
$1.15
$1.09
Tranche 3
2012
19/09/2011
15/09/2016
1,800,000
$0.32
Tranche 2
Tranche 4
Tranche 5
Tranche 6
Tranche 2
Tranche 4
Tranche 5
Tranche 6
Tranche 4
Tranche 5
Tranche 6
Tranche 7
Tranche 8
Tranche 9
2012
2013
2013
2013
2012
2013
2013
2013
2013
2013
2013
2014
2014
2014
19/09/2011
4/10/2013
25/09/2012
4/10/2013
25/09/2012
1/07/2014
25/09/2012
1/07/2015
19/09/2011
4/10/2013
25/09/2012
4/10/2013
25/09/2012
1/07/2014
25/09/2012
1/07/2015
25/09/2012
4/10/2013
25/09/2012
1/07/2014
25/09/2012
1/07/2015
25/09/2013
1/07/2014
25/09/2013
1/07/2015
25/09/2013
1/07/2016
85,000
56,667
56,667
56,666
50,000
33,333
33,333
33,334
17,000
17,000
17,000
17,000
17,000
17,000
$0.39
$0.75
$0.71
$0.68
$0.39
$0.75
$0.71
$0.68
$0.75
$0.71
$0.68
$1.21
$1.15
$1.09
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
(2)
(4)
(6)
(7)
(8)
(7)
(8)
(9)
(4)
(6)
(7)
(8)
(7)
(8)
(9)
(5)
(4)
(6)
(7)
(8)
(4)
(6)
(7)
(8)
(6)
(7)
(8)
(7)
(8)
(9)
92.
//cash converters international
/ / s h a r e - b a s e d p a y m e n t p l a n ( c o n t i n u e d )
The following vesting conditions are attached to the performance rights
number
vesting condition
2
3
4
5
6
7
8
9
i)
ii)
iii)
i)
ii)
i)
ii)
i)
ii)
i)
ii)
i)
ii)
i)
ii)
i)
ii)
Completion of various predefined organisational change initiatives.
The Consolidated Entity achieving budgeted Net Profit after tax in each of FY2013 - FY2016.
Continuous employment through to vesting determination date, being 14 October 2016.
The Consolidated Entity achieving budgeted Net Profit after tax for the financial year ending 30 June 2012.
Continuous employment through to vesting determination date, being 15 September 2012.
The Consolidated Entity achieving budgeted Net Profit after tax in each of FY2012 and FY2013.
Continuous employment through to vesting determination date, being 15 September 2013.
The Consolidated Entity achieving budgeted Net Profit after tax in each of FY2012 – FY2016.
Continuous employment through to vesting determination date, being 15 September 2016.
The Consolidated Entity achieving budgeted Net Profit after tax for the financial year ending 30 June 2013
Continuous employment through to vesting determination date, being 1 July 2013
The executive’s responsible entity/division* achieving budgeted Net Profit after tax for the financial year ending 30 June
2014
Continuous employment through to vesting determination date, being 1 July 2014
The executives responsible entity/division* achieving budgeted Net Profit after tax for the financial year ending 30
June 2015
Continuous employment through to vesting determination date, being 1 July 2015
The executives responsible entity/division* achieving budgeted Net Profit after tax for the financial year ending 30
June 2016
Continuous employment through to vesting determination date, being 1 July 2016
* the responsible entity/division allocations are as follows
R Groom, G Fee, M Cooke – consolidated group
I Day – Combined Australian operations
D Patrick, M Osborne – Cash Converters UK Ltd
During the financial year the following share-based payment arrangements were granted to key management
personnel
performance
rights series
year
grant date
vesting date
no. of rights
granted
grant date
fair value
vesting
conditions
I Day
Tranche 7
Tranche 8
Tranche 9
R Groom
Tranche 7
Tranche 8
Tranche 9
2014
2014
2014
2014
2014
2014
25/09/2013
1/07/2014
25/09/2013
1/07/2015
25/09/2013
1/07/2016
25/09/2013
1/07/2014
25/09/2013
1/07/2015
25/09/2013
1/07/2016
66,667
66,667
66,666
76,667
76,667
76,666
$1.21
$1.15
$1.09
$1.21
$1.15
$1.09
(7)
(8)
(9)
(7)
(8)
(9)
93.
//annual report 2014
/ / s h a r e - b a s e d p a y m e n t p l a n ( c o n t i n u e d )
performance
rights
series
G Fee
Tranche 7
Tranche 8
Tranche 9
year
grant date
vesting date
no. of
rights
granted
grant date
fair value
vesting
conditions
2014
2014
2014
25/09/2013
1/07/2014
25/09/2013
1/07/2015
25/09/2013
1/07/2016
17,000
17,000
17,000
$1.21
$1.15
$1.09
(7)
(8)
(9)
During the year, the following key management personnel exercised options that were granted to them as part
of the compensation. Each option converts to one ordinary share of Cash Converters International Limited.
performance
rights
series
year
grant
date
vesting
date
no. of
rights
granted
grant
date fair
value
no. vested
during the
year
exercise
price
vesting
conditions
Tranche 2
Tranche 4
Tranche 2
Tranche 4
Tranche 2
Tranche 4
Tranche 2
Tranche 4
Tranche 4
2012
19/09/2011
4/10/2013
100,000
$0.39
100,000
2013
25/09/2012
4/10/2013
66,667
2012
19/09/2011
4/10/2013
115,000
2013
25/09/2012
4/10/2013
76,667
2012
19/09/2011
4/10/2013
85,000
2013
25/09/2012
4/10/2013
56,667
2012
19/09/2011
4/10/2013
50,000
2013
25/09/2012
4/10/2013
33,333
2013
25/09/2012
4/10/2013
17,000
$0.75
$0.39
$0.75
$0.39
$0.75
$0.39
$0.75
$0.75
66,667
115,000
76,667
85,000
56,667
50,000
33,333
17,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
(4)
(6)
(4)
(6)
(4)
(6)
(4)
(6)
(6)
name
I Day
R Groom
D Patrick
M Osborne
G Fee
During the year, the following key management personnel had options lapse due to their failure to meet the
vesting conditions as applicable to that tranche.
performance
rights series
year
grant
date
vesting
date
no. of
rights
granted
grant date
fair value
no. lapsed
during year
vesting
conditions
D Patrick
Tranche 5
M Osborne
Tranche 5
Tranche 6
2013
25/09/2012
1/07/2014
56,667
$0.71
56,667
(7)
2013
2013
25/09/2012
1/07/2014
25/09/2012
1/07/2015
33,333
33,334
$0.71
$0.68
33,333
33,334
(7)
(8)
The following summarises the grants of share-based payment compensation to directors and senior
management relate to the current year:
94.
//cash converters international
/ / s h a r e - b a s e d p a y m e n t p l a n ( c o n t i n u e d )
no.
granted
(i)
name
value of
performance
rights
granted at
the grant
date (ii)
value of
lapsed
performance
rights
no.
vested
value of
vested
performance
rights
% of
grant
vested
no.
lapsed
% of
compensation
for the year
consisting of
share-based
payments
P Cumins
10,000,000
$4,865,040
I Day
600,000
$223,423
R Groom
690,000
$256,936
M Cooke
3,000,000
$1,066,260
G Fee
102,000
$95,098
-
-
-
-
-
-
-
-
-
-
4,000,000
$2,280,360
40.00%
32.06%
266,667
$130,557
44.44%
19.34%
306,667
$150,140
44.44%
20.56%
1,200,000
$499,800
40.00%
29.35%
17,000
$12,767
16.67%
4.16%
(i)
(ii)
The number granted includes rights granted in the current and prior years. Prior year grants are
included where amounts have vested during the current year.
The value of performance rights granted during the year is recognised in compensation over the
vesting period of the grant, in accordance with Australian Accounting Standards.
/ / k e y t e r m s o f e m p l o y m e n t c o n t r a c t s
Contracts of employment for Peter Cumins, Ralph Groom, and Ian Day require a notice period of not less than three
months from the executive and 12 months from the company, to terminate employment. In the event of termination
by the company the company may elect that the executive does not serve the notice period in which case 12
months’ salary would be payable. The contracts are rolling with no fixed term.
Contract of employment for David Patrick requires a notice period of 12 months by either party. Contracts of
employment for Mike Osborne and Glen Fee require a notice period of not less than three months by either party. In
the event of termination by the company the company may elect that the executive does not serve the notice period
in which case three months’ salary would be payable. The contracts are rolling with no fixed term.
None of the non-executive directors have an employment contract with the company.
/ / s h a r e h o l d i n g s o f k e y m a n a g e m e n t p e r s o n n e l
Fully paid ordinary shares held in Cash Converters International Limited
balance at 1
july 2013
no.
granted as
remuneration
no.
received on
exercise of
options
no.
acquisition /
(disposal) of
shares
no.
balance at 30
june 2014
no.
Directors
P. Cumins
R. Webb
J. Yeudall
W. Love
J. Beal
10,253,030
1,012,500
295,668
-
-
Other key management personnel
I. Day
R. Groom
G. Fee
D. Patrick
M. Osborne
M. Cooke
Total
3,781,174
1,132,318
-
85,000
50,000
-
16,609,690
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
166,677
191,667
17,000
141,667
83,333
-
-
-
(295,668)
-
-
(3,947,851)
(1,323,985)
10,253,030
1,012,500
-
-
-
-
-
-
17,000
(226,667)
(133,333)
-
-
-
-
600,344
(5,927,504)
11,282,530
95.
//annual report 2014
/ / s h a r e h o l d i n g s o f k e y m a n a g e m e n t p e r s o n n e l ( c o n t i n u e d )
balance at 1
july 2013
no.
granted as
remuneration
no.
received on
exercise of
options
no.
acquisition /
(disposal) of
shares
no.
balance at 30
june 2014
no.
Directors
P. Cumins
R. Webb
J. Yeudall
W. Love
J. Beal
8,053,030
1,112,500
295,668
-
-
Other key management personnel
I. Day
R. Groom
G. Fee
D. Patrick
M. Osborne
M. Cooke
Total
3,681,174
2,877,451
-
-
-
4,500,000
20,519,823
-
-
-
-
-
-
-
-
-
-
-
-
4,000,000
(1,800,000)
10,253,030
-
-
-
-
100,000
115,000
-
85,000
50,000
1,200,000
5,550,000
(100,000)
-
-
-
-
(1,860,133)
-
-
-
(5,700,000)
1,012,500
295,668
-
-
3,781,174
1,132,318
-
85,000
50,000
-
(9,460,133)
16,609,690
No shares were held indirectly by any member of the senior management in the current or preceding year.
/ / p e r f o r m a n c e r i g h t s / o p t i o n s h o l d i n g s o f k e y m a n a g e m e n t p e r s o n n e l
30 june 2014
balance at 1
july 2013
granted as
remuneration
options/ rights
exercised
lapsed/
forfeited
balance at 30
june 2014
Directors
P. Cumins
6,000,000
Other key management personnel
-
-
230,000
200,000
51,000
-
-
1,800,000
345,000
300,000
51,000
255,000
150,000
8,901,000
481,000
-
-
(191,667)
(166,677)
(17,000)
(141,667)
(83,333)
(600,344)
-
-
-
-
-
(56,667)
(66,667)
6,000,000
1,800,000
383,333
333,323
85,000
56,666
-
(123,334)
8,658,322
M. Cooke
R. Groom
I. Day
G. Fee
D. Patrick
M. Osborne
Total
96.
//cash converters international / / p e r f o r m a n c e r i g h t s / o p t i o n h o l d i n g s o f k e y m a n a g e m e n t p e r s o n n e l ( c o n t i n u e d )
30 june 2013
balance at 1
july 2012
granted as
remuneration
options/ rights
exercised
lapsed/
forfeited
balance at 30
june 2013
Directors
P. Cumins
10,000,000
Other key management personnel
M. Cooke
R. Groom
I. Day
G. Fee
D. Patrick
M. Osborne
Total
3,000,000
230,000
200,000
-
170,000
100,000
13,700,000
-
-
230,000
200,000
51,000
170,000
100,000
751,000
(4,000,000)
(1,200,000)
(115,000)
(100,000)
-
(85,000)
(50,000)
(5,550,000)
/ / 2 0 1 2 & 2 0 1 3 r e m u n e r a t i o n r e p o r t d i s c l o s u r e
-
-
-
-
-
-
-
-
6,000,000
1,800,000
345,000
300,000
51,000
255,000
150,000
8,901,000
At the AGM held on 16 November 2012, approximately 30% of shareholders cast a ‘no’ vote in relation to the
adoption of the remuneration report for the year end 30 June 2012. The Company therefore received what is
known as a ‘first strike’ under the Amendments to the Corporations Act. The resolution was still passed as an
‘ordinary resolution’.
At the AGM held on 20 November 2013, a ‘second strike’ was received as a result of, for a second concurrent
year, a greater than 25% ‘no’ vote in relation to the adoption of the remuneration report (actual voting 28% “no”).
In this instance, for the year end 30 June 2013. (The resolution was still passed as an ‘ordinary resolution’.)
In the event of a ‘second strike’, the Company must give shareholders the option to require that the entire board
(except the managing director and any directors appointed since the remuneration report was approved by the
board) stand for re-election at a further general meeting (the spill meeting). This meeting must take place within
90 days.
An immediate vote was taken to hold a Board spill meeting (conditional spill resolution), the result of which were
95% against and so the resolution was not passed. The failure to pass the resolution effectively resets both the
first and second strikes. The previous no votes will have no impact on the voting and outcome of the resolution
in the coming year’s AGM.
Following the vote against the remuneration report at the 2012 and 2013 AGM the Board has held discussions
with certain proxy advisors who revealed that they had made their negative voting recommendations without
considering or being aware of the fact that all of the 10,000,000 performance rights issued to Mr Cumins had
been authorised and issued pursuant to the shareholders’ resolution at the 2010 AGM. The advisors failed to
examine the history of those rights which was easily available. Had they done so, they would have realised
that those rights should be considered to have been issued by the shareholders and neither the remuneration
committee nor the Board should be criticised for implementing the instruction of the 2010 AGM. Indeed, the
Board had no choice but to carry out the instruction of the shareholders. In addition some of the advisors
wrongly believed that the performance rights were subject to no performance conditions, which is incorrect, the
performance conditions were previously disclosed.
97.
//annual report 2014 / / a u d i t o r ’ s i n d e p e n d e n c e d e c l a r a t i o n
The auditor’s independence declaration is included at the end of the financial statements.
/ / n o n - a u d i t s e r v i c e s
The directors are satisfied that the provision of non-audit services, during the year, by the auditor is compatible with
the general standard of independence for auditors imposed by the Corporations Act 2001.
The directors are satisfied that the provision of non-audit services, during the year, by the auditor did not compromise
the auditor independence requirements of the Corporations Act 2001, as the nature of the services was limited to the
preparation of the statutory income tax returns, indirect tax compliance, transaction/compliance related matters and
generic accounting advice. All non-audit services have been reviewed and approved to ensure they do not impact
the integrity and objectivity of the auditor, and none of the services undermine the general principles relating to
auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued
by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work,
acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly
sharing economic risks and rewards.
Details of the amounts paid or payable to the auditor for non-audit services provided during the year by the auditor
are outlined in note 5 to the financial statements.
The directors’ report is signed in accordance with a resolution of directors made pursuant to S298(2) of the
Corporations Act 2001.
For and on behalf of the Board
Peter Cumins
Director
Perth, Western Australia
Date: 11 September 2014
98.
//cash converters international d i r e c t o r s ’ d e c l a r a t i o n
In accordance with a resolution of the directors of Cash Converters International Limited, I state that:
1.
In the opinion of the directors:
a.
i.
the financial statements and notes are in accordance with the Corporations Act 2001, including:
giving a true and fair view of the financial position as at 30 June 2014 and the performance for the
year ended on that date of the consolidated entity; and
complying with Australian Accounting Standards and the Corporations Regulations 2001;
the attached financial statements are in compliance with International Financial Reporting
Standards, as stated in note 1 to the financial statements; and
There are reasonable grounds to believe that the Company will be able to pays its debts as and
when they become due and payable.
ii.
b.
c.
2.
This declaration has been made after receiving the declarations required to be made to the directors in
accordance with sections 295A of the Corporations Act 2001 for the financial year ended 30 June 2014.
At the date of this declaration, the Company is within the class of companies affected by ASIC Class Order 98/1418.
The nature of the deed of cross guarantee is such that each company which is party to the deed guarantees to each
creditor payment in full of any debt in accordance with the deed of cross guarantee.
In the directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the
ASIC Class Order applies, as detailed in note 23 to the financial statements will, as a group, be able to meet any
obligations or liabilities to which they are or may become subject, by virtue of the deed of cross guarantee.
Signed in accordance with a resolution of the directors made pursuant to s.295 (5) of the Corporations Act 2001.
On behalf of the directors
Peter Cumins
Director
Perth, Western Australia
Date: 11 September 2014
99.
//annual report 2014
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Woodside Plaza
Level 14
240 St Georges Terrace
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
The Board of Directors
Cash Converters International Limited
Level 18
37 St Georges Terrace
Perth WA 6000
11 September 2014
Dear Directors
Cash Converters 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 audit of the financial statements of Cash Converters International Limited
for the financial year ended 30 June 2014, 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
audit; and
(ii) any applicable code of professional conduct in relation to the audit.
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.
100.
//cash converters international
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Woodside Plaza
Level 14
240 St Georges Terrace
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 Report to the members of
Cash Converters International Limited
Report on the Financial Report
We have audited the accompanying financial report of Cash Converters International Limited, which
comprises the statement of financial position as at 30 June 2014, the statement of profit or loss and
other comprehensive income, the statement of cash flows and the statement of changes in equity for
the year ended on that date, notes comprising a summary of significant accounting policies and other
explanatory information, and the directors’ declaration of the consolidated entity, comprising the
company and the entities it controlled at the year’s end or from time to time during the financial year
as set out on pages 28 to 83 and 99.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the 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
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the consolidated financial statements comply with
International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control, relevant to the company’s
preparation of the financial report that gives a true and fair view, in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited.
101.
//annual report 2014
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Auditor’s Independence Declaration
In conducting our audit, 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 report.
Opinion
In our opinion:
(a) the financial report of Cash Converters International Limited is in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014
and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the consolidated financial statements also comply with International Financial Reporting
Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 88 to 97 of the directors’ report for the
year ended 30 June 2014. The directors of the company are responsible for the preparation and
presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion the Remuneration Report of Cash Converters International Limited for the year ended
30 June 2014, complies with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Peter Rupp
Partner
Chartered Accountants
Perth, 11 September 2014
102.
//cash converters international
s h a r e h o l d e r i n f o r m a t i o n
THE SHAREHOLDER INFORMATION SET OUT BELOW WAS APPLICABLE AS AT 11 SEPTEMBER 2014
/ / s u b s t a n t a n t i a l s h a r e h o l d e r s
Substantial shareholders (5% or above) in the Company and the number of equity securities in which they have an
number of
ordinary shares
percentage of
issued
136,848,000
40,760,766
36,259,086
30,523,546
30,248,935
23,513,302
31.88
9.50
8.45
7.11
7.05
5.48
interest are set out below:
name
EZCORP Inc
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
RBC Investor Services Australia Nominees Pty Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
/ / d i s t r i b u t i o n o f e q u i t y
Distribution schedule of holdings:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total number of holders
Number of holders of less than a marketable parcel
holders
1,091
2,953
1,541
2,010
134
7,729
276
/ / t w e n t y l a r g e s t e q u i t y s e c u r i t y h o l d e r s
name
1. EZCORP Inc
2. HSBC Custody Nominees (Australia) Limited
3. Citicorp Nominees Pty Ltd
4. RBC Investor Services Australia Nominees Pty Limited
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