Cash
Converters
International
Limited
Annual Report
For the year ended
30 June 2019
ABN 39 069 141 546
Contents
Corporate directory
Chairman’s report
Chief Executive Officer’s report
FY 2019 highlights
GEM
Our digital transformation
Operating and financial review
Directors’ report
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 financial statements
Directors’ declaration
Auditor’s independence declaration
Independent auditor’s report
Additional securityholder information
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4
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8
10
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91
These financial statements have been organised into the
following six sections:
1. Basis of preparation
2. Financial performance
3. Assets and liabilities
4. Capital structure and financing costs
5. Group structure
6. Other items
Each section sets out the accounting policies applied
in producing the relevant notes, along with details of
any key judgements and estimates used or information
required to understand the note. The purpose of this
format is to provide readers with a clearer understanding
of what drives the financial performance and financial
position of the Group.
2 | Annual Report 2019
Corporate
directory
Auditors
Deloitte Touche Tohmatsu
Brookfield Place, Tower 2
123 St Georges Terrace
Perth WA 6000
Australia
Stock Exchange
Australian Securities Exchange
Level 40, Central Park
152-158 St Georges Terrace
Perth WA 6000
Australia
ASX code: CCV
Directors
Mr Stuart Grimshaw Non-Executive Chairman
Mr Peter Cumins
Mr Kevin Dundo
Mr Lachlan Given
Executive Deputy Chairman
Non-Executive Director
Non-Executive Director
Company Secretary
Mr Brad Edwards
Registered and principal office
Level 11, Citibank House
37 St Georges Terrace
Perth WA 6000
Australia
Tel: +61 8 9221 9111
Web: www.cashconverters.com
Share registrar
Computershare Investor Services Pty Ltd
Level 11
172 St Georges Terrace
Perth WA 6000
Australia
Tel: 1300 850 505
Annual Report 2019 | 3
Chairman’s
report
For the year ended 30 June 2019
Another year has passed and
your Company continues to work
tirelessly to meet the cash needs
of our customers. It has been
both an eventful and formative
period of time where one of the
outstanding two class actions
has been settled. We continue to
work diligently to resolve the last
remaining action and, while this is
a distraction to management and
investors, we continue to evolve
our business for the benefit of our
staff, shareholders and customers.
We have also been fortunate in hiring a new CEO,
Brendan White, who brings with him an enthusiasm to
grow the business. I have known Brendan for some
time as he worked with me previously at CBA and
BOQ and for us to be able to leverage him away from
BOQ is testament to his belief in what is possible at
Cash Converters combined with what is not possible
while working with banks.
While we continue to focus on the customer and
ways we can assist with their needs, it is hard not
to reflect on the macro challenges of the past 12
months. The impacts of the Royal Commission into
banking have been far reaching and possibly it was
“the Commission we had to have”. The question that
arises from the Commission, from my perspective, is
whether anything has changed culturally, aside from
increased compliance costs.
For example, I was intrigued by the latest research
piece from UBS that suggested that the effect of the
Royal Commission in regards to factual accuracy in
home loan applications may have been a short term
aberration. The July 2019 survey found that only 63%
of respondents said their home loan applications were
“completely factual and accurate” – a record low in
their coverage period. If we put this into context,
it can be perceived that around one third of all home
loan applications are assessed on the basis of
inaccurate information.
Another example of “the more things seem to change
the less they do” is around the treatment of existing
mortgage customers compared to new customers.
New mortgage customers are typically offered
superior interest rates than existing customers.
4 | Annual Report 2019
4 | Annual Report 2019
Chairman’s report
For the year ended 30 June 2019
Loyalty does not appear to be rewarded and the
desire to attract new mortgage customers at the
expense of existing ones does seem counter-intuitive.
The Commission really challenged banks on the sales
targets that are allocated to staff as it led to poor
behaviours and was not in the interests of customers.
It would appear that sales targets are still alive and
well if the behaviour of attracting new customers is
more rewarding than retaining existing ones. Surely
customer retention is actually the best way to attract
new customers rather than just pricing.
A healthy banking system is critical to the country and
the focus on long term customer retention will reduce
costs over time.
At Cash Converters we are always looking at ways
that we can assist all customers who have a need
for cash. Increasingly we are seeing pressures on
small business as the banks struggle to economically
balance the returns as well as understand the
importance of this sector. By economic returns I
mean the way that risk weightings, and therefore
capital allocated, affect the focus of banks – small
business has a very high capital risk weighting when
compared with housing. A recent report showed
that the returns on housing, due to beneficial capital
risk weightings, are in excess of 30%. When the
ROEs of banks are now sitting around 10-12%, the
impact of the business segments can be a drain on
returns. However, for the economy, a healthy business
segment that invests into the country via infrastructure
and innovation is hugely beneficial. I believe more
needs to be done in the supporting of small business
and we, at Cash Converters, will be looking closely
as to the opportunities that banks always seem to
present to us.
As readers of our annual report, it will come as no
surprise that it is getting more complex to understand.
We have witnessed changes to accounting standards
such as the new changes to provisioning calculations
as well as the imminent change to the way leases are
accounted for. All in all, the accounting profession
seems to have done a wonderful job in confusing the
end reader into not being able to understand exactly
how companies are performing.
We have seen a change in management of Cash
Converters and we continue to build a platform
that will sustain growth for the Company. We are
fortunate that there are opportunities for us to grow
with the demand for cash in the economy, across
many segments. While it continues to be a challenge
to investors with the share price performance of
the Company, your directors believe the future is a
robust one should we be able to clear the noise of the
outstanding class action. We have the management
team, committed staff, loyal customers and the
strategy to succeed.
Your board is looking forward to the year ahead and
we would like to thank you for your support as well as
our staff for their commitment to our customers.
Stuart Grimshaw
Chairman
4 | Annual Report 2019
4 | Annual Report 2019
Annual Report 2019 | 5
Chief
Executive
Officer’s
report
For the year ended 30 June 2019
Having assumed the position
of Chief Executive Officer in
March this year, it needs to be
acknowledged that the strong
underlying performance of the
business rests with the existing
leadership team, led by
Interim CEO, Sam Budiselik.
Cash Converters delivered
revenue growth to $281.6 million
for the year, and a net loss
after tax of $1.7 million, a result
that reflected adjustments of
$22.4 million that the Company
categorises as outside its normal
operating activity. Excluding these
adjustments, the net profit after
tax of the Company was
$20.7 million, a solid underlying
result considering the legacy
regulatory, legal and operational
challenges of the past 12 months.
Prior to joining Cash Converters, I invested a
considerable amount of time engaging with staff
and listening to our customers. What became clear
was the loyalty and trust expressed towards the
brand. This is supported by an NPS of over 60,
an exceptional result given our diverse customer
base, and evidenced by strong sales and loan
application rates.
Our corporate and franchise stores continue to
perform well. They have a strong relationship with
their customers which has clearly driven our high
NPS and overall performance for the 2019 financial
year. Australian franchise operations contributed
$6.0 million in revenue, reflecting an increase on the
prior year.
The performance of our Company-owned stores
is equally encouraging, particularly in an economy
characterised by declining sales among major
retailers. In-store sales and overall retail revenue
increased within this environment and pawnbroking
revenue delivered its tenth consecutive year of growth.
Enhancements made to the operating model of our
vehicle financing division, Green Light Auto (GLA),
have already positively impacted the bottom line,
contributing to a significant increase in total loans
advanced during the year, while improving the overall
experience for brokers and customers. Our plans to
further streamline the loan application process are
well underway, with a new broker portal pilot already
in the market. We are very pleased with the trajectory
of GLA, continuing its year-on-year growth since
launching in 2016.
6 | Annual Report 2019
Chief Executive Officer’s report
For the year ended 30 June 2019
Without question, the ability of an Australian
consumer to access credit has never been more
scrutinised, and we expect that this will remain a
focus for regulators into 2020 and beyond. As a
responsible lender our mission is, and always will be,
to support our customers in providing appropriate
financial solutions. Based on the foundation we have
built over the past 12 months and the strategy we
have set moving forward, the opportunity for Cash
Converters to generate value has never been greater.
Brendan White
Chief Executive Officer
Over 1,000 hours of research has been undertaken
in the past 12 months to better understand our
customers and the segments in which we operate.
The insights we have gained from this exercise have
been fundamental to the realignment of our corporate
strategy. The customer remains at the centre of
everything that we do.
On joining the organisation I undertook a review
of all IT projects, software assets and operational
processes. Our ability to harness technology is
fundamental to our strategy to transform Cash
Converters into a more sustainable, increasingly
profitable company. Although we are investing heavily
in our technology-enabled future, at the core of any
endeavour are people and we are working hard to
attract and retain the talent necessary to deliver
this strategy.
Outlook
We commenced the 2020 financial year with a strong
balance sheet and already see signs of improved
performance across the Group. Early indicators point
to a strong second half and a continued transition to a
higher-quality, lower-risk loan book.
While our personal finance division is quickly
becoming the engine-room of our Company, our
stores are the gateway into the community, and we
are committed to finding ever better ways of serving
our customers both in-store and online.
Annual Report 2019 | 7
FY 2019
Highlights
For the year ended 30 June 2019
Group revenue up 8.2%
to $281.6 million
Personal loan
application
numbers up
Total loan
books up
18.3% to almost
450,000
27.9% to
$220.5 million
Small Amount Credit Contract (SACC) loan book now
comprises 43.4% of the total loan receivables of
the Group, down from 49.7% at 30 June 2018
8 | Annual Report 2019
8 | Annual Report 2019
GLA loan book up
GLA principal advanced
70.5% to
$71.8 million
up 47.0% to
$38.6 million
Total in-store retail sales up
4.6% to $67.3 million
Pawnbroking revenue up
3.8% to $30.5 million
Omni-channel distribution
strategy continues to
deliver with new digital
assets now deployed
across personal finance
and retail to complement
the store network, and
a vehicle finance portal
rolling out in FY 2020.
Revenue from
international
franchise operations
continues to grow.
Annual Report 2019 | 9
GEM
For the year ended 30 June 2019
Stats:
Net Promoter Score
as at 30 June 201961.9%
Promoters
as at 30 June 201972%
Survey Reponses
as at 30 June 201983,208
Overall experience
as at 30 June 20198.9%
10 | Annual Report 2019
Operations Manager Quotes:
“GEM provides the ability
to get a genuine feel for the
interactions in the stores when
I am not there. Using the feedback
provided by customers also
allows me to coach and recognise
my team’s customer service
skills, creating a state focus on it.
” Peter Hines, NSW Operations Manager
Customer Quotes:
“GEM allows us to better
understand customers in real time,
giving us the opportunity to fix
or thank our customers instantly.
GEM also provides the operations
and store management teams
with transparency on individual
staff members’ engagement
performance with our customers.
This highlights development
opportunities, providing
management with a foundation for
a continuous improvement culture
when it comes to customer service.
GEM ensures we put the customer
first in everything we do.”
” Jason Rayner, QLD Operations Manager
“The customer service
I received was amazing. I went
in to find out about getting a
cash advance and felt a little
embarrassed and uncomfortable.
The lady that served me was so
understanding and helped me work
out the best option and I didn’t
feel judged. I left the store feeling
so much better and will certainly
return if I ever need to. Excellent
and friendly customer service.
” K, Frost (SA)
“I’m over the moon about my
latest acquisition and the speed
that the finance was obtained, but
that isn’t all. The amount of top-
quality equipment I have purchased
at bargain prices from Cashies
is unbelievable. Thanks and
thanks again.
” P, Lewis (SA)
“Affordability comes first. Staff
at [the store] are always
professional and have a wonderful
and personable nature when
serving me. Always friendly and
answer all my questions. I’m
always a satisfied customer.
” R, Dobbs (QLD)
Annual Report 2019 | 11
Our digital
transformation
Throughout FY 2019, Cash Converters has undergone a full digital makeover.
Old Home Page vs new Home Page
Old Cash Loans Home Page
vs new Mobile Application
New website
The Cash Converters website has a new look.
With 68% of the overall site traffic coming from
mobile and growing, everything has been
designed to put the mobile experience first.
It’s clean, crisp and modern.
Through the new website infrastructure,
there is improved customer tracking and the
capability to experiment with products like
Adobe Analytics and Adobe Target.
12 | Annual Report 2019
New Online Shop
Checkout
Abandonment Rate
8%
Fallen from 49% to 41%
Personal Finance
Retention Campaign
Customer Lists
155%
Increased from 20,000 to 51,000 customers
Approved Loans
per month
140%
Customer retention cost has fallen to
as low as $0.97
Cashies Online
Since the launch of the e-commerce platform in
October, Cashies Online saw an average of 1000
new to Business customers per month for FY 2019.
This is a 20% higher average compared to the same
timeframe for FY 2018.
The checkout abandonment rate has fallen from
49% to 41%.
Adobe upgrade
Through the implementation of the Adobe Tech Stack,
teams in all departments have had a much stronger
ability to analyse site behaviour and optimise the
user journey.
By using all four Adobe products in unison,
the team can use a test and learn methodology to
create a personalised customer experience across the
Cash Converters brand, delivering the right message
at the right time across channels such as SMS, Email,
Website and Search.
Customer data
During the year, all customer data was brought together
into one place, Single Customer View, to allow:
Improved customer analysis
•
• Targeted marketing
• Cross selling opportunities
Single customer view has enabled a greater ability to
analyse customers as well as how they interact across
all products Cash Converters has to offer.
With the marketing team now having the ability to easily
access data, marketing can become highly targeted to
reduce the cost to acquire new customers as well as
retain them.
Our Personal Finance retention campaign customer lists
have grown by 155% from 20,000 to 51,000 customers.
Through the campaign, Cash Converters Personal
Finance has seen a 140% increase in approved loans
per month, lowering the cost of customer retention to
as low as $0.97 utilising our investment in the marketing
stack (below).
Campaign
Analytics
Target
Audience
Manager
Adobe
Single Customer View
Store
back-end
system
Personal
finance
back-end
system
What’s it
Worth
Cashies
Online
Annual Report 2019 | 13
Operating and
financial review
For the year ended 30 June 2019
Cash Converters International Limited (the
Company) and entities controlled by the
Company and its subsidiaries (the Group)
is a diverse group generating revenues
from franchising, store operations,
personal finance and vehicle finance,
supported by a corporate head office in
Perth, Western Australia. The Company
operates in Australia and the United
Kingdom and also has an equity interest
of 25% in Cash Converters New Zealand.
There is a franchise presence in a further
15 countries around the world.
Financial Performance
The Company reports revenue growth of 8.2% to
$281.565 million (2018: $260.345 million), and a full
year net loss after tax of $1.692 million compared to a
prior year profit after tax of $22.503 million. The profit
and loss statement includes adjustments that the
Company categorises as outside its normal operating
activity and has listed these items below, to provide
a comparative result that more accurately reflects the
underlying performance of the business. The effect of
these items in aggregate reduced the net profit after tax
by $22.387 million. Excluding these adjustments, the
profit after tax of the Company was $20.695 million,
and EBIT before adjustments was $39.754 million
(2018: $43.512 million).
Across the Group, the year ended 30 June 2019
(FY 2019) saw gross loan books increase by 27.9%
to $220.490 million (2018: $172.339 million), with the
most significant increases seen in the vehicle financing
business, Green Light Auto (GLA) which increased by
over 70%. Personal loan growth was most prevalent
in online lending, with the Medium Amount Credit
Contract (MACC) online loan book increasing by
40.0%. The Small Amount Credit Contract (SACC)
loan book now comprises only 43.4% of the total loan
receivables of the Group, down from 49.7% at
30 June 2018.
Whilst the strong growth in lending has driven the top
line revenue growth across the personal finance and
vehicle finance businesses, the year has been impacted
by an increase in arrears and write-offs of loans.
14 | Annual Report 2019
Operating and financial review
For the year ended 30 June 2019
Combined with this increase has been the adoption of AASB 9 ‘Financial Instruments’, the effect of which has
been to apply further increases to the provisions for doubtful debt based on the arrears profile and expected credit
loss. As the business experienced an increasing trend of arrears and loan write-offs during the year, all credit
decisioning has been reviewed and more stringent credit criteria applied across the products offered. Investment
in data analytics has provided deeper insights into the propensity of customers to repay, which has driven down
acceptance rates in the second half of the year. The vehicle financing business has overhauled its risk scorecard
and product pricing to ensure an acceptable risk profile as it expands its broker network and continues to grow the
loan book.
A summary of consolidated revenues and results by significant segment is set out below:
Segment revenues
Segment EBITDA results
Franchise operations
Store operations
Personal finance
Vehicle financing
Totals before head office costs
Head office
2019
$’000
19,124
118,216
125,136
18,160
280,636
929
2018
$’000
19,606
118,540
109,490
11,969
259,605
740
Totals after head office costs
281,565
260,345
Depreciation, amortisation and impairment
Finance costs
Profit / (loss) before income tax
Income tax benefit / (expense)
Profit / (loss) for the year
Significant adjustments
2019
$’000
11,420
13,897
38,415
866
64,598
(43,315)
21,283
(13,222)
(10,427)
(2,366)
674
(1,692)
2018
$’000
12,404
15,787
46,677
2,574
77,442
(27,666)
49,776
(7,683)
(10,822)
31,271
(8,768)
22,503
As referenced above, the result for the year has been impacted by a number of adjustments that do not reflect the
normal operating performance of the business. Details are outlined below and summarised in the following table:
Earnings before interest & tax (EBIT)
Adjustments:
McKenzie class action settlement
Class action legal fees
Credit risk review
Restructuring costs
Accelerated amortisation & depreciation
UK IT Project
Other costs
Adjusted EBIT
2019
$’000
8,061
16,400
3,151
5,059
1,492
3,546
1,558
487
39,754
2018
$’000
42,093
-
2,749
-
-
-
-
(1,330)
43,512
Annual Report 2019 | 15
Operating and financial review
For the year ended 30 June 2019
The most significant event in the year was the
settlement of the McKenzie class action in November
2018. The Company reached a settlement of $16.400
million for the action. The Lynch proceeding remains
outstanding and following the trial in November 2018,
the Company awaits judgement, the outcome of which
is still unknown. Legal fees were incurred during the
year of $3.151 million (2018: $2.749 million) in defence
of the actions. Whilst the Lynch proceeding remains
outstanding there will continue to be some additional
fees through FY 2020.
With the increase in arrears and bad debts written
off during the year, the business completed a
comprehensive review of the loan books with external
consulting assistance. The outcome of these reviews
was a complete change to the credit scorecard of
GLA and significant changes to the credit modelling for
personal finance. The reviews also critically assessed
the recoverability of loans in arrears and determined
that a number of accounts should be written off. The
net impact of these write-offs increased the net debt
expense by $5.059 million ($1.450 million for personal
finance and $3.609 million for GLA). Accelerating these
write-offs also impacted the modelling for provisions
under AASB 9 through a change to the loss rates and
expected credit loss profile.
The change of CEO during the year and additional
restructuring to the leadership team resulted in $1.492
million of restructuring costs for the year, including
payments to the outgoing CEO and additional
compensation for forfeited entitlements of the
incoming CEO (details of which are included in the
Remuneration Report).
The new CEO initiated a series of reviews of IT
projects, software assets and operational processes.
One outcome from these reviews was the decision to
abandon a software development project in the UK,
resulting in total costs of $1.558 million being expensed
in the year. The pace of change in the technology
landscape and the continued reinvestment in the
Company’s core platforms also resulted in a revision to
the expected useful life of the capitalised software and
accelerated amortisation and depreciation of $3.546
million. This reduced the carrying value of intangible
software assets to $16.771 million.
Other costs expensed in the year were the net of:
i. increases to inventory and pawnbroking provisions
for the corporate store assets of $1.410 million,
reflecting updates to the estimates used to measure
their recoverable value and the prevailing age of the
assets; and
ii. a credit to the profit and loss of $923 thousand due
to the business not meeting the vesting criteria on
the long-term incentive (LTI) plan for the options
which were due to vest on 30 June 2019. The costs
previously expensed in relation to the tranche of
options linked to normalised earnings per share
growth (NEPSG) were credited to the profit and loss.
A further $574 thousand of costs associated with
the tranche of options linked to a market-linked total
shareholder return vesting condition, were credited
directly to retained earnings in accordance with the
accounting treatment prescribed by AASB 2.
16 | Annual Report 2019
Operating and financial review
For the year ended 30 June 2019
Franchise operations
Franchise operations incorporate:
> royalties and license fees from 15 countries with
franchised Cash Converters operations;
> operations of wholly-owned subsidiary Cash
Converters UK Ltd (CCUK), which operates as
master franchisor to 197 (2018: 196) UK franchisee
operated stores;
> equity accounted returns for the Company’s 25%
equity interest in Cash Converters New Zealand
(CCNZ) where the master franchisor operates 16
corporate owned stores and 12 franchise operated
stores; and
> fees from 84 (2018: 84) franchisee owned and
operated stores in Australia.
The total number of franchised stores globally now
stands at over 650, with 84 stores in Australia, 195
in the UK and approximately 380 throughout the rest
of the world. The Company continues to look for
opportunities to expand its franchise network, both in
Australia and internationally.
EBITDA for the franchise operations was $11.420
million, a decrease of $984 thousand from the prior
year. This decrease was a combination of positive and
negative variances. A reduction of interest revenue
following the repayment of the $15.000 million loan
made to CCNZ that matured in September 2018
reduced interest income by $838 thousand. The loan
was replaced with a new partner loan of $2.914 million
from the Company (supported by a loan of $8.741
million from the 75% equity partner).
Total franchisee fees, royalty revenues and license
fees combined to provide an increase of 5.0% from
the prior year, with an additional $574 thousand from
international franchisees and $161 thousand from
Australian franchise stores.
A decline in cash advance income from UK franchisees
and increased IT expenses due to the write-off of the IT
project, reduced the UK’s EBITDA contribution by $850
thousand to $2.371 million.
Australian franchise operations contributed $5.966
million of revenue (2018: $5.805 million) reflecting
annual increases in fees. The network remains positive
and looking for new opportunities to open more stores
across the country.
New Zealand’s operation has continued its growth
trajectory, particularly in its lending business as it
expands its product portfolio available in stores and
online. This growth brings the equity investment
contribution to EBITDA of $1.613 million, up from $846
thousand in the prior year, a 90.6% increase.
Store operations
Store operations combines the performance of the 69
Company-owned Cash Converters stores in Australia.
Revenue from these stores is derived from the retailing
of new and second-hand goods both in-store and
online, as well as interest from pawnbroking loans
and cash advance short-term loans made in-store.
Commission is also paid to the stores by the Group’s
Personal Finance business for successful personal loan
applications made in-store. The store network also
receives a share of income from successful online loan
applications by customer in their state. The commission
and online income are eliminated upon consolidation of
the group result.
With an environment seeing declining sales reported
from the large retail groups, it is encouraging to see a
year of growth in retail sales from the store network,
with in-store retail sales up 4.6%. Online retail revenue
decreased during the year following changes to the
Company’s eCommerce platform, but still combined to
produce an overall retail revenue increase of 2.0% to
$74.913 million (2018: $73.444 million). Pawnbroking
revenue delivered its tenth consecutive year of growth,
with revenue up 3.8% and pawn loans outstanding
up 3.0% to $10.936 million. However, income from
the in-store Cash Advance loans declined during the
year, with principal advanced down 18.3% compared
to FY 2018, which led to a decrease in Cash Advance
revenue of 22.1% to $12.234 million. In-store personal
loan referrals were also down on the prior year for
both SACC and MACC loans, with principal advanced
down 1.8% and 5.8% respectively. The composition of
the lending from stores (compared to online) dropped
to just below 50% (2018: 53.3%) of total principal
advanced for the year.
Operating and financial review
For the year ended 30 June 2019
Overall the EBITDA from the store network decreased
by $1.890 million to $13.897 million (2018: $15.787
million) from $118.216 million in segment revenue. This
included the additional provisions for aged inventory
and pawn loans of $1.410 million collectively as aged
inventory increased and gross retail stock on hand
increased 4.0% to $20.292 million during the year
(2018: $19.503 million).
Personal finance
The personal finance operations incorporate the trading
results of Cash Converters Personal Finance Pty Ltd
(CCPF) and Mon-E Pty Ltd (Mon-E). CCPF provides
unsecured loans originated through the franchise and
corporate store networks (49.5% of principal lent) and
directly from customers online (50.5% of principal lent).
The loans are underwritten, and the principal funded
by CCPF, which pays a commission to the stores
(both corporate and franchise) for the generation of
the lead and processing the application in-store. The
business offers two loan types referred to as SACC
(Small Amount Credit Contracts) and MACC (Medium
Amount Credit Contracts). SACC loans range from
$400 to $2,000, for a duration between 6 weeks and
12 months, with a default 9-month term. The average
size SACC loan is $1,175 (2018: $1,147). MACC loans
range from $2,000 to $5,000, and can be from 4 to
24 months’ duration, with a default term of 12 months.
Average MACC loans for the year were $3,562
(2018: $3,606).
Mon-E is responsible for providing the software
platform and administration services for the Cash
Converters store network in Australia to offer small cash
advance loans to their customers (average loan size of
$440, 2018: $427) and refer personal loans from stores
to CCPF for assessing. 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 as a percentage of fees earned
by the store and successfully collected.
Segment revenue for the year increased 14.3% to
$125.136 million (2018: $109.490 million), however
increasing arrears and bad debts written off reduced
the segment EBTIDA of the division to $38.415
million (2018: $46.677 million). The credit risk review
performed, resulted in an additional $1.450 million in
net bad debt expense incurred during the year, which
contributed to the EBITDA reduction. The net bad
debt expense also includes movement in the provision
for doubtful debts, which has changed substantially
under the new accounting standard (AASB 9 ‘Financial
Instruments’ – see note 1(b) to the financial statements
for details). Of the $9.538 million increase in personal
finance provisions during the year, $3.775 million is
directly attributable to the new accounting treatment.
In the year which saw the government hand down its
findings from the Royal Commission into Misconduct
in the Banking, Superannuation and Financial Services
Industry, opportunities for the Australian consumer
to access credit have never been as limited. Cash
Converters continues in its ambition to exceed the
compliance standards set by the regulator for our
sector, whilst endeavouring to meet our customers’
every growing need for cash solutions. This change
to the credit landscape is thought to be one of the
contributing factors to an 18.8% increase in loan
applications, however the ongoing review and
refinement of the Company’s credit risk parameters
resulted in the approval rates dropping to 32.2% for
SACC and 16.4% for MACC.
For the SACC product, the small decrease in approval
rates against the significant increase in applications
led to a net increase in principal advanced of 6.0% to
$133.493 million (2018: $125.916 million). The closing
gross SACC loan book was $91.706 million (2018:
$80.366 million) up 14.1%. Net bad debt expense
for the year of $36.919 million for SACC lending was
up $16.713 million on the prior year but includes the
additional write-off of $1.545 million following the credit
risk review, and the impact of the change in accounting
standard (AASB 9) contributed $2.179 million to the
overall $6.327 million increase in the SACC provision
for doubtful debts.
Within the MACC product, a sharper decline in
approval rates as the Company deployed more refined
credit decisioning saw MACC principal advanced
remain in line with the prior year at $54.874 million
(2018: $54.935 million). The closing loan book, due to
the longer loan term was up 23.6% to $42.082 million
(2018: $34.040 million). Net bad debt for MACC also
increased during the year to $10.359 million (2018:
$7.189 million). Of the $3.210 million increase, $1.596
million is attributable to the new accounting standard.
Cash Converters continues to utilise its proprietary
software to analyse customer bank statements to arrive
at a position of affordability using actual transaction
data, not benchmarks, and complemented by
customer declarations and advanced data analytics
to assist in credit decisioning. However, all loan
approvals are still manually determined through the
credit assessment team. Having worked to optimise the
efficiency of loan processing and enhance the customer
experience, the Company was pleased to pioneer the
integration with the New Payments Platform (NPP) and
as one of the first commercial (non-bank) organisations
to utilise the technology, the Company can now
disburse approved loans to be received into customers’
accounts instantaneously.
Vehicle financing
Green Light Auto Group Pty Ltd (GLA) is the
Company’s vehicle financing business, offering a range
of secured automotive loans through a network of
brokers, car dealerships, Cash Converters stores and
direct to customer online. During the year, GLA refined
its product offerings with secured loans now offered
from $5,001 to $45,000 (previously $5,000 to $50,000)
for a term of up to 5 years (previously 7 years). In the
current year the average loan value reduced slightly to
$17,410 (2018: $18,036) with an average term of 56
months (2018: 54 months). Interest and fees charged
on the loans are risk rated to the applicant’s credit
circumstances, the nature of the asset secured against
the loan and loan term. The average written rate of the
loans advanced in 2019 was 25.4% (2018: 25.6%).
Since its launch in March 2016, the GLA loan book
has continued to grow year on year. Total applications
in 2019 were 8,083, up 46.6% on 2018 and with
an approval rate of 27.5%, which saw total loans
advanced for 2019 up 47.0% to $38.634 million (2018:
$26.278 million). This growth is pleasing given the
continued tightening of the Company’s credit criteria
and is driven by the continued expansion of the broker
and dealer network across Australia. Total contributing
broker numbers exceeded 211 at the end of the year
18 | Annual Report 2019
Operating and financial review
For the year ended 30 June 2019
and with the onboarding of AFG one of Australia’s
largest finance aggregators in May 2019 this is set to
grow further into 2020.
During the year GLA further enhanced its operating
model and completed the transfer to an integrated
loan processing function with the Group’s personal
finance operations centre in Queensland. Leveraging
the scale of the CCPF operation to reduce loan
processing time to improve the experience for brokers
and the customer. Investment has also been made
and the first phase deployed of a new broker portal
for loan applications to assist in preliminary loan
assessments, future phases of the project will see the
application process seamlessly integrate with the now
consolidated loan management back of house system,
ultimately allowing GLA to participate in the NPP loan
disbursements to further reduce the funding time for
the business.
The discontinued Carboodle lease business is now in
its final year with all lease contracts scheduled to end
by March 2020. As at 30 June 2019, 81 active leases
remain (2018: 230) and gross lease receivables of $487
thousand (2018: $1.472 million) are outstanding.
Where possible, customers at the end of their lease are
being given the opportunity to acquire their vehicle with
the residual financed by GLA.
Corporate costs
Corporate costs consist of activities in the Head Office
that support the operating entities of the business,
such as IT, Business Development, Finance, Human
Resources, Risk and Internal Audit, Legal, Marketing,
Board and executive leadership team. Included in the
Head Office segment EBITDA loss of $43.315 million is
the settlement of the McKenzie class action of $16.400
million and associated legal fees of $3.151 million
(2018: $2.749 million). The 2019 year also included
the costs of restructuring under the leadership of the
new CEO, leading to non-recurring costs for the year of
$1.492 million. After adjusting for these items and the
reversal of lapsed LTI share-based payment expenses
of $923 thousand (2018: $1.330 million), the adjusted
EBITDA for head office improved by 11.6% to $23.644
million (2018: adjusted $26.247 million).
Financial Position
Summarised Financial Position
Cash at bank
Loan receivables
Other receivables
Inventories
Other assets and intangibles
Total assets
Borrowings
Other liabilities
Total liabilities
Total equity
Operating cash flow
Gearing (net debt/equity)
Basic (loss) / earnings per share (cents)
Return on equity
2019
$’000
81,101
174,600
14,087
20,370
174,082
464,240
123,336
24,052
147,388
2018
$’000
139,991
151,724
28,261
20,673
168,480
509,129
158,347
28,374
186,721
316,852
322,408
(31,788)
13.7%
(21,549)
6.1%
(0.27 cents)
4.55 cents
(0.5%)
7.0%
Receivables (trade and personal loans)
Outstanding loan receivables (personal loans,
pawnbroking loans and vehicle finance loans) for the
year have increased from $151.724 million ($145.055
million AASB 9 adjusted - see note 1(b) to the financial
statements) to $174.600 million, corresponding to
a gross loan book increase of 27.9% to $220.490
million. Other receivables have decreased following
the repayment of the $15.000 million loan to Cash
Converters New Zealand (CCNZ), which was repaid
in September 2018. A new loan of $2.787 million
was issued during the year to CCNZ with a five year
team, charging a 5% annual interest rate. The balance
of other receivables has also reduced following the
scheduled repayments of the loans provided to the
UK franchisees who acquired the 49 corporate stores
in 2016.
Other assets and intangibles
The Company continues to invest in its technology
assets, with $6.636 million of capitalised software
development incurred during the year (2018: $7.458
million). Additional property, plant and equipment
expenditure of $616 thousand was also incurred during
the year. Following the review of assets and IT projects,
additional amortisation and depreciation was charged
in the year of $5.105 million, to reduce the useful life
of capitalised software. In addition, a UK IT project
was impaired, reducing the carrying net book value of
intangible software assets to $16.771 million (2018:
$19.369 million).
Annual Report 2019 | 19
Borrowing and gearing
As reported in the prior year, the Company’s
securitisation facility with Fortress Investment Group
was amended in December 2017 to increase the facility
limit to $150.000 million and facilitate the financing of
MACC and GLA loans, in addition to the existing SACC
financing. The amendment to the facility also extended
the term for a further three years (plus a two-year
extension option). At 30 June 2019 the facility was
drawn to $124.500 million (2018: $99.500 million).
On 19 September 2019, the Company repaid the FIIG
Securities bond of $60.000 million utilising the available
cash balances following the successful capital raise
at the end of the prior year. With the bond repaid, the
Company now only has debt facilities with the Fortress
Investment Group.
The repayment of the FIIG bond has reduced the cash
balances from 30 June 2018, (which were elevated due
to the completion in June 2018 of the non-renounceable
entitlement issue raising net proceeds of $37.966
million) from $139.991 million down to $81.101 million
at 30 June 2019. The additional drawn down from
Fortress offset some of the bond repayment and its
depletion of cash, increasing the net debt position at 30
June 2019 to $43.399 million (2018: $19.509 million)
and the gearing ratio has increased to 13.7% at 30 June
2019 (2018: 6.1%).
Cash flows
The increase in gross loan books of 27.9% during the
year, and the increased share of these loan books
weighting towards longer term MACC and GLA loans
meant that operating cash flow for the year was a net
outflow of $31.788 million (2018: $21.549 million). This
operating cash flow also includes the $16.400 million
class action settlement paid in November 2018.
Business Risks
The Company’s performance and outlook continue to be
impacted by uncertainty of the regulatory environment
and legal challenges, with recommendations from the
Senate enquiry still not enacted and the increased
powers of the ombudsman and ASIC driving a greater
burden upon compliance functions and decreasing the
opportunity to responsibly lend to customers to meet
their financial needs. As outlined in the notes to the
financial statements, a change of the protected earnings
amount (PEA) for all borrowers to 10% of net income,
would have a substantial impact on the future of SACC
lending and the carrying value of the personal finance
business.
Outlook
Cash Converters is a business in transition. With a
new Chief Executive Officer on board and other key
leadership appointments occurring, management
has identified the opportunities ahead to continue to
transform the business into a diverse, sustainable and
increasingly profitable business over the next five years,
holding firm to the ambition to become the most trusted
and customer-focused business of its type, supplying
a convenient, reliable and valuable range of personal
goods and personal finance solutions.
However, the Company still awaits the outcome of the
Lynch class action, and whilst the impact of the case
is not yet known, management continue to develop its
strategy to drive the business forward and prepare itself
for growth once this legacy issue is resolved.
Cash Converters has established itself as a market
leader in second-hand goods retailing, pawnbroking
and short-term unsecured lending in Australia, and will
further leverage that scale with both its physical store
presence and online capabilities. Through optimisation
of these core businesses the Company can deliver
increased value to the shareholders. The addressable
market for secured auto financing also remains solid
for the Green Light Auto brand to build its standing and
become a larger participant in the sector.
The next horizon for the Company will be to leverage its
platform, technology and brand to reach new customers
through its network of stores and digital infrastructure.
20 | Annual Report 2019
Operating and financial reviewFor the year ended 30 June 2019 Directors’
report
For the year ended 30 June 2019
The directors of Cash Converters International Limited submit the following report of the Company for the financial
year ended 30 June 2019. In order to comply with the provisions of the Corporations Act 2001, the directors report
as follows:
Information about directors
The following persons held office as directors of the Company during the whole of the financial year and until the
date of this report unless otherwise stated:
Mr Stuart Grimshaw – Non-Executive Chairman
Appointed director 1 November 2014
Appointed Chairman 10 September 2015
Mr Grimshaw joined the Board in 2014 and was appointed Non-Executive Chairman on
10 September 2015. Mr Grimshaw is currently the Chief Executive Officer of EZCORP Inc (a
major shareholder in the Company). Prior to joining EZCORP in November 2014, Mr Grimshaw
was the Managing Director and Chief Executive Officer of Bank of Queensland Limited (BOQ).
During his tenure at BOQ he initiated fundamental changes to BOQ’s culture, operating
model and strategic direction and established a strong track record of execution. In addition, a strong capital and
provisioning strategy resulted in two credit rating upgrades to A-, and BOQ has been well supported by the equity
markets with two global equity offerings successfully raising close to $800 million. In Mr Grimshaw’s time at the
bank, BOQ attracted and developed exceptional talent across the top four management levels and a unique culture
and brand that is now well recognised by the market.
During his 30-year career in financial services, Mr Grimshaw has held a wide variety of other roles across many
functions of banking and finance, including eight years at the Commonwealth Bank of Australia (CBA). At CBA,
he started as Chief Financial Officer and over time became Group Executive, responsible for core business lines
including Institutional and Business Banking as well as Wealth Management (Asset Management and Insurance).
Prior to joining CBA, he worked for the National Australia Bank and was the Chief Executive Officer of Great Britain,
with responsibility for large UK consumer banks Yorkshire Bank and Clydesdale Bank.
Mr Grimshaw represented New Zealand at the 1984 Olympics in Field Hockey and has a Bachelor of Commerce
and Administration (Victoria University, Wellington, New Zealand) and an MBA (Melbourne University, Australia).
He has also completed the Program for Management Development at Harvard Business School.
Over the past 3 years Mr Grimshaw has held directorships with the following listed companies:
Company
EZCORP Inc
Commenced
3 November 2014
Ceased
-
Mr Peter Cumins – Executive Deputy Chairman
Appointed director April 1995
Appointed Executive Deputy Chairman 23 January 2017
Mr Cumins joined the Company in August 1990 as Finance and Administration Manager when
the Company had just 23 stores, becoming General Manager in March 1992. He became
Managing Director in April 1995. Mr Cumins moved from this role to the role of Executive
Deputy Chairman on 23 January 2017.
Mr Cumins is a qualified accountant and has overseen the major growth in the number of
franchisees in Australia as well as the international development of the Cash Converters franchise system.
His experience in 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.
Over the past 3 years Mr Cumins has held a directorship with the following listed company:
Company
EZCORP Inc
Commenced
28 July 2014
Ceased
9 April 2019
Annual Report 2019 | 21
Operating and financial reviewFor the year ended 30 June 2019 Directors’ report
For the year ended 30 June 2019
Mr Lachlan Given – Non-Executive Director
Appointed director 22 August 2014
Mr Given joined the Board in 2014. He is the Executive Chairman of EZCORP Inc and also
a Director of The Farm Journal Corporation, a 138 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 solutions; CANSTAR Pty Ltd, the leading
Australian 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).
Over the past 3 years Mr Given has held directorships with the following listed companies:
Company
Senetas Corporation Limited
EZCORP Inc
Commenced
20 March 2013
18 July 2014
Ceased
-
-
Mr Kevin Dundo – Non-Executive Director
Appointed director 20 February 2015
Mr Dundo joined the Board on 20 February 2015. Mr Dundo practises as a lawyer and
specialises in the commercial and corporate field, with experience in the mining sector, the
service industry and the financial services industry. He is a member of the Law Society of
Western Australia, Law Council of Australia, Australian Institute of Company Directors and a
Fellow of the Australian Society of Certified Practising Accountants.
Mr Dundo is currently a Non-Executive Director of ASX-listed Imdex Limited (ASX: IMD) and
Non-Executive Chairman of ASX-listed Red 5 Limited (ASX: RED).
Mr Dundo is a member of the Company’s Audit and Risk Committee and Remuneration and Nomination
Committee, and since 14 December 2018 has been the Chair of the Audit and Risk Committee.
Over the past 3 years Mr Dundo has held directorships with the following listed companies:
Company
Imdex Limited
Red 5 Limited
Commenced
14 January 2004
29 March 2010
Ceased
-
-
Ms Andrea Waters – Non-Executive Director
Appointed director 9 February 2017
Resigned 14 December 2018
Ms Waters was Chair of the Company’s Audit and Risk Committee and a member of the Remuneration and
Nomination Committee until her resignation. Over the past 3 years
Ms Waters has held directorships with the following listed company:
Company
MyState Limited
Commenced
19 October 2017
Ceased
-
Ms Ellen Comerford – Non-Executive Director
Appointed director 9 February 2017
Resigned 30 September 2018
Ms Comerford was Chair of the Company’s Remuneration and Nomination Committee and a member of the Audit
and Risk Committee until her resignation. Over the past 3 years Ms Comerford has held directorships with the
following listed companies:
Company
Heartland Bank Limited (NZX)
Commenced
1 January 2017
Ceased
-
22 | Annual Report 2019
Directors’ report
For the year ended 30 June 2019
Directors’ shareholdings
The following table sets out each director’s relevant interest in shares and options in shares of Cash Converters
International Limited as at the date of this report:
Directors
Mr S Grimshaw
Mr P Cumins
Mr L Given
Mr K Dundo
Company Secretary
Mr Brad Edwards
Appointed 30 June 2017
Fully paid ordinary shares
Number
Share options
Number
-
-
7,575,694
4,572,920
-
-
-
-
With a background in law, Mr Edwards has extensive private practice and corporate experience, most notably
with the Bank of Queensland Limited (BOQ) for 15 years, where he held the roles of Company Secretary and
General Counsel. His career encompasses financial services, including retail franchising, regulatory matters, dispute
resolution and class action litigation, capital markets and mergers and acquisitions.
Principal activities
The principal activity of Cash Converters International Limited and its subsidiaries (the Group) 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 number of corporate stores in Australia, all of which trade under the Cash Converters name.
Country master 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.
Review of operations
The Group’s net loss attributable to members of the parent entity for the year ended 30 June 2019 was $1.692
million (2018: profit of $22.503 million) after an income tax benefit of $674 thousand (2018: expense of
$8.768 million).
A review of the Group’s operations and financial performance has been provided on pages 14 to 20.
Changes in state of affairs
During the financial year there were no significant changes in the state of affairs of the Company other than those
referred to elsewhere in this financial report and the notes thereto.
Subsequent events
There have been no other events subsequent to the reporting date requiring disclosure in this report.
Future developments
Likely developments in expected results of the Group’s operations in subsequent years and the Group’s business
strategies are referred to elsewhere in this report. In the opinion of the directors, any further information on those
matters could prejudice the interest of the Company and has therefore not been included in this report.
Dividends
On 29 August 2019 the Company announced that there would be no final dividend in respect of the financial year
ended 30 June 2019.
No final dividend was paid in respect of the financial year ended 30 June 2018.
Shares under option or issued on exercise of options
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
Number of
shares
under option
1,998,760
8,975,010
Class of
shares
Exercise price
of option
Ordinary
Ordinary
Nil
Nil
Vesting
determination
date
30 Jun 2020
30 Jun 2021
The performance rights 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.
Annual Report 2019 | 23
Directors’ report
For the year ended 30 June 2019
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.
No shares have been issued as a result of the exercise of share options or performance rights during or since the
end of the financial year.
Indemnification and insurance of directors and officers
During the financial year, the Company paid a premium in respect of a contract insuring the directors of the
Company, the Company Secretary 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.
Directors’ meetings
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:
Directors
Board of directors
Audit and Risk
Committee
Remuneration
and Nomination
Committee
Mr S Grimshaw
Mr P Cumins
Ms E Comerford
Mr K Dundo
Mr L Given
Ms A Waters
Held
Attended
Held
Attended
Held
Attended
12
12
3
12
12
6
12
12
3
12
11
6
5
5*
1
5
5*
2
5
5*
1
5
5*
2
5
5*
2
5
5*
3
4
5*
2
5
5*
3
* Denotes directors who were not a member of the Committee but attended meetings by invitation.
Non-audit services
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
income tax and 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 6.6 to the financial statements.
Rounding off of amounts
The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financials / Directors’
Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument,
amounts in the directors’ report and the financial statements are rounded off to the nearest thousand dollars, unless
otherwise indicated.
Auditor’s independence declaration
The auditor’s independence declaration is included on page 85.
24 | Annual Report 2019
Directors’ report
For the year ended 30 June 2019
Remuneration report (audited)
1. Persons addressed and scope of the Remuneration Report
2. Performance and reward summary, key context and changes
3. Overview of Cash Converters’ Remuneration Governance Framework and strategy
4. Performance outcomes for FY 2019 including STI and LTI assessment
5. Changes in KMP-held equity
6. Non-Executive Director fee policy rates for FY 2019 and FY 2020 and fee limit
7. Remuneration records for FY 2019 (statutory disclosures)
8. Employment terms for KMPs
9. Other remuneration-related matters
10. External remuneration consultant advice
1. Persons addressed and scope of the Remuneration Report
This remuneration report forms part of the directors’ report for the year ended 30 June 2019 and has been
prepared in accordance with the Corporations Act, applicable regulations and the Company’s policies
regarding key management personnel (KMP) remuneration governance. The Board has chosen to provide
additional information beyond statutory requirements, to assist shareholders in obtaining an accurate and
complete understanding of the Company’s approach to the remuneration of KMP.
KMP are the non-executive directors (NEDs), executive directors and senior executive employees who have
authority and responsibility for planning, directing and controlling the activities of the Company. On that basis,
the following roles / individuals are addressed in this report:
Non-executive directors
Mr Stuart Grimshaw
Mr Kevin Dundo
Mr Lachlan Given
Ms Andrea Waters
Ms Ellen Comerford
Executive director
Mr Peter Cumins
Position
Chairman and non-executive director
Audit and Risk Committee member from 14 December 2018
Chair of Remuneration and Nomination Committee from
30 September 2018
Audit and Risk Committee member, Chair from 14 December 2018
Remuneration and Nomination Committee member
Non-executive director
Non-executive director (resigned 14 December 2018)
Chair of Audit and Risk Committee
Remuneration and Nomination Committee member
Non-executive director (resigned 30 September 2018)
Chair of Remuneration and Nomination Committee
Audit and Risk Committee member
Executive Deputy Chairman
Senior Executives classified as KMP
Mr Brendan White
Mr Sam Budiselik
Mr Ben Cox
Mr Brad Edwards
Mr Martyn Jenkins
Ms Myrrhine Cutten
Mr Nathan Carbone
Mr Mark Reid
Chief Executive Officer (commenced 18 March 2019)
Chief Operating Officer
Interim Chief Executive Officer (27 August 2018 to 18 March 2019)
General Manager Corporate Distribution
General Counsel and Company Secretary
Chief Financial Officer
Chief Human Resources Officer (resigned 25 January 2019)
Chief Risk Officer (resigned 9 November 2018)
Chief Executive Officer (resigned 27 August 2018)
Appointments / changes that have occurred to the KMP during or since the end of the financial year are:
Ms Ellen Comerford
Ms Andrea Waters
Mr Stuart Grimshaw
Ms Comerford resigned as a Director effective 30 September 2018.
Ms Waters resigned as a Director effective 14 December 2018.
Mr Grimshaw took responsibility as Chair of the Remuneration and
Nomination Committee following the departure of Ms Comerford.
Annual Report 2019 | 25
Directors’ report
For the year ended 30 June 2019
Mr Kevin Dundo
Mr Brendan White
Mr Mark Reid
Ms Myrrhine Cutten
Mr Nathan Carbone
Mr Sam Budiselik
Mr Ben Cox
Mr Dundo took responsibility as Chair of the Audit and Risk
Committee following the departure of Ms Waters.
Mr White was appointed as Chief Executive Officer effective
18 March 2019.
Mr Reid resigned as Chief Executive Officer effective 27 August 2018.
Ms Cutten left the Company on 25 January 2019.
Mr Carbone left the Company on 9 November 2019.
Mr Budiselik was appointed Interim Chief Executive Officer on 27
August 2018 until the commencement of the new CEO Brendan
White on 18 March 2019.
Mr Cox resigned as General Manager Corporate Distribution and will
leave the Company in September 2019. Mr Cox returns to the UK to
run his family’s network of 28 franchised Cash Converters stores.
2. Performance and reward summary, key context and changes
2.1 Company performance summary relevant to remuneration
During the reporting period the Company completed a comprehensive review of operations following the
commencement of the new Chief Executive Officer, Brendan White. The outcome of these reviews resulted
in several adjustments to the reported profit that do not relate to the underlying performance of the business.
Whilst the financial performance during the year fell short of expectations, the underlying business, compliance
and operational effectiveness were managed diligently by the executive team during a period of transition. The
result for the year also reflects the settlement of the McKenzie class action and associated costs. This statutory
net loss for the year of $1.692 million does not represent the core strength of the business. The market value
of the Company remains suppressed and is attributed in part to the ongoing uncertainty of outcome of the
Lynch proceeding.
The following tables outline statutory performance indicators that must be presented in a Remuneration
Report, as well as those indicators of performance that are directly or indirectly linked to KMP remuneration:
Year ended 30 June
2019
$’000
2018
$’000
2017
$’000
2016
$’000
2015
$’000
Revenue from continuing operations
281,565
260,345
271,241
311,599
288,666
Net profit / (loss) before tax from continuing
operations
(2,366)
31,271
28,198
31,171
3,855
Net profit / (loss) after tax
- continuing operations
- discontinued operations
Profit/(loss) after tax
Share price
- beginning of year
- end of year
Dividend (i)
- interim
- final dividend
Earnings per share from continuing and
discontinued operations
- basic
- diluted
(1,692)
22,503
20,618
25,894
(1,255)
-
-
-
(31,166)
(20,430)
(1,692)
22,503
20,618
(5,272)
(21,685)
cents
cents
cents
cents
cents
31.0
16.0
-
-
31.5
31.0
-
-
43.5
31.5
-
-
70.0
43.5
2.00
1.00
108.0
70.0
2.00
-
(0.27)
(0.27)
4.55
4.43
4.21
4.12
(1.09)
(1.09)
(4.69)
(4.69)
i. Franked to 100% at 30% corporate income tax rate.
26 | Annual Report 2019
Directors’ report
For the year ended 30 June 2019
The table below sets out the comparison between Cash Converters internal targets set by the Company
compared to actual performance for the key performance metrics that are the main drivers of incentive
outcomes in FY 2019. This gives some indication of a correlation between planning and outcomes.
Year ended 30 June
2019
2018
Actual NPAT
$’000
(1,692)
22,503
Budgeted NPAT
$’000
26,300
20,419
2.2 KMP Remuneration At-A-Glance
The following chart summarises executive remuneration quantum and mix at Target (i.e. reflecting Target policy)
as well as actual/realised remuneration in respect of FY 2019, which the Board believes demonstrates that
appropriate remuneration governance practices are being applied:
Executive KMP Remuneration Elements and Mix - Target vs Realised Remuneration At-A-Glance
CEO - Target/Budget
CEO - Actual/Realised
36%
53%
36%
27%
26%
21%
Average Other Executives -
Target/Budget
51%
25%
23%
Average Other Executives -
Actual/Realised
100%
0%
0%
$0
$250,000
$500,000
$750,000
$1,000,000
$1,250,000 $1,500,000
$1,750,000 $2,000,000
Fixed Pay
STI (Cash in FY 2019)
Vested LTI (Rights)
Sign-on Compensation (Cash)
The following chart summarises Non-executive Director (NED) remuneration quantum and mix reflecting the
actual remuneration of NEDs:
NED KMP Remuneration Elements and Mix At-a-Glance
Board Chair
100%
0%
Average Other NEDs
86%
14%
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000 $140,000 $160,000 $180,000
Board Fees (inc. Super)
Committee Fees (inc. Super)
2.3 Key Context for, and Changes to, KMP Remuneration
The following outlines those matters that the Board views as relevant to a consideration of the appropriateness
of KMP remuneration for the reporting period, and changes that have or are expected to occur:
> The Board has remained mindful of the lessons for remuneration governance that arose from the royal
commission into the financial services sector, and ongoing action by APRA and other stakeholders seeking
to improve remuneration governance. The Board is confident that it is adopting best-practice approaches
appropriate to Cash Converters.
> The Board has continued to look for improvements in stakeholder communication and engagement,
including by streamlining this Remuneration Report.
> Non-Executive Director fees have not changed from FY 2018 to FY 2019.
> Base Packages of executives have not changed from FY 2018 to FY 2019, except in respect of changes
outlined below:
` Executive KMP holding the same and unchanged role have not received any increase to fixed or target
variable remuneration.
` Effective 1 January 2019, Executive Deputy Chairman, Peter Cumins executed a new employment
contract, reducing his remuneration to a Base Package of $467,912 Fixed Annual Remuneration. As
part of this new contract Mr Cumins relinquished any entitlement to participate in the STI plan for the FY
2019 and future years. Mr Cumins will also no longer receive any further allocations of performance rights
under the Company’s LTI Plan.
Annual Report 2019 | 27
Directors’ report
For the year ended 30 June 2019
` An adjustment was made to the COO’s package for the period that he held the interim CEO role.
Mr Sam Budiselik was paid an additional $250,000 in July 2019 in recognition of the additional
responsibilities and leadership during his appointment as Interim CEO from September 2018 to
March 2019.
> Short-term performance metrics have been further standardised across executive roles, with a greater focus
on risk management, and robust non-financial drivers of performance, which would appear to align with
emerging recommendations by regulators. As a result of a review in FY 2018 for the FY 2019 measurement
period, a risk scorecard measurement is incorporated into the STI Plan as a mandatory gate for all KMP
executives. There will continue to be a strong focus in FY 2020 on the link between the remuneration and
risk frameworks as part of the variable incentive plans considerations.
> With the changing market conditions and ongoing regulatory change, the Board also continues to evaluate
the structure of the executives’ Long-Term Incentive plan. As such the vesting conditions for the FY 2019
issued performance rights have been amended as detailed later in this report. Whilst retaining the two key
measures of indexed Total Shareholder Return and Earnings Per Share growth, the changes reflect the
desire of the board to ensure the continued long-term engagement and retention of the senior executives
through the establishment of achievable threshold levels for vesting and significant stretch potential over the
3-year measurement period. The previous gate condition of a positive TSR has been removed to allow each
tranche to be measured independently against the performance of those criteria.
> As detailed in the FY 2018 report, the Board approved a minimum shareholding policy for KMP. The policy
is applicable to Non-Executive Directors and KMP Executives and broadly requires accumulation of a
minimum holding of shares equivalent to one year’s Base Package (inclusive of superannuation and other
benefits) with target time to accumulate, being 5 years, and allowances for Board discretion to be applied
in circumstances such as exclusion of directors who are representatives of a major shareholder, retention of
a proportion of vested LTI grants for accumulation purposes and exceptions for KMP where circumstances
make it difficult to meet minimum requirements.
> The Board and management have achieved significant restructuring and operational improvements in
the underlying businesses, though the settlement of the McKenzie class action and outstanding Lynch
class action has suppressed some external measures of performance, such as total shareholder return.
The Board views it as appropriate to recognise that both internal and external measures of performance
and value creation have merit, and therefore it is appropriate that some level of variable reward flow to
executives for delivering expectations in relation to internal measures of performance. Not to do so would
present an unacceptable risk to the retention and motivation of the talent required to deliver the Company’s
current strategy.
> The remuneration arrangements applicable to the appointment of the new CEO, Mr Brendan White, may be
summarised as follows:
` $720,000 annual salary plus statutory superannuation contributions (Base Package)
` One-off arrangements in consideration for the existing incentives from his previous employer that Mr
White forewent in accepting the role:
» In respect of short-term incentives foregone, Mr White was paid $104,277 in cash on 10 December
2018 in lieu of 10,533 BOQ shares and $104,267 in cash on 13 December 2018 in lieu of 10,532
BOQ shares.
» In respect of long-term incentives foregone, Mr White received $81,279 in cash on 18 December
2018, in lieu of 8,210 BOQ shares, options for CCV equity in lieu of 43,520 BOQ shares and options
for CCV equity in lieu of 21,947 BOQ shares. The vesting of the options will be dependent solely
upon the continuing employment of Mr White by the Company at the compensation dates of 1
October 2019 and 1 October 2020 respectively. The number of CCV shares will be determined by an
exchange ratio methodology in accordance with his current contract.
` Mr White has been offered a Target vesting level of 75% of Base Package under the LTI Plan. Mr White
has been granted a full year’s entitlement for the FY 2019 year.
` Mr White has been offered a Target STI of 100% of base package. For FY 2019, the STI is guaranteed
at a minimum of 50% of Base package, i.e. $360,000 as a one-off arrangement that was necessary to
secure the appointment. For FY 2020 onwards, 50% of STI amounts will be deferred for 1 year.
28 | Annual Report 2019
Directors’ report
For the year ended 30 June 2019
3. Overview of Cash Converters’ Remuneration Governance Framework and Strategy
The Board of Cash Converters has developed and adopted a best-practice KMP remuneration governance
framework, including detailed policies and practices. These policies and practices are available on the
Company website at https://www.cashconverters.com/Governance/RemunerationCommittee.
Following advice from external consultants, the Board has resolved to provide an overview of the framework
in this report only, in order to streamline it, and trusts that interested stakeholders such as proxy advisors
and institutional investors that require this level of detail will consider the material on the website as part of
forming a view of this Remuneration Report. This practice appears to be recommended in the ASX Corporate
Governance Council’s Principles and Recommendations (4th Edition) relating to “incorporation by reference” of
online governance disclosures such as these.
The framework elements available online, in addition to the disclosures in this report, include:
> Short-Term Incentive Policy and Procedure;
> Long-Term Incentive Policy and Procedure;
> Engaging External Remuneration Consultants Policy;
> Non-Executive Director Remuneration Policy and Procedure;
> Senior Executive Remuneration Policy and Procedure; and
> Securities Trading Policy.
Other elements of the framework are summarised below.
3.1 Variable executive remuneration - Short-Term Incentive plan (STIP)
The STI Plan’s purpose is to give effect to an element of remuneration that is part of a market competitive total
remuneration package and aims to increase the commitment of Senior Executives to deliver and outperform
annual business plans. It also aims to align their interests with shareholders, reinforce a performance culture
and create a strong link between performance and reward, encourage a pursuit of sustainable improvements
in Group performance, encourage teamwork and co-operation among executive team members and maintain
a stable executive team by helping retain key talent. These objectives aim to be achieved by a simple plan
that rewards participants for performance relative to key performance indicators (KPIs) derived from annual
business plans.
The FY 2019 KPI metrics for Senior Executives were grouped into five categories being Group NPAT, Divisional
NPAT, Customer Engagement, measured by Net Promoter Score, Risk Scorecard, measured under a
sophisticated system developed specifically for the Company, Specific Operational Objectives related to the
Company’s strategy relevant to each role, and Individual Effectiveness, measured by an annual review by the
CEO (or by the Board in the case of the CEO). The Board selected these measures as being those that are
expected to drive economic profitability, and ultimately shareholder value creation over the long-term, within a
financial year period.
For FY 2019, gates of 90% of budget NPAT and a Risk Gate (“Meets Expectations” result for the scorecard)
applied so that no STI would be payable if these conditions were not met or exceeded.
Outcomes of STI assessment are presented later in this document. Weightings of KPIs, and outcomes, are
shown elsewhere in this document. Target remuneration mixes including the intended Target value of STI
are shown elsewhere in this document. For further details on plan design, such as treatment in the case of
termination of employment etc, please see the plan description available online at the above website.
3.2 Variable executive remuneration - Long-Term Incentive Plan (LTIP) - Performance Rights Plan
The purpose of the long-term incentive (LTI) is to create a strong link between performance and reward by
providing a variable/at risk element of Senior Executive remuneration that focuses on performance and/
or service over a period generally of three or more years. It aims to align the interests of Senior Executives
with those of shareholders in Cash Converters International Limited (the Company) and to aid in maintaining
a stable Senior Executive team. This element of remuneration constitutes part of a market competitive total
remuneration package and aims to ensure that Senior Executives have commonly shared goals related
to producing relatively high returns for Shareholders. Other purposes of the LTI Plan are to assist Senior
Executives to become Shareholders, provide a component of remuneration to enable the Company to
compete effectively for the calibre of talent required for it to be successful and to help retain employees,
thereby minimising turnover and stabilising the workforce such that in periods of poor performance the cost is
lesser (applies to non-market measures under AASB 2).
Currently the Company operates a Rights plan for the purposes of the LTIP, using indeterminate
Performance Rights.
Annual Report 2019 | 29
Directors’ report
For the year ended 30 June 2019
For FY 2019 the following metrics applied, weighted across two equal tranches, over a 3 year
Measurement Period:
Tranche 1
Performance
Level
CCIL’s TSR vs S&P ASX Small Industrials
TR Index over the Measurement Period
% of Tranche
Vesting
Stretch
>Target
Target
>Threshold
Threshold
Index TSR +2.15% < Index TSR +4.25%
Index TSR + 2.15%
>Index TSR & < Index TSR +2.15%
=Index TSR
Target
Target
>Threshold
Threshold
7% & <12%
7%
>4% & <7%
4%
<4%
100%
Pro-rata
50%
Pro-rata
25%
Nil
No gates applied to FY 2019 Invitations and no retesting applies. In the case of a Change of Control the
following formula applies:
Number of Performance Rights to Vest
=
Unvested Performance Rights x (Share Price at the
Change of Control - Offer Share Price) ÷ Offer Share Price
Outcomes of LTI assessment are presented later in this document. Target remuneration mixes including the
intended target value of LTIs are shown elsewhere in this document. For further details on plan design, such as
termination of employment etc, please see the plan descriptions available online at the above website.
4. Performance outcomes for FY 2019 including STI and LTI assessment
4.1 Short-Term Incentives
The Board believes there are strong links between internal measures of Company performance and the payment
of short-term incentives with each KMP Executive having STI KPIs linked to strategic objectives of the Company.
The STI achieved in relation to the FY 2019 period will be paid after the end of the period (i.e. during FY
2020, usually in September). For the CEO, as agreed in the offer of employment, a guaranteed STI payment
equivalent to 100% of the full year target award opportunity will be paid. No STIs will be paid to other KMP
executives. This level of award was considered appropriate under the STI plan since the objectives were
set and offers made in relation to the achievement of each KPI at the beginning of the financial year and the
required achievement of an NPAT gate condition of 90% of budgeted NPAT.
In relation to the completed FY 2019 period the following KPIs and weightings applied to Participants:
30 | Annual Report 2019
Directors’ report
For the year ended 30 June 2019
STIP KPI
Group NPAT
Divisional NPAT
Franchise Operations NPAT
Store Operations NPAT
Personal Finance NPAT
Vehicle Financing NPAT
Customer Engagement Score
Risk Scorecard Score
Operational Objectives
Individual Effectiveness
Weighting
20% - 40%
10% - 20%
10% - 20%
10% - 20%
10% - 20%
10%
10%
10% - 30%
10%
Target Met / Missed Exceeded
Missed
Met
Missed
Missed
Missed
Met
Met
Varies
All met or Exceeded
The realised value of awards in respect of FY 2019 are presented in the statutory remuneration tables.
The KPIs selected were based on their linking to the most significant matters expected to contribute to the
success of the Company during FY 2019 in the case of each role. Examples of operational objectives included:
> CIO
> Legal Counsel
> CFO
99.95% system and service availability
Lead and manage the Class Actions litigation and any consequent processes in a cost-
conscious manner to appropriate outcomes for the Company, within any mandate and
framework directed by Board
Strategic roadmap funding to be developed/approved/implemented that takes account of
the strategic plans agreed by Board
Following the end of the Measurement Period (the financial year), the Company accounts were audited and
reports on the Company’s activities during the year were prepared for the Board. The Board then assessed
the extent to which target levels of performance had been achieved in relation to each KPI and used the
pro rata scales (for non-binary measures) to calculate the total award payable. This method of performance
assessment was chosen because it is the most objective approach to short-term incentive governance, and
reflective of market best practices.
As the gate condition for NPAT was not met the Board chose not to exercise its discretion, available to it under
the Rules of the short-term incentive plan, to override the vesting outcome and hence no STI payments were
made to other executives.
4.2 Long-Term Incentives
In FY 2019 grants of Performance Rights were made to executive KMP in relation to the LTI Plan as part of
remuneration for FY 2019 (Tranches 23 to 26). These grants have a measurement period of 3 years and hence
will not have the possibility of vesting until the end of the measurement period (30 June 2022).
In relation to the completion of the FY 2019 reporting period, grants of equity made under the LTI plan whose
measurement period ended at 30 June 2019 (Tranches 17, 18, 19 and 20) did not vest due to the TSR gate
not being met (positive TSR) for the period.
The impact of Long-term incentives on changes in equity interest of the KMP are shown in Section 5 of this
report.
4.3 Impact of normalisation on incentives
The Board recognises that it is important for there to be transparency regarding normalisation adjustments
and the rationale for adjustments, and therefore the following outlines those matters that were the subject of
normalisation, and their impact on KMP remuneration:
> FY 2019 net adjustments – ($11.613 million) impacting Group profitability assessment
` Class Action settlement, Class Action legal fees, restructuring costs and lapsed performance rights
> FY 2018 net adjustments – ($1.874 million) impacting Group profitability assessment
` Reversal to profit and loss for lapsed performance rights ($1.330 million) and other items of a
non-recurring nature
Annual Report 2019 | 31
Directors’ report
For the year ended 30 June 2019
4.4 Links between Company strategy and remuneration
The Company intends to attract the superior talent required to successfully implement the Company’s
strategies at a reasonable and appropriately variable cost by:
> positioning Fixed Annual Reward (FAR) around relevant market data benchmarks when they are undertaken,
and
> supplementing the FAR with at-risk remuneration, being incentives that motivate executive focus on:
` short to mid-term objectives linked to the strategy via KPIs and annual performance assessments, and
` long-term value creation for shareholders by linking a material component of remuneration to those
factors that shareholders have expressed should be the long-term focus of executives and the Board.
To the extent appropriate, the Company links strategic implementation and measures of success of the
strategy, directly to incentives in the way that measures are selected and calibrated.
5. Changes in KMP-held equity
The following tables outline the changes in equity held by KMP over the financial year.
Fully paid ordinary shares of Cash Converters International Limited
Received on
exercise of
rights
Number
Granted as
remuneration
Balance at
1 July 2018
Number
Number
Directors
Mr S Grimshaw
Mr P Cumins
Ms E Comerford (2)
Mr K Dundo
Mr L Given
-
7,575,694
-
-
-
Ms A Waters (2)
68,750
Other key management personnel
Mr M Reid (2)
Mr S Budiselik
Mr N Carbone (2)
Mr B Cox
Ms M Cutten (2)
Mr B Edwards
Mr M Jenkins
-
116,875
-
-
-
166,203
3,375
7,930,897
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net other
change
Balance at
30 June 2019
Number
Number
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,575,694
-
-
-
68,750
-
116,875
-
-
-
166,203
3,375
7,930,897
(1) Opening balance at date of appointment
(2) Closing balance at date of resignation / ceasing to be KMP
Balance at
1 July 2017
Granted as
remuneration
Number
Number
Received on
exercise of
rights
Number
Net other
change
Balance at
30 June 2018
Number
Number
-
7,575,694
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,575,694
-
-
-
68,750
68,750
Directors
Mr S Grimshaw
Mr P Cumins
Ms E Comerford
Mr K Dundo
Mr L Given
Ms A Waters
32 | Annual Report 2019
Directors’ report
For the year ended 30 June 2019
Balance at
1 July 2017
Granted as
remuneration
Number
Number
Received on
exercise of
rights
Number
Net other
change
Balance at
30 June 2018
Number
Number
Other key management personnel
Mr M Reid
Mr S Budiselik (1)
Mr N Carbone
Mr B Cox (1)
Ms M Cutten (1)
Mr B Edwards
Mr M Jenkins
Ms A Manners (2)
Mr S Prior
-
-
-
-
-
84,511
3,375
-
-
7,663,580
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,500
8,500
-
-
116,875
116,875
-
-
-
81,692
-
-
-
-
-
-
166,203
3,375
-
8,500
267,317
7,939,397
(1) Opening balance at date of appointment / becoming member of KMP
(2) Closing balance at date of resignation / ceasing to KMP
Performance rights of Cash Converters International Limited
Balance at
1 July 2018
Granted as
remuneration
Rights
exercised
Rights
lapsed /
forfeited (3)
Balance
at 30 June
2019
Number
Number
Number
Number
Number
Balance
vested at
30 June
2019
Number
Directors
Mr S Grimshaw
Mr P Cumins
Mr K Dundo
Mr L Given
Ms A Waters (2)
Ms E Comerford (2)
-
4,572,920
-
-
-
-
Other key management personnel
Mr B White (1)
Mr S Budiselik
Mr B Cox
Mr B Edwards
Mr M Jenkins
Ms M Cutten (2)
Mr N Carbone (2)
Mr M Reid (2)
-
387,096
-
387,096
494,000
106,452
387,096
2,412,640
8,747,300
-
-
-
-
-
-
3,687,266
1,126,664
682,826
1,024,240
819,392
300,444
-
-
7,640,832
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,572,920)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,687,266
1,513,760
682,826
1,411,336
(106,904)
1,206,488
(293,852)
113,044
(387,096)
-
(1,263,354)
1,149,286
(6,624,126)
9,764,006
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) Opening balance at date of becoming member of KMP
(2) Closing balance at date of ceasing to be KMP
(3) Rights relating to Mr Cumins and Mr Jenkins that lapsed during the period were issued in FY 2017. In
addition to 690,146 rights issued in FY 2017 granted to Mr Reid that lapsed during the period, 573,208
rights issued to Mr Reid and 387,096 rights issued to Mr Carbone in FY 2017 and FY 2018, and 293,852
rights issued to Ms Cutten in FY 2018 and FY 2019 were forfeited during the period.
Annual Report 2019 | 33
Directors’ report
For the year ended 30 June 2019
Balance at
1 July 2017
Granted as
remuneration
Rights
exercised
Rights
lapsed /
forfeited (3)
Balance
at 30 June
2018
Number
Number
Number
Number
Number
Balance
vested at
30 June
2018
Number
Directors
Mr S Grimshaw
-
Mr P Cumins
8,302,920
Ms E Comerford (1)
Mr K Dundo
Mr L Given
Ms A Waters (1)
Mr R Webb
-
-
-
-
-
-
-
-
-
-
-
-
Other key management personnel
Mr M Reid
1,879,660
1,377,420
Mr S Budiselik (1)
Mr N Carbone (1)
Mr B Cox (1)
Ms M Cutten (1)
Mr B Edwards (1)
-
-
-
-
-
Mr M Jenkins
630,104
Ms A Manners (2)
Mr S Prior
-
191,066
387,096
387,096
-
106,452
387,096
387,096
322,580
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,730,000)
4,572,920
-
-
-
-
-
-
-
-
-
-
(844,440)
2,412,640
-
-
-
-
-
(523,200)
-
387,096
387,096
-
106,452
387,096
494,000
322,580
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,003,750
3,354,836
(8,500)
(5,280,206)
9,069,880
-
(8,500)
(182,566)
(1) Opening balance at date of appointment / becoming member of KMP
(2) Closing balance at date of resignation / ceasing to be KMP
(3) Rights relating to Mr Cumins, Mr Reid and Mr Jenkins that lapsed during the period were issued in FY
2016. In addition to 82,018 rights issued in FY 2016 granted to Mr Prior that lapsed during the period,
100,548 rights issued to Mr Prior in FY 2017, were forfeited during the period.
Terms and conditions of share-based payment arrangements affecting remuneration of KMP in the current or
future financial years are set out below:
Tranche
Tranche 17
Tranche 18
Tranche 19
Tranche 20
Tranche 21
Tranche 22
Tranche 23
Tranche 24
Tranche 25
Tranche 26
Grant
date
23 Nov 2016
23 Nov 2016
12 Dec 2016
12 Dec 2016
14 Feb 2018
14 Feb 2018
19 Dec 2018
19 Dec 2018
26 Mar 2019
26 Mar 2019
Grant date
fair value (i)
$
0.20
Exercise
price
$
-
0.31
0.17
0.29
0.22
0.33
0.15
0.24
0.06
0.19
-
-
-
-
-
-
-
-
-
Expiry
date
Vesting
date
30 Jun 2019
30 Jun 2019
30 Jun 2019
30 Jun 2019
30 Jun 2019
30 Jun 2019
30 Jun 2019
30 Jun 2019
30 Jun 2020
30 Jun 2020
30 Jun 2020
30 Jun 2020
30 Jun 2021
30 Jun 2021
30 Jun 2021
30 Jun 2021
30 Jun 2021
30 Jun 2021
30 Jun 2021
30 Jun 2021
i.
The grant date fair value is calculated as at the grant date using a Monte Carlo pricing model for tranches
17, 19, 21, 23 and 25 and a binomial pricing model for other tranches.
There has been no alteration of the terms and conditions of the above share-based payment arrangements
since the grant date.
34 | Annual Report 2019
Directors’ report
For the year ended 30 June 2019
The following table outlines the value of equity granted to KMP during the year that may be realised in
the future:
Name
Tranche
Mr B White
Mr S Budiselik
Mr B Cox
Ms M Cutten
Mr B Edwards
Mr M Jenkins
25
26
23
24
23
24
23
24
23
24
23
24
Number of
rights
1,843,633
1,843,633
563,332
563,332
341,413
341,413
28,646
28,646
512,120
512,120
409,696
409,696
Value at grant
Per right
$
Total
$
Value
expensed in
current year
$
Value to be
expensed in
future years
$
0.06
0.19
0.15
0.24
0.15
0.24
0.15
0.24
0.15
0.24
0.15
0.24
114,305
350,290
82,246
135,200
49,846
81,939
4,182
6,875
74,770
122,909
59,816
98,327
13,269
40,662
17,179
28,240
10,412
17,115
4,182
6,875
15,617
25,673
12,494
20,538
101,036
309,628
65,067
106,960
39,434
64,824
-
-
59,153
97,236
47,322
77,789
Total
7,397,680
1,180,705
212,256
968,449
6. Non-Executive Director fee policy rates for FY 2019 and FY 2020 and fee limit
Non-executive director fees are managed within the current annual fees limit (AFL or fee pool) of $800,000
which was approved by shareholders on 18 November 2015 and it is anticipated that there will be no
requirement for an increase of the AFL in FY 2020.
The following table outlines the Non-Executive Director Remuneration policy rates that were applicable as at
the end of FY 2019.
The Non-Executive Director Remuneration policy is designed to ensure that remuneration is reasonable,
appropriate, and produces outcomes that fall within the fee limit, at each point of being assessed. The Board
assessed the current level of NED fees for FY 2020 and determined that no change would be applicable to
main Board and existing committee fees.
Function
Main Board
Audit and risk committee
Remuneration committee
Special purpose committee
Role
Chair
Member
Chair
Member
Chair
Member
Chair
Member
Fee including Superannuation
$170,000
$95,000
$15,000
$0
$15,000
$0
$7,500
$0
Annual Report 2019 | 35
Directors’ report
For the year ended 30 June 2019
7. Remuneration records for FY 2019 (statutory disclosures)
The following table outlines the remuneration received by directors and senior executives who are classified
as KMP of the Company during the years ended 30 June 2019 and 2018, prepared according to statutory
disclosure requirements and applicable accounting standards:
Short-term employee benefits
Salary
and fees Cash STI
Non-
monetary
benefits
$
2019
Non-executive directors
Mr S Grimshaw
Mr K Dundo
Mr L Given
170,000
102,500
95,000
Ms E Comerford (1)
25,114
Ms A Waters (2)
49,958
Executive director
Mr P Cumins
590,144
Other executives
$
-
-
-
-
-
-
$
-
-
-
-
-
70,465
Mr B White (3)
227,372
649,823
-
Mr S Budiselik
337,720
250,000
11,759
Mr B Cox
Mr B Edwards
Mr M Jenkins
Mr M Reid (4)
258,379
320,416
312,253
91,004
Mr N Carbone (5)
102,286
Ms M Cutten (6)
123,556
-
-
-
-
-
-
11,759
-
11,759
1,924
3,849
6,796
Termin-
ation
benefits
$
-
-
-
-
-
-
-
-
-
-
-
Post-
employment
benefits
Super-
annuation
Other
long-
term
benefits
Share-
based
payments
$
-
-
-
2,386
-
$
-
-
-
-
-
$
-
-
-
-
-
Total
$
170,000
102,500
95,000
27,500
49,958
24,556
10,585
(714,614)
(18,864)
7,847
24,793
20,531
20,531
-
-
-
-
53,931
938,973
90,716
714,988
27,527
318,196
86,587
427,534
20,531
11,995
63,191
419,729
575,154
100,000
71,923
5,868
10,266
15,399
-
-
-
(79,031)
594,919
(16,878)
199,523
21,913
239,587
2,805,702
899,823
118,311
747,077
152,708
22,580
(466,658) 4,279,543
Total
2018
Non-executive directors
Mr S Grimshaw
Ms E Comerford
Mr K Dundo
Mr L Given
Ms A Waters
Executive director
170,000
100,457
95,000
95,000
117,500
-
-
-
-
-
-
-
-
-
-
Mr P Cumins
719,748
392,117
149,237
Other executives
Mr M Reid
612,784
308,965
11,375
Mr S Budiselik (7)
322,754
167,239
-
Mr N Carbone
310,424
65,772
8,585
Mr B Cox (8)
31,589
50,000
961
Ms M Cutten (7)
238,472
50,930
8,585
Mr B Edwards
330,078
166,196
-
Mr M Jenkins
311,546
154,145
11,375
Ms A Manners (9)
129,633
32,942
5,610
Mr S Prior (10)
241,337
-
11,375
Total
3,826,322 1,388,306
207,103
-
-
-
-
-
-
-
-
-
-
-
-
-
-
99,218
99,218
-
9,543
-
-
-
-
-
-
-
-
-
-
-
-
-
170,000
110,000
95,000
95,000
117,500
24,072
(1,469)
135,931 1,419,636
24,457
27,271
20,049
1,709
20,049
20,049
-
-
-
-
-
-
87,764 1,045,345
16,878
534,142
16,878
421,708
-
84,259
4,641
322,677
16,878
533,201
20,049
15,600
(14,852)
497,863
10,024
-
-
178,209
20,049
(2,696)
(11,547)
357,736
197,321
11,435
252,571 5,982,276
36 | Annual Report 2019
Directors’ report
For the year ended 30 June 2019
(1) Resigned 30 September 2018
(2) Resigned 14 December 2018
(3) Became KMP 18 March 2019
(4) Ceased to be KMP 27 August 2018
(5) Ceased to be KMP 9 November 2018
(6) Ceased to be KMP 25 January 2019
(7) Became KMP 3 July 2017
(8) Became KMP 27 May 2018
(9) Ceased to be KMP 1 January 2018
(10) Ceased to be KMP 4 July 2018
The STI values reported in this table are the STIs awarded for the performance period but may be paid in the
financial year following the year to which they relate (i.e. the value shown for 2019 is the value earned in FY
2019 and paid during FY 2020).
The LTI value reported in this table is the accounting charge of all grants, amortised over the vesting period.
Where a market-based measure of performance is used as a vesting condition, such as iTSR, no adjustments
can be made to the profit or loss to reflect rights that lapse unexercised. However, in relation to non-market
vesting conditions, such as EPS, adjustments have been made to the profit or loss to reverse amounts
previously expensed for rights that have lapsed during the period.
8. Employment terms for KMP and Senior Executives
The remuneration and other terms of employment for executive KMP are covered in formal employment
contracts of an ongoing nature. All KMP are entitled to receive pay in lieu of any accrued but untaken annual
and long service leave on cessation of employment. The treatment of incentives in the case of termination
is addressed in separate sections of this report that give details of incentive design. However, a retirement
payments clause in KMP employment contracts qualifies that the amounts payable will be limited to the terms
of Part 2D.2 of the Corporations Act.
A summary of contract terms in relation to executive KMP is presented below:
Name
Position held
Period of notice
From Company
From KMP
Mr P Cumins
Executive Deputy Chairman
Mr B White
Chief Executive Officer
Mr S Budiselik
Chief Operating Officer
Mr B Cox
General Manager Corporate Distribution
Mr B Edwards
General Counsel and Company Secretary
Mr M Jenkins
Chief Financial Officer
12 months
12 months
6 months
3 months
6 months
6 months
6 months
12 months
6 months
3 months
6 months
6 months
On appointment to the Board, all NEDs enter into a service agreement with the Company in the form of a
letter of appointment. The letter summarises the Board policies and terms, including compensation relevant
to the office of the director and does not include a notice period. NEDs are not eligible to receive termination
payments under the terms of the appointments.
9. Other remuneration-related matters
The following outlines other remuneration related matters that may be of interest to stakeholders, in the
interests of transparency and disclosure:
> Mr Brendan White, Chief Executive Officer received loans from the Company between December 2018 and
May 2019 totalling $441,216 to assist with the transfer of financial arrangements necessitated from his
departure from Bank of Queensland. The loan accrues interest at 5.65% per annum and is scheduled to be
repaid in full by 31 December 2019.
> Mr Ben Cox, General Manager Corporate Distribution is a Director and 20% shareholder of Cash
Converters Yorkshire Ltd, a franchisee in the UK. As part of the restructure of Cash Converters UK
operations, Cash Converters Yorkshire Ltd acquired 17 of the corporate stores from the Company. The
purchase of these stores was funded by a loan from Cash Converters (UK) Ltd to Cash Converters
Yorkshire Ltd of £2,631,731 made on 4 April 2016 and repayable over 6 years. As at 30 June 2019, the
balance owing on the loan was £1,481,145 (30 June 2018: £2,026,954). No repayments of the loan have
been missed and the Company has no reason to believe the full repayment of the loan will not be met.
> There were no other relevant material transactions involving KMP other than compensation and transactions
concerning shares, performance rights/options as discussed in this report.
Annual Report 2019 | 37
Directors’ report
For the year ended 30 June 2019
The following summarises the treatment of remuneration in respect of those KMP who are no longer employed
by the Company during or since the reporting period:
Mr M Reid – payment in lieu of notice under contract - $575,154
Mr N Carbone - payment in lieu of notice under contract - $100,000
Ms M Cutten – redundancy payments and payment in lieu of notice - $71,923
Entitlements under the STIP for the FY 2019 year were forfeited upon termination. Performance rights under
the LTIP outstanding to Mr Carbone lapsed, and a portion of those outstanding to Mr Reid and Ms Cutten
relating to their uncompleted vesting period lapsed.
10. External remuneration consultant advice
During the reporting period, the Board continued their engagement of external remuneration consultants (ERC)
to provide KMP remuneration advice. The consultants and the amount payable for the information and work
that led to their advice are listed below:
Godfrey
Remuneration Group
• Fees for work undertaken in July 2019 including provision of
$25,700
a GRG Remuneration Guide accompanied by an advisory letter
and re-drafting of the Remuneration Report for FY 2019.
The Board is satisfied that the KMP remuneration advice received was free from undue influence from KMP to
whom the advice related. The Board is satisfied the policy for engaging external remuneration consultants is
being adhered to and is operating as intended.
This directors’ report is signed in accordance with a resolution of directors made pursuant to s298(2) of the
Corporations Act 2001.
On behalf of the directors
Stuart Grimshaw
Director
Perth, Western Australia
29 August 2019
38 | Annual Report 2019
Corporate governance
For the year ended 30 June 2019
The Company’s most recent Corporate Governance Statement can be found on the Company’s website at
http://www.cashconverters.com/Governance.
The following governance-related documents can also be found in the Corporate Governance section of the
Company’s website:
> Board Charter
> Code of Conduct
> Continuous Disclosure Policy
> Securities Trading Policy
> Audit and Risk Committee Charter
> Remuneration and Nomination Committee Charter
> Gender Equality Report 2018-19
> Short-Term Incentive Policy and Procedure
> Long-Term Incentive Policy and Procedure
> Engaging External Remuneration Consultants Policy
> Non-Executive Director Remuneration Policy and Procedure
> Senior Executive Remuneration Policy and Procedure
> Diversity and Inclusion Policy
Annual Report 2019 | 39
Consolidated statement of profit or loss
and other comprehensive income
For the year ended 30 June 2019
Notes
2019
$’000
2018
$’000
Continuing operations
Franchise fee revenue
Financial services interest revenue
Sale of goods
Other revenues
Total revenue
Financial services cost of sales
Cost of goods sold
Other cost of sales
Total cost of sales
Gross profit
Employee expenses
Administrative expenses
Advertising expenses
Occupancy expenses
Class Action settlement expense
Other expenses
Finance costs
Share of net profit of equity accounted investments
(Loss) / profit before income tax
Income tax benefit / (expense)
(Loss) / 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 (loss) / profit for the year
(Loss) / earnings per share
Basic (cents per share)
Diluted (cents per share)
2.1
2.1
2.1
2.2
2.2
2.2
2.2
2.2
2.2
2.2
5.1
2.3
15,400
14,665
186,462
166,502
75,807
3,896
74,977
4,201
281,565
260,345
(78,104)
(44,803)
(2,146)
(47,620)
(43,859)
(3,259)
(125,053)
(94,738)
156,512
165,607
(71,266)
(69,099)
(9,033)
(7,735)
(15,795)
(16,400)
(29,835)
(10,427)
1,613
(2,366)
674
(1,692)
(8,005)
(10,767)
(15,155)
-
(21,334)
(10,822)
846
31,271
(8,768)
22,503
524
524
495
495
(1,168)
22,998
2.4
2.4
(0.27)
(0.27)
4.55
4.43
The accompanying notes form an integral part of the consolidated statement of profit or loss and other
comprehensive income.
40 | Annual Report 2019
Consolidated statement
of financial position
As at 30 June 2019
Current assets
Cash and cash equivalents
Trade and other receivables
Loan receivables
Inventories
Prepayments
Current tax receivable
Total current assets
Non-current assets
Trade and other receivables
Loan receivables
Plant and equipment
Deferred tax assets
Goodwill
Other intangible assets
Prepayments
Investments in associates
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Provisions
Current tax payable
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Notes
2019
$’000
2018
$’000
4.1
3.1
3.2
3.3
3.1
3.2
3.4
2.3
3.5
3.6
5.1
3.7
4.2
3.8
4.2
3.8
81,101
7,794
139,991
22,701
128,374
118,962
20,370
7,766
1,897
20,673
6,828
-
247,302
309,155
6,293
46,226
6,173
14,820
5,560
32,762
9,141
8,614
106,967
106,967
26,924
30,150
3,083
6,452
1,498
5,282
216,938
199,974
464,240
509,129
15,296
87,826
7,044
-
19,485
139,351
6,572
466
110,166
165,874
35,510
1,712
37,222
18,996
1,851
20,847
147,388
186,721
316,852
322,408
4.4
248,714
248,714
7,238
60,900
7,007
66,687
316,852
322,408
The accompanying notes form an integral part of the consolidated statement of financial position.
Annual Report 2019 | 41
Consolidated statement
of changes in equity
For the year ended 30 June 2019
Notes
Issued
capital
Foreign
currency
translation
reserve
Share-
based
payment
reserve
Retained
earnings
Total
$’000
$’000
$’000
$’000
$’000
210,203
5,335
1,871
43,430
260,839
Balance at 1 July 2017
Profit for the year
Exchange differences arising on
translation of foreign operations
Total comprehensive income
for the year
Share-based payments
Shares issued under entitlement offer,
net of issue costs
4.4
38,413
Shares issued on exercise of
performance rights
Transfer reserve balance to retained
earnings
98
-
-
-
-
-
-
495
495
-
-
-
-
-
-
-
158
-
(98)
22,503
22,503
-
495
22,503
22,998
-
-
-
158
38,413
-
-
(754)
754
Balance at 30 June 2018
248,714
5,830
1,177
66,687
322,408
AASB 9 adjustment to opening
retained earnings
Balance at 30 June 2018 after AASB 9
adjustment
Loss for the year
Exchange differences arising on
translation of foreign operations
Total comprehensive loss for the year
Share-based payments
Transfer reserve balance to retained
earnings
1(b)
-
-
-
(4,669)
(4,669)
248,714
5,830
1,177
62,018
317,739
-
-
-
-
-
-
524
524
-
-
-
-
-
281
(574)
(1,692)
(1,692)
-
524
(1,692)
(1,168)
-
574
281
-
Balance at 30 June 2019
248,714
6,354
884
60,900
316,852
The accompanying notes form an integral part of the consolidated statement of changes in equity.
42 | Annual Report 2019
Consolidated statement
of cash flows
For the year ended 30 June 2019
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Payment for Class Action settlement
Interest received
Interest received from personal loans
Net decrease / (increase) in personal loans advanced
Interest and costs of finance paid
Income tax refunded / (paid)
Notes
2019
$’000
2018
$’000
2.2
190,041
173,934
(188,395)
(186,667)
(16,400)
1,169
73,973
(73,052)
(13,257)
(5,867)
-
1,941
62,029
(56,421)
(9,937)
(6,428)
Net cash flows used in operating activities
2.7
(31,788)
(21,549)
Cash flows from investing activities
Acquisition of intangible assets
Proceeds on sale of plant and equipment
Purchase of plant and equipment
Instalment credit loans repaid by franchisees
Return on equity investment
Net cash flows provided by / (used in) investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Capital element of finance lease and hire purchase payment
Net proceeds from issue of shares
Net cash flows provided by / (used in) financing activities
Net increase / (decrease) 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
3.6
(6,634)
(6,897)
5.1
164
(739)
14,251
680
7,722
-
(2,744)
1,441
-
(8,200)
202,500
186,000
(237,500)
(135,028)
-
-
(35,000)
(59,066)
139,991
176
(79)
37,966
88,859
59,110
80,571
310
Cash and cash equivalents at the end of the year
4.1
81,101
139,991
The accompanying notes form an integral part of the consolidated statement of cash flows.
Annual Report 2019 | 43
Notes to the financial statements
For the year ended 30 June 2019
(1) Basis of preparation
In this section
This section sets out the basis upon which the Group’s financial statements are prepared as a whole.
Specific accounting policies are described in the note to which they relate.
Cash Converters International Limited is a for-profit company limited by shares, incorporated and domiciled in
Australia. Its shares are publicly traded on the Australian Securities Exchange.
The financial report of the Company for the year ended 30 June 2019 was authorised for issue in accordance
with a resolution of directors dated 29 August 2019.
(a) Statement of compliance
The financial report complies with Australian Accounting Standards and International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board.
The financial report is a general-purpose financial report which has been prepared in accordance with the
requirements of the Corporations Act 2001 and Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards Board. The financial report has been prepared on a
historical cost basis, except where noted. The financial report is presented in Australian dollars.
The financial report comprises the consolidated financial report of Cash Converters International Limited and
its subsidiaries (the Group, as outlined in note 5.2). Accounting Standards include Australian Accounting
Standards. Compliance with the Australian Accounting Standards ensures that the financial statements and
notes of the Group comply with International Financial Reporting Standards (‘IFRS’).
(b) Changes to accounting policies
Adoption of new and revised Accounting Standards
The Group has adopted all of the new and revised Standards and Interpretations, including amendments to
the existing standards issued by the Australian Accounting Standards Board (the AASB) that are relevant to
their operations and effective for the current reporting period.
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, except as detailed below in relation to AASB 9 ‘Financial Instruments’.
Standards and interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the Standards and Interpretations that were issued but
not yet effective are listed below:
Standard / Interpretation
AASB 16 ‘Leases’
AASB 2017-4 ‘Amendments to Australian Accounting
Standards – Uncertainty over Income Tax Treatments’
Long-term Interests in Associates and Joint Ventures
Amendments to IAS 28 and Illustrative Example—
Long-term Interests in Associates and Joint Ventures
Prepayment Features with Negative Compensation
Amendments to IFRS 9
Effective for annual
reporting periods
beginning on or after
Expected to be
initially applied in
financial year ending
1 January 2019
30 June 2020
1 January 2019
30 June 2020
1 January 2019
30 June 2020
1 January 2019
30 June 2020
Impact of changes to Australian Accounting Standards and Interpretations
A number of Australian Accounting Standards and Interpretations became effective during the year ended
30 June 2019 or are in issue but are not effective for the current year end. The Company has considered the
potential impact of these new standards as outlined below.
AASB 9 ‘Financial Instruments’, and the relevant amending standards
AASB 9 has been applied from 1 July 2018 and replaces AASB 139 ‘Financial instruments: Recognition and
measurement’. AASB 9 significantly changes the recognition of impairment on customer receivables with the
standard introducing an expected loss model. Under this approach impairment provisions are recognised
based on the life time expected loss on a loan. This differs from the previous incurred loss model under AASB
139 whereby impairment provisions were only recognised when there was objective evidence of impairment.
The standard also includes a single approach for the classification and measurement of financial assets based
on cash flow characteristics and the business model used for the management of the financial instruments. Of
the changes that AASB 9 introduced, the Company has identified the impact of the revised credit provisioning
approach, using the expected loss model, as having the most significant impact.
44 | Annual Report 2019
Notes to the financial statements
For the year ended 30 June 2019
(1) Basis of preparation (continued)
Under this expected loss model, impairment provisions are recognised on inception of a loan based on the
probability of default and the typical loss arising on default:
> Stage 1 – Accounts at initial recognition. The expected loss is based on a 12-month probability of default,
based on historic experience.
> Stage 2 – Accounts which have suffered a significant deterioration in credit risk. The expected loss is based
on a lifetime probability of default (PD), based on historic experience.
> Stage 3 – Accounts which have missed payments and are significantly in arrears. Provisions are based on
expected losses based on historic experience.
The impact is that impairment losses under AASB 9 are recognised in the profit or loss earlier in the life of
the respective loan. This has resulted in a one-off adjustment to provisions for loan receivables and retained
earnings / reserves on adoption of AASB 9 as follows:
Loan receivables (current and non-current), net
Deferred tax assets
Total assets
Net assets
Retained earnings
Total equity
AASB 139
$’000
AASB 9
adjustment
$’000
151,724
8,614
509,129
322,408
66,687
322,408
(6,669)
2,001
(4,668)
(4,668)
(4,668)
(4,668)
AASB 9
restated
$’000
145,055
10,615
504,461
317,740
62,019
317,740
There have been no other changes in classification and subsequent measurement of the carrying amounts of
financial assets and liabilities as a result of adopting AASB 9.
The key changes in significant accounting policies and impacts from the transition are summarised below:
Classification and subsequent measurement
Financial assets
AASB 9 has three classification categories for financial assets; amortised cost, fair value through other
comprehensive income (FVOCI) and fair value through profit or loss.
The classification is based on the business model under which the financial asset is managed and its
contractual cash flows. Compared to AASB 139, the FVOCI and amortised cost categories have been added
and the held-to-maturity, loans and receivables and available for sale classification categories have been
removed.
Amortised cost
A financial asset is measured at amortised cost if both of the following conditions are met:
i.
ii.
the financial asset is held within a business model whose objective is to hold financial assets in order to
collect contractual cash flows; and
the contractual terms of the financial asset give rise on specified dates to cash flows that meet the sole
payment of principal and interest (SPPI) requirements.
Fair value through other comprehensive income (FVOCI)
A financial asset is measured at FVOCI if the following conditions are met:
i.
ii.
the financial asset is held within a business model whose objective is achieved by both collecting
contractual cash flows and selling financial assets; and
the contractual terms of the financial asset give rise on specified dates to cash flows that meet the
SPPI requirements.
Fair value through profit or loss
Financial assets that are not measured at amortised cost or FVOCI are measured at fair value through profit
or loss.
Financial liabilities
AASB 9 largely retains the existing requirements of AASB 139 for the classification and measurement of
financial liabilities. Financial liabilities are measured at amortised cost, except for those financial liabilities that
are designated to be measured at fair value through profit or loss.
Annual Report 2019 | 45
Notes to the financial statements
For the year ended 30 June 2019
(1) Basis of preparation (continued)
Impairment
AASB 9 replaces the AASB 139’s incurred loss model with an expected credit loss model. Whilst the ultimate
credit loss under both AASB 9 and AASB 139 is the same over the lifetime of the asset, AASB 9’s expected
credit loss (ECL) requirements requires earlier recognition of credit impairments.
The impairment requirements apply to financial assets measured at amortised cost and FVOCI, lease
receivables, amounts receivable from contracts with customers as defined in AASB 15, loan commitments,
certain letters of credit and financial guarantee contracts.
In terms of AASB 9’s ECL requirements, the Group applies a three-stage approach to measuring the ECL, as
detailed above, based on changes in the financial asset’s underlying credit risk and includes forward-looking
or macroeconomic information as well as management overlays. The calculation of ECL requires judgement
and the choice of inputs, estimates and assumptions used involve uncertainty at the time that they are made.
Outcomes within the next financial period that are different from management’s assumptions and estimates
could result in changes to the timing and amount of ECL to be recognised.
The determination of the ECL is probability weighted, and incorporates all available information relevant to
the assessment, including information about past events, current conditions and reasonable and supportable
information about future events, the time value of money and economic conditions at the reporting date.
The ECL is determined with reference to the following stages:
1. Stage 1: 12 month ECL
At initial recognition, and for financial assets for which there has not been a significant increase in credit risk
(SICR) or for those financial assets for which there has been an increase in credit risk but for which the credit
risk is considered to be low, ECL is determined based on the probability of default (PD), where write off is
considered the best indicator of loan default due to the short term nature of personal loans and borrower
repayment behaviour, over the next 12 months and the life time losses associated with such PD, adjusted for
forward looking information (FLI). Interest income is determined with reference to the financial asset’s effective
interest rate (EIR) and gross carrying amount.
2. Stage 2: Lifetime ECL not credit-impaired
When there has been a SICR, the ECL is determined with reference to the financial asset’s life-time PD and
the lifetime losses associated with that PD, adjusted for FLI. The Group assesses whether there has been a
SICR since initial recognition based on qualitative and quantitative factors including contracted days in arrears,
requests for hardship assistance, loans not paying via direct debit, loans that have reached two times the loan
amount and loans extended beyond contract terms. The Group also considers reasonable and supportable
FLI which includes significant management judgment and use of alternative criteria could result in significant
changes to the timing and amount of ECL to be recognised.
3. Stage 3: Lifetime ECL credit-impaired
Financial assets are classified as stage 3 where they are determined to be credit impaired, based on the
Group’s definition of default which includes exposures that are at least 90 days past due. The ECL for credit
impaired financial assets is generally measured as the difference between the contractual and expected cash
flows from the individual exposure, discounted using the EIR for that exposure. For credit-impaired exposures
that are modelled collectively, ECL is measured as the product of the lifetime PD, Loss Given Default (LGD) and
Exposure at Default (EAD), adjusted for FLI.
AASB 15 ‘Revenue from Contracts with Customers’
AASB 15 has been applied from 1 July 2018 and replaces AASB 118 ‘Revenue’, establishing a single,
comprehensive five-step model to be applied to all contracts with customers. The core principle of AASB 15
is that an entity should recognise revenue to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services.
The Group recognises revenue from the following major sources:
> Financial services interest revenue from the provision of short-term and motor vehicle finance loans
> Sales of second-hand goods
> Franchise fee revenue
The Company’s impact assessment of all material revenue streams noted no material difference in how they
are recognised under AASB 15.
Revenue recognition - accounting policy
Revenue is measured based on the consideration to which the Group expects to be entitled in a contract with
a customer. The Group recognises revenue when it transfers control of a product or service to a customer.
46 | Annual Report 2019
Notes to the financial statements
For the year ended 30 June 2019
(1) Basis of preparation (continued)
Financial services interest revenue from the provision of short-term and motor vehicle finance loans
Interest revenue in relation to short-term and vehicle finance loans is recognised over the period to which the
revenue relates 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’s net carrying amount.
Sales of second-hand goods
Revenue is recognised when control of the goods has transferred, being at the point the customer purchases
the good at the retail outlet. Payment of the transaction price is due immediately at the point the customer
purchases the goods.
Franchise fee revenue
Franchise fees and levies in respect of particular services are recognised as a performance obligation settled
over time. Revenue is recognised on a straight-line basis over the period of the service.
Other categories of revenue
Other categories of revenue, such as financial services commission, are recognised when control of the goods
has transferred to the buyer or as the performance obligation associated with services is satisfied over time.
Bank interest is recognised as earned on an accruals basis.
AASB 16 ‘Leases’
AASB 16 replaces AASB 117 ‘Leases’ and will be applied from 1 July 2019. AASB 16 will significantly impact
the accounting for operating leases as it requires the recognition of a lease liability, being the present value
of future lease payments and the recognition of a corresponding right-of-use asset, which will initially be
recognised at the same value as the lease liability or lower amount depending on the transition approach
adopted. AASB 16 permits either a full retrospective or a modified retrospective approach for the adoption.
The Group plans to apply the modified retrospective approach in adopting AASB 16 meaning that it will apply
AASB 16 to all contracts entered into before 1 January 2019 and identified as leases in accordance with AASB
117. This election will apply consistently to all leases.
The adoption of AASB 16 will primarily affect the accounting for the Group’s operating leases, including
property leases at the corporate store network of 69 stores and head office. As at 30 June 2019, the
consolidated entity’s future minimum lease payments under non-cancellable operating leases amounted to
$38.626 million on an undiscounted basis as detailed in Note 6.2. A preliminary assessment indicates that
$152 thousand of these arrangements relate to leases other than short-term leases and leases of low-value
assets, and hence the Group will recognise a right-of-use asset and lease liability in the range of $57 million
to $64 million in respect of these leases. Management is still assessing the incremental borrowing rate to be
applied to present value calculations. The provision for onerous lease contracts which was required under
AASB 117 of $253 thousand will be derecognised.
In addition, the recognition of expenses related to these leases will now change under AASB 16. The standard
replaces the straight-line operating lease expense with a depreciation charge for right-of-use assets and
interest expense on lease liabilities. The financial statements will therefore report an increased EBITDA,
however current estimates indicated a reduction in net profit (in the first year at least) following the application
of the standard of $1 million to $2 million.
Under AASB 16, an intermediate lessor accounts for the head lease and the sublease as two separate
contracts. The intermediate lessor is required to classify the sublease as a finance or operating lease by
reference to the right-of-use asset arising from the head lease (and not by reference to the underlying asset
as was the case under AASB 117). Because of this change, the Group will reclassify certain of its sublease
agreements as finance leases. As required by AASB 9, an allowance for expected credit losses will be
recognised on the finance lease receivables. The leased assets will be derecognised, and finance lease asset
receivables recognised. This change in accounting will change the timing of recognition of the related revenue
(recognised in finance income).
(c) Key judgements and estimates
In applying the Group’s accounting policies, management continually evaluates judgements, estimates and
assumptions based on experience and other factors, including expectations of future events that may have
an impact on the Group. All judgements, estimates and assumptions made are believed to be reasonable
based on the most current set of circumstances available to management. Actual results may differ from
the judgements, estimates and assumptions. Significant judgements, estimates and assumptions made by
management in the preparation of these financial statements are outlined below:
Significant accounting judgements
In the process of applying the Group’s accounting policies, management has made the following judgements,
apart from those involving estimations, which have the most significant effect on the amount recognised in the
financial statements:
> Recoverability of deferred tax assets – see note 2.3(g)
> Classification of contingent liabilities – see note 6.1
Annual Report 2019 | 47
Notes to the financial statements
For the year ended 30 June 2019
(1) Basis of preparation (continued)
Significant accounting estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and
assumptions of future events. The key estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting
period are:
> Impairment of goodwill and other intangible assets – see note 3.5 and 3.6
> Useful lives of other intangible assets – see note 3.6
> Impairment of financial assets (including loan receivables) – see note 3.2
> Impairment for inventory obsolescence – see note 3.3
(d) Basis of consolidation
The consolidated financial statements comprise the financial statements of Cash Converters International
Limited and entities controlled by the Company and its subsidiaries (the Group, as outlined in note 5.2). 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.
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.
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.
(e) Foreign currency
Both the functional and presentation currency of Cash Converters International Limited and its Australian
subsidiaries is Australian dollars ($). The functional and presentation currency of the non-Australian Group
companies is the national currency of the country of operation.
As at the reporting date, the assets and liabilities of foreign subsidiaries are translated into Australian dollars at
the rate of exchange ruling at the reporting date and the statements of comprehensive income are translated
at the average exchange rates for the year. The exchange differences arising on the translation are taken
directly to a separate component of equity, the foreign currency translation reserve.
Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling
at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated
at the rate of exchange ruling at the balance sheet date. Foreign currency differences arising on translation are
recognised in the income statement.
(f) Other accounting policies
Significant and other accounting policies that summarise the measurement basis used, and are relevant to an
understanding of the financial statements are provided throughout the notes to the financial statements.
(g) Rounding
The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’
Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument
amounts in the financial report are rounded off to the nearest thousand dollars, unless otherwise indicated.
48 | Annual Report 2019
Notes to the financial statements
For the year ended 30 June 2019
(2) Financial performance
In this section
This section explains the results and performance of the Group. This section provides additional
information about those individual line items in the financial statements that the Directors consider most
relevant in the context of the operations of the Group, including:
a. Accounting policies that are relevant for understanding the items recognised in the financial
statements; and
b. Analysis of the Group’s result for the year by reference to key areas, including revenue, results by
operating segment and income tax.
2.1 Revenue
Financial services interest revenue
Personal loan interest and establishment fees
Pawnbroking fees
Cash advance fee income
Vehicle loan interest and establishment fees
Other financial services revenue
Sale of goods
Retail sales
Vehicle trade sales
Other revenue
Bank interest
Other vehicle revenue
Other revenue
Accounting policies
Franchise fees
2019
$’000
2018
$’000
120,853
104,270
30,490
17,742
16,679
698
29,383
22,150
8,639
2,060
186,462
166,502
75,538
74,121
269
856
75,807
74,977
929
1,005
3,896
741
1,831
4,201
Franchise fees and 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.
Personal loan, cash advance, vehicle finance loan, vehicle lease and pawnbroking interest
Interest revenue 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’s net carrying amount.
Loan establishment fee revenue
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.
Other vehicle revenue
Charges relating to the vehicle leases such as vehicle maintenance, warranty, registration and insurance are
recognised over the life of the lease.
Other categories of revenue
Other categories of revenue, such as financial services commission and retail sales, are recognised when the
Group has transferred the risks and rewards of the goods to the buyer or when the services are provided.
Bank interest is recognised as earned on an accruals basis.
Annual Report 2019 | 49
Notes to the financial statements
For the year ended 30 June 2019
2.2 Expenses
Financial services cost of sales
Net bad and doubtful debt expense
Commissions
Other financial services cost of sales
Refer below for details of finance costs.
Employee expenses
Employee benefits
Share-based payments
Superannuation expense
Administrative expenses
General administrative expenses
Communications expenses
IT expenses
Travel costs
Occupancy expenses
Rent
Outgoings
Other
Other expenses
Legal fees
Professional and registry costs
Auditing and accounting services
Bank charges
Other expenses from ordinary activities
Depreciation
Amortisation
Loss on write down of assets
Finance costs
Interest
Finance lease charge
50 | Annual Report 2019
Notes
3.2
2019
$’000
2018
$’000
60,409
13,644
4,051
78,104
31,660
12,204
3,756
47,620
65,990
64,091
281
4,995
159
4,849
71,266
69,099
2,883
1,478
3,723
949
9,033
2,503
1,669
2,923
910
8,005
11,221
11,220
1,975
2,599
1,791
2,144
15,795
15,155
3,742
6,772
566
831
4,702
2,903
6,242
4,077
3,097
5,394
343
876
3,941
3,081
4,364
238
29,835
21,334
10,427
10,820
-
2
10,427
10,822
Notes to the financial statements
For the year ended 30 June 2019
2.2 Expenses (continued)
Class Action settlement expense
On 22 October 2018, the Company reached a settlement in relation to the McKenzie Class Action, under the
terms of which the Company paid $10.600 million into a fund for distribution to members of the class, and a
further $5.800 million of legal, administrative and other costs.
Accounting policies
Employee benefits expense
The Group’s accounting policy for liabilities associated with employee benefits is set out in note 3.8. The policy
relating to share-based payments is set out in note 6.5.
Leasing
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.
Assets held under finance leases are initially recognised as assets of the Group at their fair value at the
inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding
liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease
payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a
constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately
in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in
accordance with the Group’s general policy on borrowing costs (see note 4.2 below).
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.
Impairment
Impairment expenses are recognised to the extent that the carrying amount of assets exceeds their
recoverable amount. Refer to note 3.5 for further details on impairment.
2.3 Taxation
This note sets out the Group tax accounting policies and provides an analysis of the Group’s
income tax expense / benefit and deferred tax balances, including a reconciliation of tax expense
to accounting profit.
Income tax is accounted for using the balance sheet method. Accounting income is not always
the same as taxable income, creating timing differences. These differences usually reverse over
time. Until they reverse, a deferred tax asset or liability must be recognised in the statement of financial
position
(a) Consolidated income statement
The major components of tax expense are:
Current income tax expense
Current year
Adjustment for prior years
Deferred income tax expense
Temporary differences
Adjustment for prior years
Income tax (benefit) / expense reported in income statement
Tax reconciliation
2019
$’000
3,622
(143)
(4,177)
24
(674)
2018
$’000
7,257
(330)
1,810
31
8,768
Profit / (loss) before tax from continuing operations
(2,366)
31,271
Income tax at the statutory rate of 30% (2018: 30%)
Research and development tax benefits recognised
(710)
-
9,381
(298)
Annual Report 2019 | 51
Notes to the financial statements
For the year ended 30 June 2019
2.3 Taxation (continued)
Adjustments relating to prior years
Income tax rate differential
Non-deductible items
Tax effect of share-based payment expense
Recognition of previously impaired tax losses
Income tax (benefit) / expense on profit before tax
(b) Deferred tax
Deferred income tax in the statement of financial position relates to the following:
Deferred tax assets
Allowance for doubtful debts
Accruals
Provision for employee entitlements
Other provisions
Other
Carry forward losses
Deferred tax liabilities
Fixed assets
Intangible assets
Other
Net deferred tax assets
Reconciliation of net deferred tax assets
Opening balance at beginning of period
Tax expense during period recognised in profit or loss
Tax benefit during period recognised in equity
Prior year adjustment
Other
Closing balance at end of period
(c) Unrecognised deferred tax balances
Deferred income tax relating to the UK in the balance sheet excludes the following:
Tax losses - revenue
(d) Carry forward tax losses
2019
$’000
(119)
(19)
66
84
24
(674)
11,553
612
2,137
108
270
2,799
17,479
(1,440)
(1,181)
(38)
(2,659)
14,820
8,614
4,177
2,001
(24)
52
2018
$’000
(1)
(263)
325
48
(424)
8,768
6,462
671
1,945
-
477
2,750
12,305
(2,493)
(1,198)
-
(3,691)
8,614
9,879
(1,810)
446
(31)
130
14,820
8,614
4,254
4,160
Carry forward losses of $2.799 million (2018: $2.750 million) have been recognised in relation to the Group’s
UK operations, which are profitable in the current year, however have had a recent history of losses. Refer to
note 2.3(g) for further information supporting the recognition of these losses.
(e) Tax consolidation
Relevance of tax consolidation to the Group
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 5.2.
52 | Annual Report 2019
Notes to the financial statements
For the year ended 30 June 2019
2.3 Taxation (continued)
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 obligation. No amounts have been recognised in the financial statements in respect of this
agreement as payment of any amounts under the tax sharing agreement is considered remote.
(f) Accounting policies
Current taxes
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. Current tax assets and liabilities are measured at the amount expected
to be recovered from, or paid to, taxation authorities. All are calculated at the tax rates and tax laws enacted or
substantively enacted by the balance sheet date.
Deferred taxes
Deferred income tax liabilities are recognised for all taxable temporary differences. Deferred income tax assets
are recognised for all deductible temporary differences, carried forward unused tax assets and unused tax
losses, to the extent it is probable that taxable profit will be available to utilise them. 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) that affect neither taxable
income nor accounting profit. A deferred tax liability is not recognised in relation to the temporary differences
arising from the initial recognition of goodwill.
The carrying amount of deferred income tax assets is reviewed at balance sheet date and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to utilise them.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year
when the asset is realised, or the liability is settled, based on tax rates and tax laws that have been enacted or
substantively enacted at the balance sheet date.
Deferred tax assets and liabilities are offset only if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the
same taxation authority.
Current and deferred tax for the period
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.
(g) Key estimate: deferred tax assets
A net deferred tax asset of $14.820 million (2018: $8.614 million) has been recognised in the consolidated
statement of financial position. This includes $2.799 million (2018: $2.750 million) of carried forward tax losses
in relation to the Group’s UK operations, which although profitable in the current year, have a recent history of
losses. The UK tax losses have an indefinite availability period subject to satisfaction of the same ownership
and continuity of business tests. A deferred tax asset for the UK operations has only been recognised to the
extent tax losses are expected to be recoverable against future earnings.
In making this assessment, a forward-looking estimation of taxable profit was made, based on management’s
best estimate of future UK performance from continuing operations as at 30 June 2019.
Continuing operations in Australia were profitable during the current year and the Australian tax group is
expected to continue to be profitable, therefore supporting the recognition of net deferred tax assets arising
from temporary differences in Australia.
2.4 Earnings per share
Earnings per share (EPS) is the amount of post-tax profit / (loss) attributable to each share. Basic EPS is
calculated on the Company’s statutory profit for the year divided by the weighted average number of shares
outstanding. Diluted EPS adjusts the basic EPS for the dilutive effect of any instruments, such as options, that
could be converted into ordinary shares. The calculation of basic earnings per share has been based on the
following profit / (loss) attributable to ordinary shareholders and weighted average number of ordinary
shares outstanding.
Annual Report 2019 | 53
Notes to the financial statements
For the year ended 30 June 2019
2.4 Earnings per share (continued)
Reconciliation of earnings used in calculating earnings per share
2019
$’000
2018
$’000
Basic and diluted earnings per share
(Loss) / profit attributable to shareholders of the Company used in
calculating earnings per share
(1,692)
22,503
Weighted average number of shares used as the denominator
Weighted average number of shares - basic
Dilutive effect of performance rights
Weighted average number of shares - diluted
Number
Number
616,437,946
494,462,348
12,210,611
13,981,247
628,648,557
508,443,595
The number of potential ordinary shares not included in the above calculation is 10,973,771
(2018: 9,819,506), equating to a weighted average dilutive effect of 12,210,611 (2018: 13,981,247).
2.5 Segment information
The Group’s operating segments are organised and managed separately according to the nature of their
operations. Each segment represents a strategic business unit that provides different services to different
categories of customer. The Chief Executive Officer (chief operating decision-maker) monitors the operating
results of the business units separately for the purpose of making decisions about resource allocation and
performance assessment. The Group’s reportable segments under AASB 8 ‘Operating Segments’ are
therefore as follows:
Franchise operations
This involves the sale of franchises for the retail sale of new and second-hand goods and the sale of master
licenses for the development of franchises in countries around the world.
Store operations
This segment involves the retail sale of new and second-hand goods, cash advance and pawnbroking
operations at corporate owned stores in Australia.
Personal finance
This segment comprises the Cash Converters Personal Finance personal loans business and Mon-E, which is
responsible for providing the administration services for the Cash Converters network in Australia to offer small
cash advance loans to customers.
Vehicle financing
This segment comprises Green Light Auto Group Pty Ltd, which provides motor vehicle finance since March
2016, and fully maintained vehicles through a lease product to customers for a term of up to 4 years (a product
that the Group ceased to offer during the 2016 financial year).
The accounting policies of the reportable segments are the same as the Group’s accounting policies.
The following is an analysis of the Group’s revenue and results by reportable operating segment for the periods
under review.
Segment profit represents the profit earned by each segment without the allocation of central administration
costs and directors’ fees and expenses, interest income and expense in relation to corporate facilities and tax
expense. This is the measure reported to the chief executive officer (chief operating decision maker) for the
purpose of resource allocation and assessment of segment performance.
54 | Annual Report 2019
Notes to the financial statements
For the year ended 30 June 2019
2.5 Segment information (continued)
Franchise
operations
$’000
Store
operations
$’000
Personal
finance
$’000
Vehicle
financing
$’000
Corporate
head office
$’000
Total
$’000
Year ended 30 June 2019
Interest revenue (i)
Other revenue
Gross revenue
1,771
18,895
20,666
52,677
128,241
16,886
75,496
52
1,274
128,173
128,293
18,160
Less inter-company sales
(1,542)
(9,957)
(3,157)
-
Segment revenue
19,124
118,216
125,136
18,160
External interest revenue (ii)
-
-
10
-
Total revenue
19,124
118,216
125,146
18,160
-
-
-
-
-
919
919
199,575
95,717
295,292
(14,656)
280,636
929
281,565
EBITDA (iii)
Less inter-company
eliminations
Segment EBITDA
Depreciation and
amortisation
EBIT
Interest expense
12,322
10,235
41,182
859
(43,315)
21,283
(902)
3,662
(2,767)
7
-
-
11,420
13,897
38,415
866
(43,315)
21,283
(1,532)
(2,762)
(166)
(322)
(8,440)
(13,222)
9,888
11,135
38,249
544
(51,755)
8,061
Profit / (loss) before tax
9,888
11,135
31,145
-
-
(7,104)
(2,528)
(1,984)
(795)
(10,427)
(52,550)
(2,366)
Income tax benefit
Loss for the year
Year ended 30 June 2018
Interest revenue (i)
Other revenue
Gross revenue
2,987
18,487
21,474
53,376
112,729
73,476
328
9,281
2,687
126,852
113,057
11,968
Less inter-company sales
(1,868)
(8,312)
(3,567)
-
Segment revenue
19,606
118,540
109,490
11,968
External interest revenue (ii)
-
-
-
1
Total revenue
19,606
118,540
109,490
11,969
674
(1,692)
178,373
94,978
273,351
(13,747)
259,604
741
260,345
-
-
-
-
-
740
740
EBITDA (iii)
Less inter-company
eliminations
Segment EBITDA
Depreciation and
amortisation
EBIT
13,666
11,285
49,926
2,565
(27,666)
49,776
(1,262)
4,502
(3,249)
9
-
-
12,404
15,787
46,677
2,574
(27,666)
49,776
(124)
(3,267)
(186)
(564)
(3,542)
(7,683)
12,280
12,520
46,491
2,010
(31,208)
42,093
Interest expense
(276)
-
(5,073)
(1,128)
(4,345)
(10,822)
Profit / (loss) before tax
12,004
12,520
41,418
882
(35,553)
31,271
Income tax expense
Profit for the year
(8,768)
22,503
(i) Interest revenue comprises personal loan interest, cash advance fee income, pawnbroking interest from
customers and commercial loan interest from third parties
(ii) External interest is interest received on bank deposits
(iii) EBITDA is earnings before interest, tax, depreciation, amortisation and impairment
Annual Report 2019 | 55
Notes to the financial statements
For the year ended 30 June 2019
2.5 Segment information (continued)
Group assets by reportable segment
Franchise operations
Store operations
Personal finance
Vehicle financing
Total of all segments
Unallocated assets
Consolidated total assets
2019
$’000
2018
$’000
33,709
75,282
37,728
80,822
213,365
219,941
63,256
385,612
78,628
464,240
47,129
385,620
123,509
509,129
Unallocated assets include various corporate assets including cash held at a corporate level that has not been
allocated to the underlying segments.
Group liabilities by reportable segment
Franchise operations
Store operations
Personal finance
Vehicle financing
Total of all segments
Unallocated liabilities
Consolidated total liabilities
6,075
8,008
5,663
7,559
128,394
118,127
225
1,681
142,702
133,030
4,686
53,691
147,388
186,721
Unallocated liabilities include Group borrowings not specifically allocated to the underlying segments.
Other segment information
Franchise operations
Store operations
Personal finance
Vehicle financing
Total of all segments
Unallocated
Total
Depreciation,
amortisation and
impairment
Additions to
non-current
assets
2019
$’000
1,532
2,597
166
258
4,553
5,795
10,348
2018
$’000
124
3,111
184
484
3,903
3,542
7,445
2019
$’000
1,452
782
2,098
1,471
5,803
1,449
7,252
2018
$’000
1,640
1,590
2,637
2,339
8,206
1,528
9,734
56 | Annual Report 2019
Notes to the financial statements
For the year ended 30 June 2019
2.5 Segment information (continued)
Geographical information
The Group operates in two principal geographical areas – Australia (country of domicile) and the United
Kingdom. The Group’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
Non-current assets
2019
$’000
2018
$’000
2019
$’000
2018
$’000
269,246
248,480
138,167
143,831
11,744
11,222
2,037
2,427
575
643
-
-
281,565
260,345
140,204
146,258
Non-current assets include property, plant and equipment, goodwill and other intangible assets, and exclude
deferred tax assets, trade and other receivables and other financial assets.
2.6 Dividends
Recognised amounts
Final dividend – prior year
100% franked at 30%
Interim dividend – current year
100% franked at 30%
Unrecognised amounts
Final dividend – current year
100% franked at 30%
2019
2018
Per share
cents
Total
$’000
Per share
cents
Total
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Company did not pay a dividend in respect of the financial year ended 30 June 2018.
On 29 August 2019 the Company announced that there would be no final dividend in respect of the financial
year ended 30 June 2019.
The Company has Australian franking credits available of $69.339 million on a tax paid basis
(2018: $66.109 million).
Annual Report 2019 | 57
Notes to the financial statements
For the year ended 30 June 2019
2.7 Notes to cash flow statement
Reconciliation of profit to net cash flow from operating activities:
Profit / (loss) after tax
Non-cash adjustment to reconcile profit after tax to net cash flows:
Amortisation
Depreciation
Share-based payments
Loss on disposal of non-current assets
Share of net (profit) / loss of equity accounted investment
Changes in assets and liabilities:
Trade and loan receivables
Inventories
Other assets
Trade and other payables
Provisions
Income tax payables
Net cash provided by operating activities
2019
$’000
(1,692)
7,445
2,903
281
2,873
(1,632)
2018
$’000
22,503
4,364
3,081
159
238
(848)
(29,324)
(47,608)
301
(2,520)
(3,684)
(219)
(6,520)
321
(2,784)
(2,121)
(1,196)
2,342
(31,788)
(21,549)
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.
(3) Assets and liabilities
In this section
This section shows the assets used to generate Cash Converters’ trading performance and the
liabilities incurred as a result. Information on other assets and liabilities are in the following sections:
> Section 2 – Deferred tax assets and liabilities
> Section 4 – Financing activities
> Section 5 – Equity-accounted investments
3.1 Trade and other receivables
Current
Trade receivables
Allowance for impairment losses
Total trade receivables (net)
Finance lease receivables
Vendor finance loans
Loan to associate
Other receivables
Total trade receivables
(i)
(ii)
(iii)
(iv)
(v)
1,151
(26)
1,125
128
1,817
-
4,724
7,794
1,537
(136)
1,401
157
2,068
14,981
4,094
22,701
58 | Annual Report 2019
Notes to the financial statements
For the year ended 30 June 2019
3.1 Trade and other receivables (continued)
Non-current
Finance lease receivables
Vendor finance loans
Loan to associate
Other receivables
Total trade and other receivables
2019
$’000
2018
$’000
-
3,358
2,913
22
6,293
534
5,014
-
12
5,560
(ii)
(iii)
(iv)
(v)
i. Trade receivables include weekly franchise fees, wholesale sales, pawnbroking 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.
ii. The Group entered into finance lease arrangements with customers for leasing of vehicles. All leases are
denominated in Australian dollars. The average term of finance leases entered into is 4 years. The Group
ceased entering into such finance lease arrangements from March 2016.
iii. Vendor finance loans are loans made to purchasers of the Group’s UK corporate stores during the year
ended 30 June 2017 as part of the purchase agreement. The loans have various terms of up to 6 years,
and bear interest at rates between nil and 9%. The receivables are held at amortised cost. No receivables
are past due or impaired at 30 June 2019 (2018: nil).
iv. Commercial loan advanced to Cash Converters Holdings LP (New Zealand master franchisee) with a
maturity date of 14 September 2023. Interest is charged quarterly at a rate of 5% per annum.
v. Other receivables include GST receivable, development agent fees outstanding, sub-master license sales,
Mon-E fees, financial commission and instalment credit loans. None of these receivables are past due or
considered impaired (2018: nil).
As at 30 June the ageing analysis of trade receivables was as follows:
0 to 30 days
31 to 60 days past due not impaired
61 to 90 days past due not impaired
90 + days past due not impaired
Considered impaired
Balance at end of year
Accounting policy
688
109
32
296
26
963
39
104
295
136
1,151
1,537
Trade receivables and other receivables that have fixed or determinable payments that are not quoted in an
active market are classified as trade and other receivables and are measured at amortised costs 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.
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.
Allowance for impairment losses
As at 30 June 2019, trade receivables and instalment credit loans of $26 thousand (2018: $136 thousand)
were impaired and fully provided for. Movements in the provision for impairment of trade receivables were as
follows:
Balance at beginning of year
Impairment losses recognised on receivables
Amounts written off as uncollectible
Foreign currency exchange differences
Balance at end of year
136
(109)
-
(1)
26
58
88
(12)
2
136
Annual Report 2019 | 59
Notes to the financial statements
For the year ended 30 June 2019
3.1 Trade and other receivables (continued)
Amounts receivable under finance leases
Not later than one year
Later than one year and not later than five years
Less unearned finance income
Present value of minimum lease payments receivable
Allowance for uncollectible lease payments
Minimum lease
payments
Present value of
minimum lease
payments
2019
$’000
579
-
579
(92)
487
(282)
205
2018
$’000
1,725
504
2,229
(758)
1,471
(780)
691
2019
$’000
487
-
487
-
487
(282)
205
2018
$’000
937
534
1,471
-
1,471
(780)
691
Unguaranteed residual values of assets leased under finance leases at the end of the reporting period are
estimated at $177 thousand (30 June 2018: $491 thousand). The residual amounts have been excluded from
the above calculations in the present value amounts – the amounts only relate to the minimum repayments.
The interest rate inherent in the leases is fixed at the contract date for the entire lease term. The average
effective interest rate contracted is approximately 27.5% (30 June 2018: 26.0%) per annum.
3.2 Loan receivables
Current
Personal short-term loans (unsecured)
Allowance for impairment losses
Deferred establishment fees
Total personal short-term loans (net)
Vehicle finance loans (secured)
Allowance for impairment losses
Deferred establishment fees
Total vehicle finance loans (net)
Total loan receivables
Non-current
Personal short-term loans (unsecured)
Allowance for impairment losses
Total personal loans (net)
Vehicle finance loans (secured)
Allowance for impairment losses
Deferred establishment fees
Total vehicle finance loans (net)
Total loan receivables
(i)
(ii)
(i)
(ii)
2019
$’000
2018
$’000
147,020
(27,143)
(4,712)
115,165
16,429
(2,242)
(978)
13,209
134,311
(18,358)
(5,736)
110,217
10,765
(1,506)
(514)
8,745
128,374
118,962
5,998
(992)
5,006
50,430
(6,209)
(3,001)
41,220
46,226
3,277
(164)
3,113
31,305
(162)
(1,494)
29,649
32,762
i. The credit period provided in relation to personal short-term unsecured 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 Group 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.
ii. Vehicle finance loans are secured loans advanced for financing the purchase of vehicles. The average remaining
term of these loans is 3.5 years (2018: 4.5 years) and the average interest rate is 25.0% (2017: 25.6%).
60 | Annual Report 2019
Notes to the financial statements
For the year ended 30 June 2019
3.2 Loan receivables (continued)
As at 30 June the ageing analysis of personal loan receivables was as follows:
0 to 30 days
31 to 60 days past due not impaired
61 to 90 days past due not impaired
90 + days past due not impaired
Considered impaired
Balance at end of year
As at 30 June the ageing analysis of vehicle finance loan receivables was as follows:
0 to 30 days
31 to 60 days past due not impaired
61 to 90 days past due not impaired
90 + days past due not impaired
Considered impaired
Balance at end of year
2019
$’000
111,954
2018
$’000
109,781
7,170
3,495
2,264
3,254
3,892
2,446
28,135
18,215
153,018
137,588
44,245
4,155
2,729
7,279
8,451
38,147
1,464
440
351
1,668
66,859
42,070
Allowance for impairment losses
In determining the recoverability of a personal loan, the Group 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 loss allowance required in excess of the loss allowance.
The following table explains changes in the loss allowance between the beginning and end of the year:
Personal loan receivables
Loss allowance
Balance at 1 July 2018
AASB 9 adjustment to opening
allowance for impairment losses
Balance at 1 July 2018 after AASB 9
adjustment
Movements with P&L impact
Transfers:
Transfers from Stage 1 to Stage 2
Transfers from Stage 1 to Stage 3
Transfers from Stage 2 to Stage 1
Transfers from Stage 2 to Stage 3
Transfers from Stage 3 to Stage 1
Transfers from Stage 3 to Stage 2
New financial assets originated
Changes in PDs/LGDs/EADs
Changes to model assumptions and
methodologies
Write-offs
Total net change during the period
Balance at 30 June 2019
Stage 1
12 month ECL
$’000
Stage 2
Lifetime ECL
$’000
Stage 3
Lifetime ECL
$’000
Total
$’000
18,522
3,765
8,742
8,691
4,854
22,287
(680)
(437)
83
-
38
-
9,276
(778)
408
(6,896)
1,014
9,756
680
-
(83)
(325)
-
397
8,362
(98)
161
(7,697)
1,397
10,088
-
437
-
325
(38)
(397)
6,058
1,113
74
-
-
-
-
-
-
23,696
237
643
(4,135)
(18,728)
3,437
8,291
5,848
28,135
Annual Report 2019 | 61
Notes to the financial statements
For the year ended 30 June 2019
3.2 Loan receivables (continued)
The following table further explains changes in the gross carrying amount of the loans and receivables to help
explain their significance to the changes in the loss allowance:
Personal loan receivables
Gross carrying amount
Balance at 1 July 2018
Movements with P&L impact
Transfers:
Transfers from Stage 1 to Stage 2
Transfers from Stage 1 to Stage 3
Transfers from Stage 2 to Stage 1
Transfers from Stage 2 to Stage 3
Transfers from Stage 3 to Stage 1
Transfers from Stage 3 to Stage 2
New financial assets originated
Changes in PDs/LGDs/EADs
Write-offs
Total net change during the period
Balance at 30 June 2019
Stage 1
12 month ECL
$’000
Stage 2
Lifetime ECL
$’000
Stage 3
Lifetime ECL
$’000
Total
$’000
104,896
22,997
9,695
137,588
(6,290)
(3,509)
325
-
91
-
105,560
(5,062)
(87,643)
3,472
108,368
6,290
-
(325)
(986)
-
1,178
22,682
(5,216)
(19,329)
4,294
27,291
-
3,509
-
986
(91)
(1,178)
12,742
(592)
(7,712)
7,664
17,359
-
-
-
-
-
-
140,984
(10,870)
(114,684)
15,430
153,018
In determining the recoverability of a vehicle finance loan, the Group considers any change in the credit quality
of the receivable from the date credit was initially granted up to the reporting date. As the current customer
base is relatively small, the Group has made a provision based on known historical losses and reasonable
estimation of expected future losses. As these loans are secured by the underlying vehicle financed, the total
loss will be reduced by the recoverable amount. Accordingly, the directors believe that there is no further credit
loss allowance required in excess of the loss allowance for doubtful debts.
The following table explains changes in the loss allowance between the beginning and end of the year:
Vehicle finance loan receivables
Loss allowance
Stage 1
12 month ECL
$’000
Stage 2
Lifetime ECL
$’000
Stage 3
Lifetime ECL
$’000
Total
$’000
1,668
2,905
Balance at 1 July 2018
AASB 9 adjustment to opening
allowance for impairment losses
Balance at 1 July 2018 after
AASB 9 adjustment
Movements with P&L impact
Transfers:
Transfers from Stage 1 to Stage 2
Transfers from Stage 1 to Stage 3
Transfers from Stage 2 to Stage 1
Transfers from Stage 2 to Stage 3
Transfers from Stage 3 to Stage 1
Transfers from Stage 3 to Stage 2
New financial assets originated
Changes in PDs/LGDs/EADs
Changes to model assumptions and
methodologies
Write-offs
Total net change during the period
Balance at 30 June 2019
62 | Annual Report 2019
1,071
1,626
1,876
4,573
(130)
(122)
195
-
59
-
1,005
131
(37)
(174)
927
1,998
130
-
(195)
(664)
-
92
1,289
762
(61)
(442)
911
2,537
-
122
-
664
(59)
(92)
940
1,687
(64)
(1,158)
2,040
3,916
-
-
-
-
-
-
3,234
2,580
(162)
(1,774)
3,878
8,451
Notes to the financial statements
For the year ended 30 June 2019
3.2 Loan receivables (continued)
The following table further explains changes in the gross carrying amount of the loans and receivables to help
explain their significance to the changes in the provision as discussed above:
Vehicle finance loan receivables
Gross carrying amount
Balance at 1 July 2018
Movements with P&L impact
Transfers:
Transfers from Stage 1 to Stage 2
Transfers from Stage 1 to Stage 3
Transfers from Stage 2 to Stage 1
Transfers from Stage 2 to Stage 3
Transfers from Stage 3 to Stage 1
Transfers from Stage 3 to Stage 2
New financial assets originated
Changes in PDs/LGDs/EADs
Write-offs
Total net change during the period
Balance at 30 June 2019
Accounting policy
Stage 1
12 month ECL
$’000
Stage 2
Lifetime ECL
$’000
Stage 3
Lifetime ECL
$’000
Total
$’000
32,483
5,215
4,372
42,070
(3,676)
(3,049)
637
-
129
-
33,028
(4,082)
(4,894)
18,093
50,576
3,676
-
(637)
(2,073)
-
191
3,701
(744)
(1,407)
2,707
7,922
-
3,049
-
2,073
(129)
(191)
1,987
(48)
(2,752)
3,989
8,361
-
-
-
-
-
-
38,716
(4,874)
(9,053)
24,789
66,859
AASB 9 ‘Financial Instruments’ has been applied from 1 July 2018, replacing AASB 139, materially changing
the recognition of impairment on loan receivables. Refer to Note 1(c).
Loan receivables that have fixed or determinable payments that are not quoted in an active market are
classified as loan receivables and are measured at amortised costs 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.
Key estimate – impairment of financial assets
Under AASB 9, a three-stage approach is applied to measuring expected credit losses (ECL) based on credit
migration between the stages as follows:
> Stage 1: At initial recognition, a provision equivalent to 12 months ECL is recognised.
> Stage 2: Where there has been a significant increase in credit risk (SICR) since initial recognition, a provision
equivalent to full lifetime ECL is required.
> Stage 3: Lifetime ECL is recognised for loans where there is objective evidence of impairment.
ECL are probability weighted and determined by evaluating a range of possible outcomes, taking into account
the time value of money, past events, current conditions and forecasts of future economic conditions.
Probability of default
To measure the expected credit losses, loan receivables have been grouped based on shared credit risk
characteristics and the days past due. The expected loss rates are based on the payment profiles of loan
receivables over a period of 12 months before 1 June 2019 respectively and the corresponding historical credit
losses experienced within this period.
Macroeconomic scenarios
The assessment of SICR and the calculation of ECL both incorporate forward-looking information. The Group
has performed historical analysis to identify key economic variables impacting credit risk and expected credit
losses for Personal Loans and Motor Vehicle Loans. Expected credit losses are a probability-weighted estimate
of credit losses over the expected life of the financial instrument.
Annual Report 2019 | 63
Notes to the financial statements
For the year ended 30 June 2019
3.2 Loan receivables (continued)
Loss given default
Loss given default is estimated based on historical data related to amounts recovered post write off.
Write-off policy
The Group writes off financial assets in whole or in part on the following basis:
> For personal loans, when payments on the loan reach 90 days past due, unless the loan is in a hardship
arrangement or in dispute,
> For motor vehicle loans, the earlier of the date on which all practical asset recovery efforts have been
exhausted with no reasonable expectation of further recoveries and when the loan has reached 180 days in
contractual arrears and no payment has been received for 90 days.
Indicators that there is no reasonable expectation of recovery include (i) ceasing enforcement activity and (ii)
where the Group’s recovery method is foreclosing on collateral and the value of the collateral such that there is
no reasonable expectation of full recovery. Written off loans can subsequently be sent to third party collection
agents for recovery.
3.3 Inventories
New and pre-owned goods at cost
Provision for obsolete stock
New and pre-owned goods (net)
New and used motor vehicles at cost
Accounting policies
2019
$’000
21,904
(1,563)
20,341
29
2018
$’000
21,164
(534)
20,630
43
20,370
20,673
Inventories are valued at the lower of cost and net realisable value. Costs, including purchase costs 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.
As a result of increasing aged inventory during the year, the Company has amended its estimates used to
determine the provision for obsolete stock. Taking in to account both the difference between the marked down
price and original costs, an additional provision has been made following an assessment of the aged inventory
and the historic profits/(losses) incurred when sales have been made compared to the profits achieved on
non-aged inventory sales. The resulting increase to the provision of $1.0 million accounts for the expected
reduced return upon sale. This allows for items that have not been marked down but are likely to be before a
sale is achieved. At the reporting date the provision represents 12% of the value of general inventory and 4%
of jewellery inventory.
64 | Annual Report 2019
Notes to the financial statements
For the year ended 30 June 2019
3.4 Plant and equipment
Cost
Balance at 1 July 2017
Additions
Transfers between asset categories
Disposals
Foreign currency exchange differences
Balance at 30 June 2018
Additions
Disposals
Foreign currency exchange differences
Balance at 30 June 2019
Depreciation
Balance at 1 July 2017
Disposals
Depreciation expense
Foreign currency exchange differences
Balance at 30 June 2018
Disposals
Depreciation expense
Foreign currency exchange differences
Balance at 30 June 2019
Net book value
As at 30 June 2018
As at 30 June 2019
Accounting policies
Leasehold
improvements
$’000
Plant and
equipment
$’000
Total
$’000
25,360
2,275
-
(2,147)
34
25,522
616
(3,354)
15
22,799
15,127
(1,856)
3,081
29
16,381
(2,670)
2,903
12
16,626
11,704
1,884
(17)
(1,529)
31
12,073
544
(2,746)
14
9,885
8,029
(1,324)
1,434
26
8,165
(2,209)
1,389
11
7,356
3,908
2,529
9,141
6,173
13,656
391
17
(618)
3
13,449
72
(608)
1
12,914
7,098
(532)
1,647
3
8,216
(461)
1,514
1
9,270
5,233
3,644
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 revalued 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 and fittings
8 years
5 years
5 years
8 years
Annual Report 2019 | 65
Notes to the financial statements
For the year ended 30 June 2019
3.5 Goodwill
Gross carrying amount
Goodwill
Accounting policies
2019
$’000
2018
$’000
106,967
106,967
Goodwill arising on an acquisition of a business is carried at cost at the date of acquisition of the business less
accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units
(CGUs) that are expected to benefit from the synergies of the combination. CGUs 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 CGU is less than its carrying amount, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to the other assets
of the unit pro rata based on the carrying amount of each asset in the CGU. An impairment loss recognised for
goodwill is recognised directly in profit or loss and is not reversed in subsequent periods.
On disposal of the relevant CGU, the attributable amount of goodwill is included in the determination of the
profit or loss on disposal.
Allocation of goodwill to CGUs
Goodwill has been allocated for impairment testing purposes to the following CGUs or groups of CGUs:
Personal finance
Store operations
Impairment losses recognised
90,561
90,561
16,406
16,406
106,967
106,967
No impairment losses have been recognised in the years ended 30 June 2019 or 30 June 2018.
Impairment testing and key assumptions
Impairment testing approach applicable to all CGUs
Impairment modelling for each CGU has been prepared separately based on a value in use model which uses
cash flow projections based on budgets approved by management covering a five-year period. Cash flows
beyond the five-year period are estimated using a terminal value calculated based on a terminal growth rate
under standard valuation principles.
Key assumptions are based on a combination of past experience for mature products and external sources
(market data) for less mature products and economic metrics such as interest rates.
Working capital requirements are factored into the modelling based on historic requirements for each CGU,
and vary in line with earnings growth. Capital investment, required to run the business (i.e. replacement and
non-expansionary capital expenditure) has been included based on budgeted amounts for the next financial
year and incremental growth in subsequent years consistent with increasing revenues.
The recoverable value of all non-current assets, including goodwill, property, plant and equipment (note 3.4)
and other intangible assets (note 3.6) is assessed using the impairment testing as outlined in this note.
Impact of regulations
The Personal Finance business operates in a regulated industry. The impairment testing for this business
segment is based on management’s expectation of performance, considering applicable legislative
requirements at the date of the impairment testing, being 30 June 2019. Any material changes to legislation
impacting this business in future periods may have a significant positive or negative impact on future
performance and may result in an impairment.
The following key assumptions were used in the impairment testing:
Assumption
Personal finance
Store operations
2020 budget revenue growth / (reduction)
2020 budget expense growth / (reduction)
Revenue growth rate beyond 1 year
Expense growth rate beyond 1 year
Terminal growth rate > 5 years
Pre-tax discount rate applied to cash flows
(5%)
(11%)
1% - 2%
(4%) - 2%
2.5%
16.1%
(5%)
(11%)
1% - 2%
(4%) - 2%
2.5%
16.1%
66 | Annual Report 2019
Notes to the financial statements
For the year ended 30 June 2019
3.5 Goodwill (continued)
Bad debt rates have been forecast based on historic average rates and are adjusted in future periods to move
towards industry and historical averages for individual products experienced by the Group. This projection
reflects the benefits of the enhanced credit assessment processes which have been implemented, and
consequent anticipated lower bad debt rates.
For the year ended 30 June 2018 the key assumptions used included:
> 2019 growth rates for revenue and expenses in Personal finance of +13% and +17% respectively, in the
following years growth rates ranged from -1% to +5% for revenue and -1% to +6% for expenses;
> 2019 growth rates for revenue and expenses in Store operations of 0% and -2% respectively, in the
following years growth rates ranged from +3% to +4% for revenue and +2% for expenses;
> Pre-tax discount rates of 15.8% and terminal growth rates of 2.5%.
Impairment sensitivity disclosures - regulatory environment
Reasonably possible changes are considered in the context of regulatory requirements that have been enacted
or substantively enacted at the date of the impairment testing, or where the outcome of future changes can
reasonably be modelled at the date of impairment testing.
With this in mind, potential future legislative changes not yet enacted or substantively enacted may significantly
impact the Group’s operations, should they be introduced in future periods.
As disclosed in note 3.5 of the 30 June 2017 annual report, on 28 November 2016, the Minister for Revenue
and Financial Services issued a media release in response to the Final Report of the Small Amount Credit
Contract (SACC) Law Review advising that the Government supports most of the recommendations, in
part or in full, of the Final Report. One of the recommendations is to extend the SACC protected earnings
amount (PEA) requirement to all consumers and lowering it to 10 per cent of the consumer’s net income. The
Company is continuing discussions with the Government around these recommendations, with no changes to
the applicable SACC legislation having currently been enacted.
Consequently, there is significant uncertainty with respect to the timing of enacting any legislative change, as
well as the final scope and form of any eventual change, if any.
The recoverable value of both the Personal finance and Store operations businesses may be impacted by
potential future legislative changes given the impact on both the Group’s personal loan and cash advance
operations. Refer to note 2.5 for further information on the Group’s operations.
Whilst ultimately the Group’s business operations could potentially be adjusted to mitigate the impact of these
changes, the likely impact of the legislation if enacted in its current proposed form from 1 July 2020, based
on the current profile of the loan book and with reasonably possible changes to other key assumptions being
taken into account, may result in an impairment within a range of $45 million to $60 million (2018: $45 million
to $55 million). The increase in range reflects the reduced profitability in the current financial year and the
impact this has on the forward forecasts.
As outlined above, this estimate is subject to significant variability due to both the ultimate form and enactment
date of the legislation, both of which are uncertain, as well as the profile of the loan book when any applicable
legislative changes were to come into effect.
Additionally, at both the date of impairment testing and the date of this report there is no certainty that any
change to applicable legislation will be made or the timing of any such change.
Impairment sensitivity disclosures - Store based growth
Within Store Operations, revenue growth from retail and pawnbroking respectively is forecast to grow on
average 5.2% and 4.7% per annum over the five-year forecast period. Growth rates of 4.0% and 3.3% over
the same period for the retail and pawnbroking businesses respectively would result in an impairment break
even position with respect to the recoverable amount of the assets within the Store Operations CGU.
3.6 Other intangible assets
Allocation of other intangible assets to CGUs
Other intangible assets are allocated to their respective CGU and tested for impairment when impairment
indicators are identified. Refer to note 3.5 for details of impairment testing. The recoverable value of other
intangible assets is assessed using the same assumptions and methods as the goodwill for the related CGUs.
No impairment has been recognised in the year ended 30 June 2019 (2018: nil).
Annual Report 2019 | 67
Notes to the financial statements
For the year ended 30 June 2019
3.6 Other intangible assets (continued)
The allocation of other intangible assets to CGUs is as follows:
Franchise operations (excluding UK)
Franchise operations (UK)
Personal finance
Store operations
Vehicle financing
Categories of other intangible assets
Cost
Balance at 1 July 2017
Additions
Disposals
Foreign currency exchange differences
2019
$’000
5,715
3,096
11,897
4,271
1,945
26,924
2018
$’000
6,213
2,939
14,100
6,241
657
30,150
Reacquired
rights
$’000
Trade names
& customer
relationships
$’000
Software
$’000
Total
$’000
7,638
16,868
-
(80)
46
-
(18)
-
19,130
7,458
(21)
42
43,636
7,458
(119)
88
Balance at 30 June 2018
7,604
16,850
26,609
51,063
Additions
Disposals
Impairment
Foreign currency exchange differences
Balance at 30 June 2019
Amortisation
Balance at 1 July 2017
Disposals
Amortisation expense
Foreign currency exchange differences
Balance at 30 June 2018
Disposals
Amortisation expense
Foreign currency exchange differences
-
-
-
18
7,622
-
-
-
-
6,636
(6,782)
(1,192)
21
6,636
(6,782)
(1,192)
39
16,850
25,292
49,764
4,516
8,351
(80)
513
12
(18)
379
-
4,961
8,712
-
500
5
-
141
-
3,782
(14)
3,472
-
7,240
(4,320)
5,600
1
16,649
(112)
4,365
12
20,913
(4,320)
6,241
6
Balance at 30 June 2019
5,466
8,853
8,521
22,840
As at 30 June 2018
As at 30 June 2019
Accounting policies
2,643
2,156
8,138
7,997
19,369
16,771
30,150
26,924
Reacquired rights and customer relationships acquired through business combinations are recognised at fair
value at acquisition date less accumulated amortisation and impairment.
Trade names relating to repurchased sub-master licenses both overseas and in Australia are recognised at
cost less accumulated amortisation.
Software development expenditure is recognised as an asset when it is possible that future economic benefits
attributable to the asset will flow. Software assets are recognised at cost less accumulated amortisation.
68 | Annual Report 2019
Notes to the financial statements
For the year ended 30 June 2019
3.6 Other intangible assets (continued)
Intangible assets are amortised as follows:
Asset
Reacquired rights
Customer relationships
Trade names
Software
Amortisation period
The remaining life of each franchise agreement as at the acquisition date
Useful life of 5 years based on historic average customer relationships
Useful life which is not more than 100 years
Useful life of 5 years based on historic experience
Key estimate – useful lives of other intangible assets
The Company 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 other intangible assets requires the entity to make
significant estimates based on both past performance and expectations of future performance. During the
year ended 30 June 2019 the Company revised its estimate of the useful lives of all software assets, previously
between 5 and 8 years, to 5 years, resulting in an additional accelerated amortisation charge of $2.941 million.
3.7 Trade and other payables
Current
Trade payables
Accruals
2019
$’000
2018
$’000
2,014
13,282
15,296
3,691
15,794
19,485
The Group 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.
3.8 Provisions
Current
Employee benefits
Fringe benefits tax
Onerous lease contracts
Other
Non-current
Employee benefits
Onerous lease contracts
(i)
(i)
6,235
5,666
41
518
250
36
864
6
7,044
6,572
887
825
1,712
817
1,034
1,851
i.
The provision for onerous lease contracts relates to the Group’s previously discontinued UK operations.
Accounting policies
Provisions are recognised when the Group 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 cash flows estimated to settle the present obligation, the carrying amount is
the present value of those cash flows.
When some or all 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.
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long
service leave and personal 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.
Annual Report 2019 | 69
Notes to the financial statements
For the year ended 30 June 2019
(4) Capital structure and financing costs
In this section
This section outlines how the Group manages its capital structure and related financing costs, including
its balance sheet liquidity and access to capital markets.
The Board determines the appropriate capital structure of the Group, specifically how much is raised
from shareholders (equity) and how much is borrowed from financial institutions and capital markets
(debt), in order to finance the Group’s activities both now and in the future.
The Board considers the Group’s capital structure and its dividend policy at least twice a year ahead of
announcing results, in the context of its ability to continue as a going concern, to execute the strategy
and to deliver its business plan.
4.1 Cash and cash equivalents
Cash on hand
Cash at bank
2019
$’000
2,407
78,694
81,101
2018
$’000
2,700
137,291
139,991
Cash at bank includes restricted cash of $6.592 million (2018: $4.495 million) that is held in accounts
controlled by the CCPF Receivables Trust No 1 that was established to operate the Company’s securitisation
facility with Fortress Finance. The facility prescribes that cash deposited in this account can only be used to
fund new principal advances. Surplus funds at the end of the period are redistributed in keeping with the terms
of the securitisation facility. Cash at bank includes a further $5.730 million (2018: $5.730 million) on deposit as
security for banking facilities.
4.2 Borrowings
Current
Securitisation facility
Bonds
Non-current
Securitisation facility
(i)
(ii)
(i)
87,826
-
87,826
79,393
59,958
139,351
35,510
18,996
i. The securitisation facility represents a liability owed by CCPF Receivables Trust No 1, a consolidated
subsidiary established as part of the borrowing arrangement with the Fortress Investment Group. This
liability is secured against eligible receivables (which includes Small and Medium Amount Credit Contracts
issued by Cash Converters Personal Finance and secured vehicle loans provided by Green Light Auto)
which have been assigned to the Trust. Collections from Trust receivables are used to pay interest of the
securitisation facility, with the remainder remitted to the Group twice per month. Receivables have maturities
of up to 5 years and the facility has accordingly been presented as current and non-current liabilities in line
with the maturities of the underlying receivables. The facility limit is $150 million. In the ordinary course of
business, the consolidated entity currently expects to utilise this facility until at least 10 November 2020,
with an option to extend for a further two years from this date.
ii. Represented a September 2013 issue of $60 million of senior unsecured 7.95% notes which matured in
September 2018 with FIIG Securities Limited.
Reconciliation of liabilities arising from financing activities
2018
Cash flows Non-cash changes
Borrowing costs
Securitisation facility
Bonds
$’000
98,389
59,958
Total liabilities from financing activities
158,347
$’000
25,000
(60,000)
(35,000)
$’000
(53)
42
(11)
2019
$’000
123,336
-
123,336
70 | Annual Report 2019
Notes to the financial statements
For the year ended 30 June 2019
4.2 Borrowings (continued)
Accounting policies
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.
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.
Financing arrangements
Unrestricted access was available at balance date to the following lines of credit:
Total facilities
Securitisation facilities
Bond
Used at balance date
Securitisation facilities
Bond
Unused at balance date
Securitisation facilities
2019
$’000
2018
$’000
150,000
-
150,000
124,500
-
124,500
150,000
60,000
210,000
99,500
60,000
159,500
25,500
50,500
Refer to note 4.3 for further information in relation to financial instruments.
Loan covenants and review events
The Group’s borrowing facilities are subject to various covenants and review events. The securitisation has
various eligibility criteria which the receivables of the Group must meet to be funded under the facility. During
the reporting period there have been no events that would cause these covenants to be breached.
4.3 Financial risk factors
The Group’s activities expose the Group to a variety of financial risks: market risks (including currency
risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme
focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on
financial performance.
Financial risk and capital management is carried out in accordance with policies approved by the
Board. The Board reviews and approves written principles of overall risk management, as well as
written policies covering specific areas such as managing capital, mitigating interest rates, liquidity,
foreign exchange and credit risk. The Audit and Risk Committee assists the Board in monitoring the
implementation of risk management policies.
Annual Report 2019 | 71
Notes to the financial statements
For the year ended 30 June 2019
4.3 Financial risk factors (continued)
(a) Categories of financial instruments
Financial assets
Cash and cash equivalents
Trade and other receivables
Loan receivables
Financial liabilities
Trade and other payables
Borrowings
2019
$’000
2018
$’000
81,101
14,087
174,600
269,788
15,296
123,336
138,632
139,991
28,261
151,724
319,976
19,485
158,347
177,832
The Group has no material financial assets or liabilities that are held at fair value.
(b) Financial risk management objectives
The Group’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 Group.
The Group does not enter into or trade financial instruments, including derivative financial instruments,
for speculative purposes.
(c) Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates
and interest rates. There has been no change to the Group’s exposure to market risks or the manner in which
it manages and measures the risk from the previous period.
(d) Foreign currency risk management
The Group 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 to
translate transactions into the reporting currency. There are no foreign currency denominated monetary assets
or monetary liabilities in the Group at the reporting date (2018: nil) other than in the functional currency of the
operating entity.
(e)
Interest rate risk management
The Company and the Group 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. Loans issued by the Group are at fixed
rates. The risk is managed by the Group by monitoring interest rates.
The Company and the Group’s exposures to interest rates on financial assets and financial liabilities are
detailed in the liquidity risk management section of this note.
Interest rate sensitivity analysis
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 $446 thousand (2018: increase/
decrease by approximately $74 thousand).
72 | Annual Report 2019
Notes to the financial statements
For the year ended 30 June 2019
4.3 Financial risk factors (continued)
(f) Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial
loss to the Group. The Group measures credit risk on a fair value basis. The Group 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 Group has a policy of obtaining sufficient collateral or other
securities from these franchisees. The majority of loans within the financing divisions relate to loans made by
Cash Converters Personal Finance and Green Light Auto which may be both secured and unsecured loans.
Credit risk is present in relation to all loans made, which is managed within an agreed corporate policy on
customer acceptance and ongoing review of recoverability. For secured loans, the fair value of the credit risk
considers the underlying value of the collateral against the loan.
(g) Liquidity risk management
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 Group’s short, medium and
long-term funding and liquidity management requirements. The Group 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 4.2 is
a listing of additional undrawn facilities that the Company / Group has at its disposal to further reduce liquidity
risk.
Liquidity and interest risk tables
Financial liabilities
The following table details the Group’s remaining contractual maturity for its financial liabilities. The table has
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on
which the Group can be required to pay. The table includes both interest and principal cash flows.
To the extent that interest flows are at floating rates, 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
Group may be required to pay.
2019
Non-interest bearing
Variable interest rate instruments
2018
Non-interest bearing
Fixed interest rate instruments
Variable interest rate instruments
Weighted
average
effective
interest rate
%
0.00
7.25
0.00
7.95
8.72
1 year
or less
1 to 5
years
More than
5 years
Total
$’000
$’000
$’000
$’000
15,296
87,826
103,122
19,485
60,752
79,393
159,630
-
35,510
35,510
-
-
18,997
18,997
-
-
-
-
-
-
-
15,296
123,336
138,632
19,485
60,752
98,390
178,627
Annual Report 2019 | 73
Notes to the financial statements
For the year ended 30 June 2019
4.3 Financial risk factors (continued)
Financial assets
The following table details the Group’s expected maturity for its financial assets. The table below has 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 / Group anticipates that the cash flow will occur in a
different period.
Weighted
average
effective
interest rate
1 year
or less
1 to 5
years
More than
5 years
Total
%
$’000
$’000
$’000
$’000
2019
Non-interest bearing
Fixed interest rate instruments
Variable interest rate instruments
2018
Non-interest bearing
Fixed interest rate instruments
Variable interest rate instruments
0.00
86.87
1.39
0.00
94.1
1.65
27,862
236,815
35,201
299,878
30,540
255,260
84,605
370,405
-
96,654
-
96,654
-
68,677
-
68,677
-
-
-
-
-
-
-
-
27,862
333,469
35,201
396,532
30,540
323,937
84,605
439,082
The amounts included above for variable interest rate instruments for both assets and liabilities are subject to
change if actual rates differ from those applied in the above average calculations.
(h) Fair value of financial instruments
The fair value of the Group’s financial assets and liabilities are determined on the following basis:
Financial assets and financial liabilities that are measured at fair value on a recurring basis
Subsequent to initial recognition, at fair value financial instruments are grouped into Levels 1 to 3 based on the
degree to which the fair value is observable. Levels are defined as follows:
> Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for
identical assets or 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 2019 and 30 June 2018, the Group has no material financial assets and liabilities that are
measured on a recurring basis at fair value.
Financial assets and financial liabilities that are not measured at fair value on a recurring basis (but where fair
value disclosures are required)
At 30 June 2019 and 30 June 2018, 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.
74 | Annual Report 2019
Notes to the financial statements
For the year ended 30 June 2019
4.4 Issued capital
2019
Number
2018
Number
2019
$’000
2018
$’000
Balance at beginning of year
616,437,946
493,047,424
248,714
210,203
Issued during the year
Shares issued on exercise of performance rights
Entitlement offer
Share issue costs
Balance at end of year
-
-
-
102,166
123,288,356
-
-
-
-
98
39,452
(1,039)
616,437,946
616,437,946
248,714
248,714
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 par value concept in relation to 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.
(5) Group structure
In this section
This section provides information to assist users understand how the Group structure affects the
financial position and performance of the Group as a whole. The Group includes entities that are
classified as associates, which are accounted for using the equity method.
In this section of the notes there is information about:
1.
Changes to the structure that occurred during the prior year as a result of business combinations
or the disposal of a discontinued operation;
2.
Investments in associates;
3. Composition of the Group; and
4. Parent entity financial information.
5.1 Investment in associates
Balances of the investments in associates and joint ventures are as follows:
Balance at beginning of year
Net profit for year
Return on investment received
Foreign exchange adjustment in value of investment
Balance at end of year
2019
$’000
5,282
1,613
(680)
237
6,452
2018
$’000
4,607
846
-
(171)
5,282
Associates are those entities over which the Company has significant influence, but not control or joint control,
over the financial and operating policies. Significant influence is the power to participate in the financial and
operating policy decisions of the investee, but not control or joint control over those policies.
The financial statements include the Company’s share of the total recognised gains and losses of associates
on an equity accounted basis, from the date that significant influence commences until the date that significant
influence ceases. If the Company’s share of losses exceeds its interest in an associate, their carrying amount is
reduced to nil and recognition of further losses is discontinued except to the extent the Company has incurred
legal or constructive obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Company and its associates are eliminated to the extent of the
Company’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred.
During the year, the Company held an investment in the Cash Converters Holdings Limited Partnership, the
master franchisor in New Zealand. The Company holds a 25% equity interest (ownership and voting interest) in all
aspects of the New Zealand enterprise, including corporate stores, franchise contracts and financial services.
Annual Report 2019 | 75
Notes to the financial statements
For the year ended 30 June 2019
5.2 Controlled entities
(a) Composition of the Group
Controlled entities of Cash Converters International Limited:
Name of entity
BAK Property Pty Ltd (1)
Cash Converters (Cash Advance) Pty Ltd (1) (2)
Cash Converters Finance Corporation Limited (3)
Cash Converters (NZ) Pty Ltd
Cash Converters Personal Finance Pty Ltd (1) (2)
Cash Converters Pty Ltd (1) (2)
Cash Converters (Stores) Pty Ltd (1) (2)
Cash Converters UK Holdings PLC
Cash Converters USA, Inc (3)
Cash Converters USA Limited (3)
Finance Administrators of Australia Pty Ltd (1) (2)
Green Light Auto Group Pty Limited (1) (2)
Mon-E Pty Ltd (1) (2)
Safrock Finance Corporation (QLD) Pty Ltd (1) (2)
Safrock Finance Corporation WA Pty Ltd (1) (2)
CCPF Receivables Trust No 1
Country of
incorporation
Ownership
interest
Australia
Australia
Australia
Australia
Australia
Australia
Australia
UK
USA
Australia
Australia
Australia
Australia
Australia
Australia
Australia
2019
100%
100%
2018
100%
100%
64.33%
64.33%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
99.285%
99.285%
99.285%
99.285%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
(1) These companies are parties to the Deed of Cross Guarantee and members of the Closed Group as at
30 June 2019.
(2) These companies are members of the tax consolidated group.
(3) Non-controlling interest is not considered material in these subsidiaries.
(b) Deed of cross guarantee
Cash Converters International Limited and certain wholly-owned companies (the Closed Group), identified in
(a) above, are parties to a Deed of Cross Guarantee (the Deed). The effect of the Deed is that members of the
Closed Group guarantee to each creditor payment in full of any debt in the event of winding up of any of the
members under certain provisions of the Corporations Act 2001. ASIC Corporations Instrument 2016/785,
issued on 28 September 2016, provides relief to parties to the Deed from the Corporations Act 2001
requirements for preparation, audit and lodgement of financial reports and directors’ reports, subject to certain
conditions as set out therein.
Pursuant to the requirements of this Corporations Instrument, a summarised consolidated Statement of Profit
or Loss and Other Comprehensive Income for the year ended 30 June 2019 and consolidated Statement
of Financial Position as at 30 June 2019, comprising the members of the Closed Group after eliminating all
transactions between members are set out on the following pages.
76 | Annual Report 2019
Notes to the financial statements
For the year ended 30 June 2019
5.2 Controlled entities (continued)
Summarised statement of profit or loss and comprehensive income
Profit / (loss) before income tax
Income tax benefit / (expense)
Total comprehensive income
Summary of movements in Closed Group’s retained earnings
Retained earnings at beginning of year
AASB 9 adjustment to opening retained earnings
Transfer reserve balance
Net profit
Dividends paid or provided for
Retained earnings at end of year
Statement of financial position
Current assets
Cash and cash equivalents
Trade receivables
Loan receivables
Inventories
Prepayments
Current tax receivable
Total current assets
Non-current assets
Trade and other receivables
Loan receivables
Plant and equipment
Deferred tax assets
Goodwill
Other intangible assets
Prepayments
Investments in associates
Other financial assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Provisions
Current tax payable
Total current liabilities
2019
$’000
(2,200)
674
(1,526)
2018
$’000
28,908
(8,768)
20,140
103,916
83,022
(4,669)
574
(1,526)
-
754
20,140
-
98,295
103,916
69,227
4,318
128,374
20,364
7,165
1,897
131,541
19,675
118,962
20,673
6,261
-
231,345
297,112
22,236
46,226
6,022
12,021
106,967
24,687
3,083
6,452
30,250
257,944
18,130
32,762
8,964
5,864
106,967
27,900
1,498
5,282
30,250
237,617
489,289
534,729
10,564
87,826
6,526
-
15,719
139,351
5,709
466
104,916
161,245
Annual Report 2019 | 77
Notes to the financial statements
For the year ended 30 June 2019
5.2 Controlled entities (continued)
Non-current liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
5.3 Parent entity disclosures
2019
$’000
35,510
887
36,397
2018
$’000
18,996
817
19,813
141,313
181,058
347,976
353,671
248,714
967
98,295
347,976
248,714
1,041
103,916
353,671
The financial information of the parent entity, Cash Converters International Limited has been prepared on the
same basis as the consolidated financial report.
(a) Statement of financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
(b) Comprehensive income
(Loss) for the year
Other comprehensive income
Total comprehensive (loss)
1,904
252,565
254,469
9
-
9
254,460
2
315,385
315,387
60,466
-
60,466
254,921
248,714
248,714
884
4,862
1,177
5,030
254,460
254,921
(456)
-
(456)
-
-
-
(c) Guarantees entered into by parent entity in relation to the debts of its subsidiaries
Cross guarantees have been provided by the parent entity and its controlled entities as listed in note 5.2.
Guarantee provided under the deed of cross guarantee (1)
2,348
2,307
(1) Cash Converters International Limited has provided a cross guarantee to HSBC for a BACS facility provided
to CCUK.
78 | Annual Report 2019
Notes to the financial statements
For the year ended 30 June 2019
(6) Other items
In this section
This section includes additional information not disclosed elsewhere in the report but required to be disclosed
to comply with the Accounting Standards, the Corporations Act 2001 or the Corporations Regulations.
6.1 Contingent liabilities
In the course of its normal business the Group 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 involve
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.
On 31 July 2015, the Company was served with a statement of claim lodged with the New South Wales
Registry of the Federal Court of Australia commencing a class action claim on behalf of borrowers resident
in Queensland who took out personal loans from the Company’s subsidiaries during the period from 30 July
2009 to 30 June 2013.
The proceeding relates to the brokerage fee charged to customers. The brokerage fee system has not been
used since 30 June 2013. Cash Converters has vigorously defended the proceeding, with a trial completed
in November 2018 and the Company awaits the outcome. Given the current stage of the proceedings, the
financial impact of the class action on Cash Converters cannot be reliably and accurately determined at this
time. However, if Cash Converters does not successfully defend the proceedings, Cash Converters would
likely be required to make a significant payment by way of damages or settlement, which could have a material
adverse impact on the financial performance and position of Cash Converters.
The directors are not aware of any other material contingent liabilities in existence as at 30 June 2019 requiring
disclosure in the financial statements.
6.2 Commitments
Operating leases
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 Group exercises its option to renew. The Group 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
One to five years
Later than five years
Capital expenditure
As at 30 June 2019, capital expenditure commitments were nil (2018: nil).
Other contractual commitments
Within one year
One to five years
6.3 Related party disclosures
2019
$’000
11,223
26,136
1,267
38,626
2018
$’000
10,593
25,969
3,105
39,667
785
450
1,235
246
256
502
The immediate parent and ultimate controlling party of the Group is Cash Converters International Limited.
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.
During the year an amount of $120,000 (2018: $120,000) was paid to an entity related to the beneficial owner
of EZCORP Inc, the Company’s largest shareholder for consulting services.
During the year an amount of $441,216 was loaned to Brendan White, Chief Executive Officer of the Company.
Interest is payable to the Company on this loan at a rate of 5.65% per annum, and the loan is repayable by
December 2019. The balance of this loan, including accrued interest at 30 June 2019 was $451,065.
Other than share-based payments (as disclosed in note 6.5) and shareholdings of Key Management Personnel
(KMP) (as disclosed in the remuneration report), the parent, its subsidiaries, associates and KMP made no
other related party transactions during the reporting period.
Annual Report 2019 | 79
Notes to the financial statements
For the year ended 30 June 2019
6.4 Key management personnel disclosures
Details of directors and other members of KMP of Cash Converters International Limited during the year are:
> Mr Stuart Grimshaw (Non-Executive Chairman)
> Mr Peter Cumins (Executive Deputy Chairman)
> Mr Kevin Dundo (Non-Executive Director)
> Mr Lachlan Given (Non-Executive Director)
> Ms Andrea Waters (Non-Executive Director, resigned 14 December 2018)
> Ms Ellen Comerford (Non-Executive Director, resigned 30 September 2018)
> Mr Brendan White (Chief Executive Officer from 18 March 2019)
> Mr Sam Budiselik (Chief Operating Officer)
> Mr Ben Cox (General Manager Corporate Distribution)
> Mr Brad Edwards (General Counsel and Company Secretary)
> Mr Martyn Jenkins (Chief Financial Officer)
> Ms Myrrhine Cutten (Chief Human Resources Officer to 25 January 2019)
> Mr Nathan Carbone (Chief Risk Officer to 9 November 2018)
> Mr Mark Reid (Chief Executive Officer to 27 August 2018)
The aggregate compensation of the KMP of the Group is set out below:
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payments
Termination benefits
6.5 Share-based payments
2019
$
3,823,836
152,708
22,580
(466,658)
747,077
2018
$
5,421,732
197,321
11,435
252,571
99,218
4,279,543
5,982,277
Cash Converters rights plan
The Cash Converters rights plan, which was approved by shareholders on 18 November 2015, allows the
directors of the Company to issue performance rights which will vest into ordinary shares in the Company
upon the achievement of certain vesting conditions. As at 30 June 2019, the shareholders had approved the
issue of 15,920,500 performance rights under the Company’s previous rights plan, approved by shareholders
on 30 November 2010 and 26,862,021 performance rights under the new rights plan, to the then managing
director (now Executive Deputy Chairman) and the Company’s senior management team in various tranches
with each tranche containing 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 9,218,162 performance rights were granted in Tranches 23, 24, 25
and 26 to senior executives of the Company.
The following arrangements were in existence during the current reporting period:
Tranche
Grant date
23 Nov 2016
Number of
rights
2,286,460
Grant date fair
value
$0.20
Exercise
price
$0.00
23 Nov 2016
2,286,460
12 Dec 2016
12 Dec 2016
892,649
892,649
14 Feb 2018
1,730,644
14 Feb 2018
1,730,644
19 Dec 2018
2,765,448
19 Dec 2018
2,765,448
26 Mar 2019
1,843,633
26 Mar 2019
1,843,633
$0.31
$0.17
$0.29
$0.22
$0.33
$0.15
$0.24
$0.06
$0.19
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
17
18
19
20
21
22
23
24
25
26
80 | Annual Report 2019
Expiry date
30 Jun 2019
30 Jun 2019
30 Jun 2019
30 Jun 2019
30 Jun 2020
30 Jun 2020
30 Jun 2021
30 Jun 2021
30 Jun 2021
30 Jun 2021
Notes to the financial statements
For the year ended 30 June 2019
6.5 Share-based payments (continued)
Fair value of performance rights granted during the year
The weighted average fair value of the performance rights granted during the financial year is $0.17 (2018:
$0.28). 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.
Grant date
Option pricing model
Grant date share price
Exercise price
Expected volatility
Option life
Dividend yield
Risk-free interest rate
Tranche 23
19 Dec 2018
Tranche 24
19 Dec 2018
Tranche 25
Tranche 26
26 Mar 2019
26 Mar 2019
Monte Carlo
Binomial
Monte Carlo
Binomial
$0.24
$0.00
50%
$0.24
$0.00
50%
$0.19
$0.00
50%
$0.19
$0.00
50%
2.53 years
2.53 years
2.27 years
2.27 years
0.00%
1.95%
0.00%
1.95%
0.00%
1.52%
0.00%
1.52%
Movement in performance rights during the year
The following table illustrates the number of, and movements in, performance rights during the year. The
performance rights were issued at no charge, and the weighted average exercise price is nil. No rights were
exercisable at the end of the current year.
Outstanding at beginning of year
Granted during year
Forfeited / lapsed during year
Exercised during year
Outstanding at end of year
Share options exercised during the year
Tranche
Grant date
Year ended 30 June 2019
Year ended 30 June 2018
2019
Number
9,819,506
2018
Number
12,755,380
9,218,162
3,461,288
(8,063,898)
(6,294,996)
-
(102,166)
10,973,770
9,819,506
Number
exercised
Exercise date
Share price at
exercise date
-
12
25 Sep 2014
102,166
14 Nov 2017
$0.35
Share options forfeited / lapsed during the year
Tranche
Grant date
Year ended 30 June 2019
17
18
19
20
21
22
23
24
23 Nov 2016
23 Nov 2016
12 Dec 2016
12 Dec 2016
14 Feb 2018
14 Feb 2018
19 Dec 2018
19 Dec 2018
Number
lapsed
2,286,460
2,286,460
892,649
892,649
731,264
731,264
121,576
121,576
8,063,898
Annual Report 2019 | 81
Notes to the financial statements
For the year ended 30 June 2019
6.5 Share-based payments (continued)
Tranche
Grant date
Year ended 30 June 2018
13
14
15
16
19
20
18 Nov 2015
18 Nov 2015
28 Jan 2016
28 Jan 2016
12 Dec 2016
12 Dec 2016
Number
lapsed
1,865,000
1,865,000
1,232,224
1,232,224
50,274
50,274
6,294,996
Share options outstanding at year end
The total number of options outstanding at 30 June 2019 was 10,973,770 (2018: 9,819,506).
Tranche
Grant date
21
22
23
24
25
26
14 Feb 2018
14 Feb 2018
19 Dec 2018
19 Dec 2018
26 Mar 2019
26 Mar 2019
Number of
rights
999,380
999,380
2,643,872
2,643,872
1,843,633
1,843,633
10,973,770
Grant date fair
value
$0.22
$0.33
$0.15
$0.24
$0.06
$0.19
Exercise price
Expiry date
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
30 Jun 2020
30 Jun 2020
30 Jun 2021
30 Jun 2021
30 Jun 2021
30 Jun 2021
The weighted average remaining contractual life for the performance rights outstanding at 30 June 2019 was
1.8 years (2018: 1.4 years).
Accounting policies
The Group provides benefits to executives of the Group in the form of share-based payment transactions,
whereby KMP render services in exchange for options (equity-based transactions). These performance
rights are indeterminate rights and confer the right (following valid exercise) to the value of an ordinary Share
in the Company at the time, either settled in Shares that may be issued or acquired on-market, or settled in
the form of cash, at the discretion of the Board (a feature intended to ensure appropriate outcomes in the
case of terminations).
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).
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 vesting is conditional upon a market condition and awards do
not ultimately vest, amounts previously charged to the share-based payment reserve are reversed directly to
retained earnings, and not to profit and loss.
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
dilutive earnings per share.
82 | Annual Report 2019
Notes to the financial statements
For the year ended 30 June 2019
6.6 Auditor’s remuneration
Auditor of the parent entity
Audit / review of the financial report
Taxation services
Independent expert in relation to Enforceable Undertaking
Investigating accountant’s report
Other non-audit services
Related practice of the parent entity auditor
Audit
Taxation services
2019
$
2018
$
452,815
406,050
-
-
-
26,083
46,974
15,176
95,249
90,800
81,140
50,000
45,557
26,987
541,048
795,783
The auditor of Cash Converters International Limited is Deloitte Touche Tohmatsu.
6.7 Events subsequent to the end of the year
There has not been any matter or circumstance other than that referred to in the financial statements or notes
thereto that has arisen since the end of the financial year that has significantly affected or may significantly
affect the operations of the Group.
Annual Report 2019 | 83
Directors’ declaration
For the year ended 30 June 2019
The directors declare that:
a. in the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts
as and when they become due and payable;
b. in the directors’ opinion, the attached financial statements are in compliance with International Financial
Reporting Standards, as stated in note 1 to the financial statements;
c. in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the
Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the
financial position and performance of the Group; and
d. the directors have been given the declarations required by s295A of the Corporations Act 2001.
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 5.2 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 s295(5) of the Corporations Act 2001.
On behalf of the directors
Stuart Grimshaw
Director
Perth, Western Australia
29 August 2019
84 | Annual Report 2019
Auditor’s independence declaration
For the year ended 30 June 2019
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Tower 2, Brookfield Place
123 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
The Board of Directors
Cash Converters International Limited
Level 18
37 St Georges Terrace
Perth WA 6000
29 August 2019
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 2019, 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
Leanne Karamfiles
Partner
Chartered Accountants
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their
related entities. DTTL (also referred to as “Deloitte Global”) and each of its member firms and their affiliated entities are legally
separate and independent entities. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
Annual Report 2019 | 85
Independent auditor’s report
For the year ended 30 June 2019
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Tower 2, Brookfield Place
123 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
Independent Auditor’s Report to the members of
Cash Converters International Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Cash Converters International Limited (the “Company”) and
its subsidiaries (the “Group”), which comprises the consolidated statement of financial position as
at 30 June 2019, the consolidated statement of profit or loss and other comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the
year then ended, and notes to the financial statements, including a summary of significant
accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its
financial performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have
also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has
been given to the directors of the Company, would be in the same terms if given to the directors as
at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial report for the current period. These matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
86 | Annual Report 2019
Independent auditor’s report
For the year ended 30 June 2019
Key audit matter
How the scope of our audit responded to
the Key Audit Matter
Carrying value of non-current assets
As disclosed in Notes 3.5 and 3.6, the
carrying value of goodwill and other
intangible assets as at 30 June 2019 relating
to the personal finance and store operations
was $107.0 million and $16.2 million
respectively.
The assessment of the recoverable value of
these assets requires significant judgement
in respect of assumptions such as discount
rates, forecast loan volumes and forecast
bad debt levels.
Our procedures included, but were not limited
to:
obtaining an understanding of the key
controls management has in place in
relation to the estimate of the recoverable
amount of the personal finance and store
operations;
comparing the forecasts used in calculating
the recoverable amount to the Board
approved business plan;
evaluating the forecasts used in calculating
the recoverable amount by reference to
recent performance of the business and
assessing historical forecasting accuracy;
in conjunction with our valuation specialists
we assessed and challenged the
assumptions and methodologies used, in
particular:
the discount rate against that of
comparable companies;
forecast loan volumes for personal
loans against recent actual levels;
forecast bad debt levels for personal
loans;
forecast retail and pawn broking
revenue growth rates;
In relation to the assumptions applied
above, where possible we corroborated
market related assumptions by reference
to external data.
evaluating management’s consideration of
the impact of potential legislative changes
on future personal loan volumes;
sample testing management’s models for
mathematical accuracy;
applying sensitivities to the forecast cash
flows including:
growth in the number of loans and
the expected bad debt rates reflecting
rates historically observed;
the impact on store revenue growth
applying market benchmarks for
growth rates expected in the industry.
assessing the appropriateness of the
disclosures in the Notes to the financial
statements.
Annual Report 2019 | 87
Independent auditor’s report
For the year ended 30 June 2019
Allowance for impairment losses – loan
receivables
As disclosed in Note 3.2, the carrying value
of loan receivables as at 30 June 2019 was
$174.6 million, net of allowances for
impairment losses of $36.6 million.
The assessment of the recoverable value of
loans requires significant judgements in
determining the approach for estimating
expected credit losses.
Our procedures included, but were not limited
to:
evaluating the key controls management
have in place in relation to the estimate of
the expected credit losses, loan
originations, collections and arrears
management;
challenging the assumptions and
methodology used to determine the timing
of recognition of loss events and significant
increase in credit risk, probability of
default, loss given default and forward
looking information;
assessing the accuracy and completeness
of the historical data on a sample basis
utilised in the model;
in conjunction with our credit modelling
specialists, developing an independent
expectation of the allowance for
impairment losses based on historical data
and forward looking information; and
assessing the appropriateness of the
disclosures in the Notes to the financial
statements.
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the annual report, but does not include the financial report and our auditor’s
report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors 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 preparing the financial report, the directors are responsible for assessing the ability of the Group
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Group or to
cease operations, or has no realistic alternative but to do so.
88 | Annual Report 2019
Independent auditor’s report
For the year ended 30 June 2019
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as
intentional omissions,
involve collusion,
fraud may
misrepresentations, or the override of internal control.
forgery,
Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and
events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the financial report.
We are responsible for the direction, supervision and performance of the Group audit. We
remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Annual Report 2019 | 89
Independent auditor’s report
For the year ended 30 June 2019
90 | Annual Report 2019
Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 25 to 38 of the Directors’ Report for the year ended 30 June 2019. In our opinion, the Remuneration Report of Cash Converters International Limited, for the year ended 30 June 2019, complies with section 300A of the Corporations Act 2001. Responsibilities 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. DELOITTE TOUCHE TOHMATSU Leanne Karamfiles Partner Chartered Accountants Perth, 29 August 2019 Additional securityholder information
As at 23 September 2019
1. Number of holders of equity securities
(a) Distribution of holders of equity securities
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
(b) Voting rights
Holders
Number
689
Fully paid ordinary shares
Number
312,130
1,314
795
1,445
330
4,573
3,678,034
6,243,940
48,124,070
558,079,772
616,437,946
Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting
or by proxy has one vote on a show of hands.
(c) Less than marketable parcel of shares
The number of shareholders holding less than a marketable parcel is 1,579, given a share price of
$0.145 per share.
(d) Substantial shareholders
Ordinary shareholder
EZCORP Inc
Perpetual Limited
FMR LLC
Mitsubishi UFL Financial Group, Inc
Carol Australia Holdings Pty Limited
Commonwealth Bank of Australia
2. Twenty largest equity security holders
Number of shares
214,183,714
% of issued shares
34.75
74,577,146
43,023,094
42,147,146
41,397,986
40,385,823
Ordinary shareholder
EZCORP Inc
1.
2.
3.
4.
5.
6.
7.
8.
9.
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
JP Morgan Nominees Australia Pty Limited
Riolane Holdings Pty Ltd
Mrs Lilian Jeanette Warmbrand
National Nominees Limited
Mr Christopher John Francis
Vadina Pty Limited
10. Cash Converters Franchisees Association Inc
11. Rocsange Pty Ltd
12. Mr Frederick Benjamin Warmbrand
13.
Ian & Ruby Fok Super Pty Ltd
14. BNP Paribas Noms Pty Ltd
15. NCH Pty Ltd
16. Dorran Pty Ltd
17. Ms Choi Chu Lee
18. Redbrook Nominees Pty Ltd
19. Kamala Holdings Pty Ltd
20. Mr Kamil Umit Yesilyurt
12.10
6.98
6.84
6.72
6.55
% of issued
shares
34.75
19.93
8.25
4.86
1.03
0.79
0.65
0.49
0.46
0.42
0.39
0.38
0.32
0.28
0.28
0.24
0.24
0.24
0.24
0.23
Number of
shares
214,183,714
122,885,052
50,886,888
29,967,460
6,375,226
4,842,270
3,997,226
3,027,931
2,863,750
2,595,040
2,400,000
2,345,774
1,996,500
1,707,976
1,705,423
1,500,000
1,500,000
1,500,000
1,454,896
1,387,500
459,122,626
74.47
Annual Report 2019 | 91
Notes to the financial statements
For the year ended 30 June 2019
cashconverters.com
Annual Report 2019 | 92
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