Annual Report
2020
B
Our business
est.
1984
16
Countries
705
Stores
83 Corporate stores
622 Franchise stores
4
Business units
Personal finance
Vehicle finance
Store operations
Franchise operations
Meeting the needs
of a growing and
under-serviced
market
Diversified
product range
across lending
and retail
Unique, integrated,
multi-channel
store and online
network
Over 36 years
of operation
through various
business cycles
Consistent
track record
of solid
earnings
Supportive
financier and
a strong balance
sheet
Significant
domestic growth
opportunities
Proprietary technology delivering
high customer satisfaction and
bad debt optimisation
Corporate directory
Directors
Registered and principal office
Auditors
Mr Jason Kulas
Non-Executive Chairman
Mr Peter Cumins
Executive Deputy Chairman
Mr Kevin Dundo
Non-Executive Director
Ms Julie Elliott
Non-Executive Director
Mr Lachlan Given
Non-Executive Director
Mr Robert Hines
Non-Executive Director
Company Secretary
Mr Brad Edwards
Level 11, Citibank House
37 St Georges Terrace
Perth WA 6000
Australia
Tel: +61 8 9221 9111
www.cashconverters.com
Share registrar
Computershare Investor
Services Pty Ltd
Level 11
172 St Georges Terrace
Perth WA 6000
Australia
Tel: 1300 850 505
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
Contents
Chairman’s report
Chief Executive Officer’s report
GEM
Cashies online
Company highlights
Financial highlights
Operating and financial review
Directors’ report
Remuneration report (audited)
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 security holder information
2
4
6
7
8
11
12
20
26
38
39
40
41
42
43
91
92
93
98
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
Cash Converters International Limited | Annual Report 2020
Chairman’s
report
At the outset I wish to thank Stuart Grimshaw for his nearly six years
of service on the Board of Cash Converters, most of that as Chairman.
The importance of the customer and providing them with
the best possible and most responsible financial options to
suit their circumstances is the most obvious and important
similarity between each business.
While it was a challenging year for most businesses Cash
Converters performed well, evidenced by its financial results
for the period ended 30 June 2020. It is a credit to the
management team who delivered a solid result while having
to flexibly restructure business areas to cater for the volatility
caused by COVID-19.
The Board is optimistic about the future of Cash Converters
but remains cautious and conservative about the wider
domestic and global business environment. The ability for
businesses to remain nimble and pivot with new challenges
and opportunities as they arise remains key to future
success – an ability Cash Converters has demonstrated
in the most recent financial year.
The Board has endorsed management’s strategy led
by Chief Executive Officer, Sam Budiselik, who has
outlined a simple but effective plan to build upon the
Company’s already strong domestic operations, optimise
its current product and service offerings, and identify new
opportunities for expansion. These three strategic pillars of
Operational Excellence, Product Development and Network
Expansion will allow Cash Converters to consolidate and
grow its position as the lender and retailer of choice for its
customers now and into the future.
During the year, the Company settled the remaining class
action and looks forward to focusing on delivery of its
strategic objectives.
I look forward with confidence to Cash Converters growing
sustainably into the future to the benefit of its customers,
employees, and shareholders.
Jason Kulas
Chairman
During that time, Stuart was instrumental in providing
the Board with the leadership and commercial
judgement necessary to oversee and resolve a number
of significant challenges, including class actions,
regulatory matters and most recently, the business
impact of COVID-19. Stuart continued the Board’s
focus on rebasing the Company’s approach to sound
fundamentals around customer service, responsible
lending, and appropriate risk-based parameters, with
a view to rewarding shareholders in a sustainable
manner in the long term. We thank Stuart for his
valuable contribution.
I would also like to convey the Board’s gratitude to Kevin
Dundo, who retires from the Board after this year’s Annual
General Meeting.
Kevin served on the Board for six years and made a
valuable contribution as an Independent Non-Executive
Director, having served as Chair of the Audit and Risk
Committee and as a member of the Remuneration and
Nomination Committee.
As nominee Director of the Company’s largest shareholder,
EZCORP, I have the privilege of leading the Board
and providing Cash Converters with insights from an
international perspective. While only recently stepping
into the Chief Executive role at EZCORP and becoming
Non-Executive Chairman of Cash Converters, I note there
are clear similarities between aspects of each business.
Chairman’s report 3
‘‘
These three strategic pillars of
Operational Excellence, Product
Development and Network Expansion
will allow Cash Converters to consolidate
and grow its position as the lender
and retailer of choice for its customers
now and into the future.”
Jason Kulas, Chairman
4
Cash Converters International Limited | Annual Report 2020
Chief
Executive
Officer’s report
My appointment as Chief Executive Officer of Cash Converters in
February this year coincided with the commencement of restrictions
to combat the spread of COVID-19 in Australia. Like so many other
companies, we were challenged as these restrictions rightly expanded
across the nation.
Had Cash Converters been less established, well-
funded and supportive of its Customers we could have
been more severely impacted. We continued trading
through all corporate stores across Australia during
this period while maintaining exemplary hygiene and
distancing measures. Continuity across the broader
business was enabled through the strength of our
digital assets, facilitating record online retail sales
among other achievements.
We did not require the support of Job Keeper and true
to the spirit of the Company I am proud say that we were
there for our Customers when they needed us most.
Although our underlying result for the year ended
30 June 2020 (FY 2020) was strong, the previous six
months have been arguably the most challenging period
in Cash Converters’ 36-year history. It is during these
periods when team capability is truly tested. Observing
the way the team came together and the effort of
our front-line colleagues to ensure a COVID-19-free
environment in stores makes me so proud to work
for Cash Converters. It is a privilege to lead such a
passionate group of individuals.
Although it occurred after FY 2020 it would be remiss
of me not to acknowledge the departure of our previous
chairman Stuart Grimshaw. Stuart has – and continues
to be – a valuable source of guidance and counsel to the
Company. His ability to consider both the strategic and
tactical implications of complex issues while remaining
focused on what matters most – the Customer – will have
a lasting impact upon me and Cash Converters.
At the same time, we are excited to welcome our new
Chairman Jason Kulas and I look forward to leveraging
Jason’s retail and consumer finance experience.
Operational Performance
Our Customer-centricity enabled Cash Converters to
report a pleasing set of full-year results. While our
revenue ($279.0 million) was down 0.9% on the previous
corresponding period, on an underlying basis the Company
outperformed across many of our key metrics.
Adjusted for the final class action settlement, Cash
Converters reported an Operating NPAT of $19.6 million
and Operating EBITDA of $62.1 million, up 63.2% and
51.5% respectively on the previous corresponding
period. These headline results were driven by earnings
improvements across each of the Company’s segments
– most notably a reduction in Net Bad Debt Expense
as a proportion of personal finance revenue and a
year-on-year increase in retail profit margin. While we
experienced a temporary reduction in lending demand,
our stores demonstrated counter-cyclical retail behaviour
complemented by particularly strong online sales of home
entertainment and technology items. This strong in-store
retail turnover was facilitated, in part, by all Australian
corporate Cash Converters stores remaining open
throughout the financial year ensuring that we maintained
a vital presence within the community in their time of
greatest need. Our stores demonstrated the strategic
importance of our physical network complementing our
digital assets, and we remain committed to expanding the
physical store network as a result.
Chief Executive Officer’s report 5
‘‘
With the necessary leadership team now in place,
Cash Converters is confident in its ability to deliver
upon and beyond its strategic objectives.”
Our loan books, the engine room of the Company, finished
a combined 24.2% below 30 June 2019 levels on a gross
basis – as Cash Converters took prudent steps to tighten its
credit criteria in the face of a rapidly declining local economy
in March of this calendar year. This was coupled with the
equally sensible decision by many of our customers to use
money received through Government Stimulus or early
access of Superannuation to repay debt. Loan settlement
rates rose in the last quarter of FY 2020 and remain above
average but have since reversed in recent months as some
sense of ‘normality’ returns. The maturation of our vehicle
finance loan book continued despite significantly impacted
outgoings, resulting in increased interest revenue which
contributed positively to this segments’ EBITDA.
Underpinning the execution of our strategy is our ability
to attract and retain team members who share this vision
and have the requisite skills to bring it to fruition. With the
necessary leadership team now in place, Cash Converters
is confident in its ability to deliver, meet and exceed its
strategic objectives.
Outlook
We enter the new financial year with a strategy for growth
that will see us continue to innovate, win new customers,
and support existing customers both in-store and online.
Our unique, integrated, multi-channel store and online
network and strong balance sheet will allow us to meet
whatever challenges await us.
Our current trajectory and economic environment indicate
that reduced gross loan book balances will likely remain in
FY 2021, but we anticipate a full recovery towards the end
of next calendar year. The first half of the current financial
year (H1 FY 2021) is forecast to be challenging as the
reduction in lending volumes from the previous quarter
manifests in our earnings. This impact is viewed by the
Company as temporary and the expectation is that by
H2 FY 2021 borrowing behaviours will have returned to
what would historically be considered normal. While we
do expect Australia to recover in the short to medium term,
we have added an appropriate economic risk reserve to
our allowance for impairment losses. The overall provision
as a percentage of the gross loan book has increased to
19.0% from 17.5% the year prior.
Strategy
The advantage of a diversified in-store and online
offering has been demonstrated, particularly in the
current economic climate, and a key pillar of Cash
Converters’ strategy over the following 12 months
is to consolidate its position domestically as a lender
and retailer of choice. In defining this strategy, the
Executive Leadership Team were very clear about
what is ‘core’ and ‘non-core’ to the ongoing success
of Cash Converters. This decision will manifest itself
in a variety of ways, including a renewed focus on
operational excellence across all aspects of the
business, new ways of meeting our customers’
needs, and the expansion of our store network
in Australia.
As mentioned above, growing our corporate store network
by acquiring franchise outlets and developing new sites,
particularly on the east coast of Australia where we remain
underrepresented, is a key strategic priority. Work is already
underway to deliver on this outcome.
With a renewed securitisation facility running to December
2022 and adequate available cash, we are well-positioned
to benefit from the inevitable economic recovery ahead.
Sam Budiselik
Chief Executive Officer
$62.1m
Normalised
Operating
EBITDA
51.5%
6
Cash Converters International Limited | Annual Report 2020
GEM
‘‘
Application process was extremely quick
and repayments are affordable. The ability
to apply for smaller loans through the
app, especially if you’ve already had a
loan before, is great as not everyone has
the ability to be able to go in store.”
Online personal finance customer
Our Voice of Customer program (GEM) provides us with significant
insights into areas of opportunity to improve the experience with our
customers online and in-store.
The program continues to evolve, with the introduction of new surveys and functionality to support the extraction of
data and insights that are shared with relevant business units to assist in pinpointing the opportunity and have a direct
impact on the customer. The goal is to create seamless experiences for our customers no matter which touchpoint
they are interacting with us.
62.0
58.0
72.4
84.0
Net promoter score
Net sentiment score
%
Promoters
%
Positive customer feedback
• Customer experience results for FY 2020 finished
higher than FY 2019 despite the pandemic
• The number of people passive to the Cash Converters
brand fell 0.9%, and promoters rose by 0.7%
• 84% of our customer feedback has positive sentiment
• Of all surveys completed, 97% had positive sentiments
regarding our people and their service.
Additionally, through GEM feedback, we were able
to improve customer experience on our Webshop by
prioritising some software functionality upgrades.
This reduced negative sentiment regarding the website
from a high of 83.8% in July 2019 to a low of 57.8% in
June 2020.
Cashies Online 7
‘‘
How you select your staff; wouldn’t
change a thing. During the past few
months I have been purchasing items
online from stores all over Australia.
All of them have been fantastic –
very helpful. Kind and friendly staff,
even though I didn’t go into the store.
Their phone manner was perfect and
I got the sense of the listed points.”
NSW customer
Cashies
Online
The growth of Cashies Online
COVID-19 had a significant impact on the growth of Webshop in FY 2020, in terms of transaction volume, revenue
and new customer numbers. This growth was attributable, in part, to a new marketing strategy using Google Smart
Shopping which allows customers to compare and shop for advertised products. This strategy, combined with
increasing demand contributed to a 113% increase in new Webshop customers from March (1,666) to April (3,541).
Online sales – franchise and corporate
March
April
May
June
2020
2019 increase
$925,613
$1,559,239
$1,427,936
$1,144,194
+50%
+142%
+72%
+62%
113%
85.4%
In December, the new Wishlist was
launched contributing to an uplift
in revenue and NPS by 1.6 points
from 54.7 in November to 56.3 in
December. Upcoming new features
planned for Webshop include Free
Postage and Saved Search.
increase in New Webshop Customers
between March and April
increase in New to Business Customers
on previous corresponding period
$11.5m
FY 2020 total
Webshop
sales
147%
8
Cash Converters International Limited | Annual Report 2020
FY 2020
Company highlights
Significant growth 42.6%
in online corporate retail sales
Online lending increased to
of total principal advanced
54.9%
$150m
Securitisation Facility
renewed until December 2022
$0.289
Net tangible assets per share
All Australian corporate stores
remained open (despite COVID-19)
$106.5m
Cash (and cash equivalents)
31.4%
Company highlights
9
‘‘
Not only were all the staff we
dealt with friendly, courteous and
professional in their standards
of business, but were also very fair
in their valuation of the item we
showed to them, and ultimately
exchanged for cash.”
QLD customer
10
Cash Converters International Limited | Annual Report 2020
‘‘
Friendly and professional staff
are always helpful and
knowledgeable about the products
and services. My experience with
Cash Converters has always
been of excellent quality.”
NSW customer
Financial highlights 11
FY 2020
Financial highlights
$19.6m
63.2%
Normalised Group Operating^ NPAT
$62.1m
51.5%
Normalised Group Operating^ EBITDA
$49.2m
Personal finance EBITDA
27.6%
$2.9m
Vehicle finance EBITDA
210.7%
$25.7m
Corporate stores EBITDA
85.3%
SACC net bad debt decreased to
25.1% of revenue from 39.1%
MACC net bad debt decreased to
28.6% of revenue from 39.3%
^ The operating results are presented net of the significant expense items directly associated with the settlement of class action
litigation claims, to aid the comparability and usefulness of the financial information reflecting the underlying performance of
the business. This information should be considered in addition to, but not instead of or superior to, the Company’s financial
statements prepared in accordance with IFRS. The Operating results presented may be determined or calculated differently by
other companies, limiting the usefulness of those measures for external comparative purposes.
All comparisons are against previous corresponding period, unless otherwise stated
12
Cash Converters International Limited | Annual Report 2020
Operating and
financial review
Cash Converters International Limited (“Cash Converters” or “the Company”) and entities
controlled by the Company and its subsidiaries (“the Group”) is diverse, generating revenues
from franchising, consumer retail store operations, personal finance and vehicle finance and
is supported by a corporate head office in Perth, Western Australia. The Company operates
in Australia and the United Kingdom and has an equity interest of 25% in Cash Converters
New Zealand. There is a franchise presence in a further 13 countries around the world.
Impact of COVID-19
The Group has continued to focus on the health and
wellbeing of its employees and customers. The ability to
service customers while doing so and remain profitable
demonstrates resilience and an ability to operate
effectively during periods of significant uncertainty and
change. This operating and financial review reflects
what has been an incredibly difficult operating period
and details how Cash Converters has rapidly adapted
to ensure that customers are supported in their time
of greatest need. The outcomes experienced include
the impacts of government fiscal support and stimulus
measures.
The impact of COVID-19 on operations was experienced
from mid-March when the closure of non-essential
businesses and the implementation of stay-at-home
requirements began.
All Australian Corporate stores remained open for
business throughout the financial year while observing
the necessary hygiene and social distancing measures.
This outcome was possible through the tremendous
care and effort shown by every member of the team.
However, as an international franchisor the impact of
COVID-19 was felt differently across the many regions
in which the Group operates. Most significantly, all
franchise stores in the United Kingdom were closed by
Government mandate between 23 March 2020 to 1 June
2020. The Group’s equity accounted associate in New
Zealand was similarly impacted by lockdown restrictions
starting on 25 March 2020, returning progressively to
the lowest level of restrictions by 8 June 2020.
Revenue from these segments were impacted as a
result, but the quantum is immaterial relative to the
Group’s earnings profile.
It is worth noting that Cash Converters was not eligible
for and made no direct claims under the JobKeeper
Payment scheme allowances. Economic support
packages provided to affected workers, businesses
and the broader community had a noticeable impact
on business.
As mentioned in its 1 July 2020 Business Update to the
market, Cash Converters has experienced a significant
decline in personal and vehicle loan outgoings and
associated loan book balances since mid-March 2020
due to changes in customer demand and the Company’s
own prudent approach to eligibility refinement.
These declines continued into June 2020, and while
still below pre-COVID forecasts the Company has
reported an increase in lending activity in the first months
of the new financial year (FY 2021). The associated
reduction in revenue from this business line was partially
offset by a counter-cyclical increase in retail sales during
the same period.
Despite the progress made domestically and abroad
towards limiting the spread of COVID-19, significant
uncertainty remains. There is prevailing uncertainty with
respect to forward-looking statements and there has
been a focus on presenting appropriate disclosure with
respect to business impacts, risks and uncertainties and
key assumptions.
Operating and financial review 13
‘‘
The staff were polite and friendly,
they explained everything to me
and made everything so easy, and
were extremely kind and caring.
Honestly I’d change nothing, they
were the most polite, considerate
young people I had the pleasure
of interacting with.”
VIC customer
Key financial performance highlights
Total revenue
(Loss) / profit for the year
EBIT 2
EBITDA 2
As reported
Operating 1
2020
$’000
279,008
(10,491)
(693)
19,168
2019
$’000
2020
$’000
2019
$’000
281,565
279,008
281,565
(1,692)
8,232
21,454
19,573
42,255
62,116
11,993
27,783
41,005
1 The operating results are presented net of the significant expense items outlined below that were directly associated with the
settlement of class action litigation claims, to aid the comparability and usefulness of the financial information reflecting the underlying
performance of the business. This information should be considered in addition to, but not instead of or superior to, the Group’s
financial statements prepared in accordance with IFRS. The operating results presented may be determined or calculated differently
by other companies, limiting the usefulness of those measures for external comparative purposes.
2 The Company reports EBIT calculated as earnings before interest expense and tax and EBITDA calculated as EBIT before
depreciation and amortisation. EBIT and EBITDA are non-IFRS measures and are alternative performance measures reported in
addition to but not as a substitute for the performance measures reported in accordance with IFRS. These measures focus directly
on operating earnings and enhance comparability between periods. A reconciliation of the impact to EBITDA of first time adoption of
AASB 16 Leases is included in this report.
Cash Converters reported strong in-store and online retail sales. Conversely, customers’ need for short term credit
was temporarily subdued interrupting what had been an above forecast first nine months to the financial year for this
business line.
(Loss) / profit for the year, EBIT and EBITDA are presented in the table above as reported and on an operating basis
to illustrate the impact of the significant expense inclusive of legal costs incurred on class action litigation claims.
In October 2019 the Group agreed to a settlement payment of $42.500 million ($32.500 million payable upfront and
$10.000 million payable by September 2020) on the sole remaining Lynch class action lawsuit. This action had been
previously lodged on behalf of borrowers residing in Queensland who took out personal loans between July 2009 and
June 2013.
The settlement received Federal Court approval on 24 March 2020 and upon payment of the balance $10.000 million
by 30 September 2020, the matter will be finalised.
The prior year comparative is presented to illustrate the settlement inclusive of legal costs of the separate McKenzie
class action in November 2018.
These costs are reported in the Head Office segment.
14
Cash Converters International Limited | Annual Report 2020
EBITDA is reconciled and presented below on what is considered a comparable basis in this transition year of
the new lease standard:
EBITDA
Class Action litigation claim and costs
EBITDA – operating basis
Rental lease payments
EBITDA – comparable basis
2020
$’000
19,168
42,948
62,116
(11,055)
51,061
The Group has applied AASB 16 Leases retrospectively from 1 July 2019 with no restatement of comparatives.
FY 2020 reported EBITDA no longer includes an expense amounting to $11.055 million for rental lease payments
made under leases that would have previously been classified as operating leases.
Consolidated revenues and results by significant segment as reported are set out below:
Segment revenues
Segment EBITDA 1
Personal finance
Vehicle financing
Store operations
Franchise operations
Totals before head office costs
Head office
Totals after head office costs
Depreciation, amortisation and impairment
Finance costs
(Loss) before income tax
Income tax benefit
(Loss) for the year
2020
$’000
115,395
20,961
125,449
16,874
278,679
329
279,008
2019
$’000
125,136
18,160
118,216
19,124
280,636
929
281,565
2020
$’000
49,171
2,882
25,749
10,118
87,920
(68,752)
19,168
(19,861)
(12,607)
(13,300)
2,809
(10,491)
1 The Company reports EBIT calculated as earnings before interest expense and tax and EBITDA calculated as EBIT before
depreciation and amortisation. EBIT and EBITDA are non-IFRS measures and are alternative performance measures reported
in addition to but not as a substitute for the performance measures reported in accordance with IFRS. These measures focus
directly on operating earnings and enhance comparability between periods.
2019
$’000
21,454
19,551
41,005
-
41,005
2019
$’000
38,524
928
13,897
11,420
64,769
(43,315)
21,454
(13,222)
(10,598)
(2,366)
674
(1,692)
Operating and financial review 15
EBITDA on an operating basis and a comparable basis is set out below:
Personal finance
Vehicle financing
Store operations
Franchise operations
Totals before head office costs
Head office
Total EBITDA 1
Operating basis 2
Comparable basis 3
2020
$’000
49,171
2,882
25,749
10,118
87,920
(25,804)
62,116
2019
$’000
38,524
928
13,897
11,420
64,769
(23,764)
41,005
2020
$’000
48,729
2,882
16,446
9,686
77,743
(26,7682)
51,061
2019
$’000
38,524
928
13,897
11,420
64,769
(23,764)
41,005
1 The Company reports EBIT calculated as earnings before interest expense and tax and EBITDA calculated as EBIT before depreciation
and amortisation. EBIT and EBITDA are non-IFRS measures and are alternative performance measures reported in addition to but not as
a substitute for the performance measures reported in accordance with IFRS. These measures focus directly on operating earnings and
enhance comparability between periods.
2 The operating results are presented net of the significant expense items outlined above that were directly associated with the settlement
of class action litigation claims, to aid the comparability and usefulness of the financial information reflecting the underlying performance
of the business. This information should be considered in addition to, but not instead of or superior to, the Group’s financial statements
prepared in accordance with IFRS. The operating results presented may be determined or calculated differently by other companies,
limiting the usefulness of those measures for external comparative purposes.
3 The Company presents here EBITDA calculated on a basis comparable in FY 2020 to FY 2019 with rental lease payments of
$11.055 million deducted as it would have been without the implementation of AASB 16 Leases.
The most significant impact to revenue and earnings has been in the last quarter of the financial year and in personal and
vehicle finance as demand reduced from customers that benefited from government stimulus, and eligibility was impacted
including for customers who experienced job losses. The Group experienced early settlements on all lending products and
a decline in demand and eligibility impacted origination with a year on year reduction reported in principal advanced.
The decline in vehicle finance outgoings during the last quarter of the year was significant with earlier than reforecast loan
settlements due to customer refinancing patterns and tightened lending criteria. For illustration purposes in the tables
below pawnbroking and Cash Advance services are included in personal finance.
16
Cash Converters International Limited | Annual Report 2020
Principal advanced
Personal finance
Vehicle finance
Total
2020
$’000
230,948
18,839
249,787
2019
$’000
282,567
38,648
321,215
Variance
-18.3%
-51.3%
-22.2%
Based on the current trajectory and economic environment the year-on-year reduction in gross loan book balances will
likely remain in FY 2021 while the Company invests heavily in replenishing these books. This is expected to have a relatively
negative effect on revenue and earnings. The first half of the current financial year (H1 FY 2021) is forecast to be challenging
as the reduction in lending volume experienced in the previous quarter manifests. However, this impact is viewed by the
Company as temporary and the expectation is that by H2 FY 2021 borrowing behaviours will have returned to what would
historically be considered normal.
Gross loan books
Personal finance
Vehicle finance
Total
2020
$’000
101,690
58,307
159,997
2019
$’000
148,307
62,881
211,188
Variance
-31.4%
-7.3%
-24.2%
Store operations demonstrated counter-cyclical retail behaviour and particularly strong online sales of home entertainment
and technology items – the assumption being that many households were spending increasing amounts of time at home
or working remotely. Store sales trended lower in the final months of FY 2020 as inventory levels decreased, although this
has remained above the monthly average experienced in prior years. Retail gross profit margins have held strong through
the year.
The New Zealand operations responded during the year to changes in consumer credit legislation with the introduction of
an alternative complying personal loan product. The legislative change and the impact of COVID-19 necessitated a review
by the Company of the carrying value of the 25% equity investment in this operation. The application of judgement was
required due to the absence of deep historical evidence on product performance and the uncertainties associated with
COVID-19 impacts. Included in the reported value is an impairment loss provision of $2.300 million.
Key financial position highlights
Cash and cash equivalents
Net loan receivables
Trade and other receivables
Inventories
Intangible assets
Other assets
Total assets
Borrowings
Other liabilities
Total liabilities
Total equity
Operating and financial review 17
2020
$’000
106,548
129,616
11,630
15,221
128,338
88,481
479,834
87,792
85,671
173,463
306,371
2019
$’000
81,101
174,600
14,087
20,370
133,891
40,191
464,240
123,336
24,052
147,388
316,852
Variance
31.4%
-25.8%
-17.4%
-25.3%
-4.1%
120.2%
3.4%
-28.8%
256.2%
17.7%
-3.3%
Gearing (net debt / equity)
-6.1%
13.3%
The Group closed the year with a strong balance sheet.
Operational cash flow generated was $70.111 million
(2019: $31.788 million used) with net repayment of
borrowings of $43.560 million (2019: $35.000 million).
After cash flows used in investing activities of $1.776
million (2019: $7.772 million provided) the Company
generated a net cash surplus of $24.775 million (2019:
$59.066 million net cash outflow). Operational cash flow
generated in the current year includes the settlements
on loan books and decreased outgoings experienced,
particularly in the last quarter.
The Group determined to fund the class action settlement
of $42.500 million (and the associated legal costs) with
cash on hand generated from operations. Of this amount,
$32.500 million was paid during the year with the final
settlement payment due and payable on 30 September
2020 and provided for in other liabilities.
Cash and cash equivalents include restricted cash of
$4.839 million (2019: $6.592 million) to operate the Group’s
securitisation facility with Fortress Finance and $6.270
million (2019: $5.730 million) on deposit as security for
banking facilities. The Group closed the year with undrawn
securitisation facility funding lines of $60.750 million.
Net loan receivables reflect reduced demand experienced
during the last quarter of the year and the Group has
responded in the assessment of expected credit loss
provisioning to the potential impact of COVID-19. In addition
to the usual considerations applied, the assessment has
required the application of judgement in anticipation of
relatively high levels of unemployment persisting. A suitable
economic risk reserve assessed within the reasonable range
of possible outcomes based on this judgement has
been incorporated into the impairment loss provision.
The overall provision as a percentage of the gross loan
book has increased from the prior year at 17.5% to 19.0%.
Inventories reduced year-on-year due to above forecast
retail demand and includes an appropriate assessment of
obsolescence provision.
Consistent with previous financial years, the carrying
value of intangible assets has been assessed for and
recorded net of any required impairment charge. Included
in the assessment of the carrying value of goodwill is the
application of judgement with respect the likelihood of
scope and form as well as timing of any future possible
regulatory changes on which there remains uncertainty,
as well as the potential impact of COVID-19.
Included in other assets is a right-of-use asset generated
with the introduction of AASB 16 Leases, with recognition
of a corresponding lease liability, and the carrying value of
the investment in the New Zealand operation inclusive of
the provision impairment.
On 30 June 2020, the Group finalised an agreement
with Fortress Investment Group (“Fortress”) to extend
the term of the securitisation funding facility through to
18 December 2022. The reduction in balance year on
year reflects the impact of reduced lending activity during
the financial year, and the gearing ratio presenting as a
negative ratio due to the available cash exceeding the
borrowings drawn down amount.
18
Cash Converters International Limited | Annual Report 2020
Operating and financial review 19
financial system. The Company views these commitments
as an area of continuous improvement and continues to
strengthen its risk management and compliance capabilities
while engaging transparently with regulators (ASIC and
AUSTRAC).
Outside of these exists the accepted risks of regulatory
change, poorly executed strategy, failure to respond
appropriately to changes in technology and the threat
posed through competitor behaviours, all of which are
a source of constant consideration and review by the
Company’s management team and Board of Directors.
Outlook
Revenue and earnings for the first half of FY 2021 are
expected to be significantly lower than previous periods as
the impact of COVID-19 manifests itself more fully. Since
the end of the financial year, Victoria has entered “Stage 4”
pandemic restrictions impacting 19 metropolitan corporate
stores and 9 franchise stores with effect from Thursday
6 August 2020 for a minimum six-week period. Online retail,
pawnbroking and personal finance services have been
maintained and embraced by affected customers.
The extent of the COVID-19 impact is dependent upon
the longevity and severity of the pandemic, the pace
of business re-openings and rebound, the impact of
government responses and the degree to which customer
behaviours return to historical norms. The full impacts of
the COVID-19 pandemic have yet to result in anticipated
increases in loan repayment delinquencies due to the
government stimulus package supporting consumers.
Cash Converters’ proven ability to respond effectively to
these changes provides a competitive advantage.
The Company is of the view that it is well positioned to
respond to the eventual increase in demand for personal
and vehicle financing.
The advantage of a diversified in-store and online customer
offering has been demonstrated, particularly in the current
economic climate, and a key pillar of Cash Converters’
strategy over the following 12 months is to consolidate its
position domestically as a lender and retailer of choice.
The strength of the balance sheet provides the Company
with greater resources to better serve its customers at
a time when they need it most. To deliver on its strategy
the Company is investing in its critical capabilities of risk
and compliance, technological innovation and product
development. These capabilities will be deployed to
capitalise upon any near-term opportunities with the
intention of generating long-term value for customers
and shareholders.
Culture and people
The values and culture of Cash Converters are the
foundation of its success and the reason it has continued
to operate for over 36 years. Its people are passionate and
proud to help others. With care and respect, their focus is
to provide customers with solutions through a reliable and
convenient supply of retail and personal finance products.
The Net Promotor Score (NPS) system is used to measure
customer engagement. NPS is measured on a customer’s
willingness to recommend Cash Converters to a friend or
family member. Customers are surveyed at multiple stages
of the journey and this data is referenced daily to improve
service and celebrate team members.
With a positive NPS score of 62 (2019: 61) Cash Converters
demonstrates the significant value it adds to its customers
and the wider community.
Business Risk Assessment
Like all businesses, Cash Converters faces uncertainty and
the ability to understand, manage and mitigate risk provides
a competitive advantage.
For example, as a provider of personal finance products
there is an inherent risk that customers may not meet
their expected repayments as they manage their financial
commitments. Cash Converters’ success in working with
these customers over time is based on many factors that
mitigate compliance risk and risk of default with those
who may subsequently experience financial difficulty.
These include:
• Treating customers with empathy, care, and respect
• A high investment in engagement methods to provide
customers with freedom of choice
• Efficient and thorough understanding and assessment
of customer eligibility prior to origination
• A value-driven culture where a premium is placed on
customer service and unlocking possibilities together.
While responsible lending policies and a customer-first
approach aims to minimise risk, credit risk is influenced
by factors outside the control of Cash Converters such
as unemployment, relative income growth, consumer
confidence and interest rates. The risk of default is ever-
present. Cash Converters often has the advantage in
offering credit products to customers that it has served over
many years and knows well, affording a unique opportunity
to provide a high level of service.
The Company’s ability to accurately assess value, purchase
and sell quality consumer goods at appropriate prices is
influenced by many factors. Again, while acknowledging
these risks, the depth of skill and experience in this
specialist area is a source of competitive advantage for
Cash Converters.
Cash Converters welcomes the industry emphasis towards
non-financial risk, including conduct and culture as well as
detecting, deterring and disrupting criminal abuse of the
20
Cash Converters International Limited | Annual Report 2020
Directors’
report
For the year ended 30 June 2020
The Directors of Cash Converters International Limited submit the following report of the Company
for the financial year ended 30 June 2020. 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:
Appointed Director
1 November 2014
Appointed Chairman
10 September 2015
Mr Stuart Grimshaw
Non-Executive Chairman
During the financial year Mr Grimshaw held the role of 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.
Directors’ report 21
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 three years Mr Grimshaw has held a directorship with the following listed
companies:
Company
EZCORP Inc
Commenced
3 November 2014
Ceased
6 July 2020
Mr Peter Cumins
Executive Deputy Chairman
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 three years Mr Cumins has held a directorship with the following listed
company:
Company
EZCORP Inc
Commenced
28 July 2014
Ceased
9 April 2019
Mr Kevin Dundo
Non-Executive Director
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 Imdex Limited (ASX: IMD) and Avenira
Limited (ASX: AEV) and Non-Executive Chairman of Red 5 Limited (ASX: RED).
Mr Dundo is a member of the Company’s Audit and Risk Committee and Remuneration
and Nomination Committee, and from 14 December 2018 to 9 June 2020 was the Chair
of the Audit and Risk Committee.
Over the past three years Mr Dundo has held directorships with the following listed
companies:
Company
Imdex Limited
Red 5 Limited
Avenira Limited
Commenced
14 January 2004
29 March 2010
22 October 2019
Ceased
-
-
-
Appointed Director
April 1995
Appointed Executive
Deputy Chairman
23 January 2017
Appointed Director
20 February 2015
22
Cash Converters International Limited | Annual Report 2020
Appointed Director
14 April 2020
Appointed Director
22 August 2014
Ms Julie Elliott
Non-Executive Director
Ms Elliott is currently a Company Director and Consultant and has over 30 years’
experience in both executive and director roles across banking, financial services and
government. Her previous positions include Chief Executive Officer at Bank of Sydney,
Chair of State Trustees Limited and senior management roles with major banks. In addition
to various advisory and consulting roles, Ms Elliott is currently a Director and Chair of the
Governance and Remuneration Committee at P&N Bank, and a Director of Asia Pacific
Capital Ltd and Australian Invoice Finance Limited. She is a Fellow and Graduate of the
Australian Institute of Company Directors and a Fellow of Chartered Accountants Australia
& New Zealand and FINSIA.
Ms Elliott is the Chair of the Company’s Remuneration and Nomination Committee, and
a member of the Audit and Risk Committee.
Over the past three years Ms Elliott has not held any directorships with other listed
companies.
Mr Lachlan Given
Non-Executive Director
Until 18 September 2019 Mr Given held the role of Executive Chairman of EZCORP Inc and
is now Head of M&A and Funding. He is 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.
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 three years Mr Given has held directorships with the following listed
companies:
Company
Commenced
Senetas Corporation Limited
20 March 2013
Ceased
-
EZCORP Inc
18 July 2014
18 September 2019
Appointed Director
14 April 2020
Directors’ report 23
Mr Robert Hines
Non-Executive Director
Mr Hines is a qualified accountant and has over 30 years’ experience across the energy,
agriculture and banking and finance sectors with senior executive roles focusing on retail,
operations and finance. Prior to commencing his current role as Chief Operating Officer
at Queensland Sugar Ltd, Mr Hines held senior executive roles including Chief Financial
Officer at each of Bank of Queensland (ASX: BOQ), Suncorp (ASX: SUN) and QIC.
Mr Hines is a Fellow of the Australian Institute of Company Directors, Chartered
Accountants Australia & New Zealand and CPA Australia and a Senior Fellow of FINSIA.
Mr Hines is the Chair of the Company’s Audit and Risk Committee, and a member of the
Remuneration and Nomination Committee.
Over the past three years Mr Hines has not held any directorships with other listed
companies.
Directors’ shareholdings
The following table sets out each director’s relevant interest in shares and options of
Cash Converters International Limited as at the date of this report:
Fully paid
ordinary shares
Number
-
8,175,694
-
-
-
422,000
Share options
Number
-
-
-
-
-
-
Directors
Mr S Grimshaw
Mr P Cumins
Mr K Dundo
Ms J Elliott
Mr L Given
Mr R Hines
Mr Brad Edwards
Company Secretary
With a background in law, Mr Edwards has extensive private practice and corporate
experience, most notably with the Bank of Queensland Limited (ASX: BOQ) for 15 years,
where he held the roles of Company Secretary and Group General Counsel. His career
encompasses banking and financial services, retail franchising, regulatory matters, dispute
resolution and class action litigation, capital markets and mergers and acquisitions.
Appointed
30 June 2017
24
Cash Converters International Limited | Annual Report 2020
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 2020 was $10.491 million
(2019: $1.692 million) after an income tax benefit of $2.809 million (2019: $674 thousand).
A review of the Group’s operations and financial performance has been provided on pages 12 to 19.
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
Victoria entered Stage 4 pandemic restrictions with effect from Thursday 6 August 2020 for a minimum six-week period,
impacting 19 metropolitan corporate stores and 9 franchise stores. The ongoing impact is not able to be estimated by the
directors at this point in time.
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 27 August 2020 the Company resolved that there would be no final dividend in respect of the financial year ended
30 June 2020.
No final dividend was paid in respect of the financial year ended 30 June 2019.
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
Number of
shares under
option
Class of
shares
Exercise price
of option
Cash Converters International Limited
3,909,058
Ordinary
Cash Converters International Limited
10,201,088
Ordinary
Nil
Nil
Vesting
determination
date
30 Jun 2021
30 Jun 2022
The performance rights above are in substance share options with an exercise price of nil, which vest and may potentially
be exercised into ordinary shares once certain performance / vesting conditions are met.
The holders of these performance rights do not have the right, by virtue of the performance right, to participate in any share
or other interest issue other than bonus share issues 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.
Directors’ report 25
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
Mr S Grimshaw
Mr P Cumins
Mr K Dundo
Ms J Elliott
Mr L Given
Mr R Hines
Board of
Directors
Audit and Risk
Committee
Remuneration and
Nomination Committee
Held
Attended
Held
Attended
Held
Attended
8
8
8
3
8
3
8
8
8
3
8
3
5
5*
5
2
5*
2
5
5*
5
2
5*
2
4
4*
4
1
4*
1
4
4*
4
1
4*
1
* 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 92.
26
Cash Converters International Limited | Annual Report 2020
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 2020 including STI and LTI assessment
5. Changes in KMP-held equity
6. Non-Executive Director fee policy rates for FY 2020 and FY 2021 and fee limit
7. Remuneration records for FY 2020 (statutory disclosures)
8. Employment terms for KMP
9. Loans to KMP
10. Other remuneration-related matters
1 Persons addressed and scope of the Remuneration Report
This Remuneration Report forms part of the Directors’ Report for the year ended 30 June 2020 and has been
prepared in accordance with the Corporations Act, applicable regulations and the Company’s policies regarding
key management personnel (KMP) remuneration governance.
KMP includes all directors and executives 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
Position
Mr Stuart Grimshaw
Chairman and non-executive director
Audit and Risk Committee member
Remuneration and Nomination Committee member
Chair of Remuneration and Nomination Committee (to 9 June 2020)
Mr Kevin Dundo
Audit and Risk Committee member
Chair of Audit and Risk Committee (to 9 June 2020)
Remuneration and Nomination Committee member
Ms Julie Elliott
Non-Executive Director (from 14 April 2020)
Mr Lachlan Given
Mr Robert Hines
Audit and Risk Committee member (from 14 April 2020)
Remuneration and Nomination Committee member (from 14 April 2020)
Chair of Remuneration and Nomination Committee (from 9 June 2020)
Non-Executive Director
Non-Executive Director (from 14 April 2020)
Audit and Risk Committee member (from 14 April 2020)
Chair of Audit and Risk Committee (from 9 June 2020)
Remuneration and Nomination Committee member (from 14 April 2020)
Executive Director
Mr Peter Cumins
Executive Deputy Chairman
Directors’ report
27
Remuneration report (continued)
Senior Executives classified as KMP
Mr Sam Budiselik
Chief Executive Officer (from 26 February 2020)
Chief Operating Officer (to 26 February 2020)
Mr Leslie Crockett
Chief Financial Officer (from 2 June 2020)
Mr Brad Edwards
General Counsel and Company Secretary
Mr Peter Egan
Mr Ben Cox
Chief Risk Officer (from 3 February 2020)
General Manager Corporate Distribution (to 13 September 2019)
Mr Martyn Jenkins
Chief Financial Officer (to 2 September 2019)
Mr Brendan White
Chief Executive Officer (to 26 February 2020)
2 Performance and reward summary, key context and changes
2.1 Remuneration policy and relationship to performance
In setting the Company’s remuneration strategy, the Remuneration Committee makes recommendations which:
a) attract, retain and motivate senior executives to deliver long-term sustainable growth within an appropriate control
framework;
b) demonstrate a clear and strong correlation between performance and reward; and
c) align the interests of senior executives with those of the Company’s shareholders.
The following table shows the statutory key performance indicators of the Group over the last five years:
Revenue from continuing operations
279,008
281,565
260,345
271,241
311,599
Year ended 30 June
2020
$’000
2019
$’000
2018
$’000
2017
$’000
2016
$’000
Net profit / (loss) before tax from
continuing operations
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
(13,300)
(2,366)
31,271
28,198
31,171
(10,491)
(1,692)
22,503
20,618
-
-
-
(10,491)
(1,692)
22,503
20,618
cents
16.0
17.5
-
-
cents
31.0
16.0
-
-
cents
31.5
31.0
-
-
4.55
4.43
cents
43.5
31.5
-
-
4.21
4.12
25,894
(31,166)
(5,272)
cents
70.0
43.5
2.00
1.00
(1.09)
(1.09)
Earnings per share from continuing and discontinued operations
- basic
- diluted
(1.70)
(1.70)
(0.27)
(0.27)
(i) Franked to 100% at 30% corporate income tax rate.
28
Cash Converters International Limited | Annual Report 2020
Remuneration report (continued)
3 Overview of Cash Converters’ Remuneration Governance
Framework and Strategy
The Remuneration Committee is a committee of the Board responsible for making recommendations to the Board on:
a) Base salaries for executives and Board and Committee fees for non-executive Directors;
b) Short term incentives for senior executives; and
c) Incentive and equity-based remuneration plans.
The Corporate Governance Statement and the Remuneration Committee Charter provide further information on the
role of this Committee. These documents and related policies and practices are available on the Company website at
www.cashconverters.com/governance/remuneration-nomination.
Executive KMP
The Remuneration Policies are designed to ensure that remuneration outcomes are aligned with the long-term success of
the Group. Incentives are based on the achievement of sustained growth in earnings as well as relative shareholder return.
These measures provide a clear and strong correlation between performance and reward and align the interests of senior
executives with those of the Company’s shareholders.
The overall remuneration structure remains similar to the prior year comprising:
a) Executive KMP fixed remuneration packages, consisting of base salary and superannuation as per the Superannuation
Guarantee (Administration) Act 1992, in line with those paid for roles with equivalent responsibilities by companies of
a similar market capitalisation.
b) A Short-Term Incentive (STI), payable only on achievement of annual financial and non-financial strategic targets.
c) A Long-Term Incentive (LTI), paid in the form of performance rights potentially converting to shares after a three-year
performance period, based on the following:
• 50 per cent dependent on earnings per share compound annual growth rate over a three-year performance period;
and
• 50 per cent dependent on total shareholder return (TSR) relative to the S&P ASX Small Industrials TR Index over the
same three-year performance period.
Eligibility to participate in the STI and/or LTI is at the recommendation of the Remuneration Committee and approval of
the Board. The participation level in terms of percentage of fixed remuneration to set STI target awards and the grant
of performance rights which may vest over the three-year performance period outlined above is determined annually as
part of the remuneration review process. The assessment is based on benchmarked relevant market practice in similar
companies with similar characteristics.
The remuneration structure ensures that if the Group under-performs on its earnings and / or return targets, no STI will
be payable to executive KMP. Under-performance over the longer-term will also result in no vesting of performance rights.
Remuneration for all executives is reviewed at least annually. There is no guaranteed increase in any executive’s
employment contract.
Executive Director: Executive Deputy Chairman Arrangements
The overall remuneration structure remains similar to the prior year.
A fixed remuneration package is contracted comprising base salary of $371,597 per annum, superannuation as per the
Superannuation Guarantee (Administration) Act 1992 and usage of a fully maintained company car.
The Executive Director does not participate in any Incentive Plan.
Non-Executive Director arrangements
The Remuneration Policy is designed to ensure that remuneration outcomes enable the Company to attract, retain and
motivate the high calibre of Non-Executive Directors required for it to meet its objectives.
A Non-Executive Director is not entitled to receive performance-based remuneration. They may be entitled to fees or
other amounts, as the Board determines, where they perform duties outside the scope of the ordinary duties of a Director.
They may also be reimbursed for out of pocket expenses incurred.
Directors’ report 29
Remuneration report (continued)
Securities Trading Policy
The Securities Trading Policy imposes trading restrictions on all employees, contractors and consultants who are
considered to be in possession of market sensitive information. In addition are restrictions in the form of closed periods for
KMP who are prohibited from trading in the Company’s securities, except:
• in a six-week trading window period commencing 24 hours after the release of the final and half-yearly financial results;
• after release of a disclosure document offering equity Securities in the Company; or
• dates as declared by the Board in the circumstances that the Board is of the view that the market can reasonably be
expected to be fully informed on those dates.
KMP are prohibited from entering into contracts to hedge their exposure to any securities held in the Company.
4 Performance outcomes for FY 2020 including STI and LTI assessment
Short-Term Incentives (STI)
The STI component of remuneration currently consists of a cash bonus that is focused on a balanced scorecard approach,
with financial and non-financial measures. Awards under the STI required that the target profit threshold set as part of the
annual budgeting process was met. The STI achieved in relation to the FY 2020 period has been accrued in the FY 2020
results and will be paid after the end of the period.
In considering the award of STI remuneration the Board has been cognisant of the challenging economic environment,
including the effect of COVID-19. Consistent with performance incentives as awarded across the broader business the
Board has recognised Executive performance and delivery of the operating profit in a year of unprecedented challenges
and the need to attract and retain an executive KMP team in a period of abnormal economic uncertainty and ongoing
regulatory scrutiny.
The key performance indicators (KPIs) are selected based on what needs to be achieved over the performance period to
achieve the business strategy over the longer term, varied to reflect individual executive roles and responsibilities.
The average amount awarded to KMP in STI as a percentage of target STI for FY 2020 was 100%. In relation to the
completed FY 2020 period the following KPIs and weightings applied to Participants:
Feature
Description
Maximum opportunity
Range from 21% to 100% depending on nature of role and service periods
Performance metrics
KPIs are aligned to the strategic priorities of sustained growth in earnings and relative
shareholder return
Metric
Achievement of
earnings
Risk and
Compliance
Leadership and
growth initiatives
Project
performance
Weighting
Impact
Mandatory
threshold
Mandatory
threshold
Assessed on
an individual
basis
Assessed on
an individual
basis
Target
Rationale for selection
Management of value
measured using
operating profit
Regulatory compliance
Delivery of optimal
financial performance
Appropriate management
of risk
Board’s assessment of
leadership and strategy
delivery
Long-term strategy
development for delivery
of shareholder return
Achievement of
milestones
Milestones to long-term
strategy development
Delivery of STI
Board discretion
The STI is payable on release of the audited financial results and has been accrued in the
FY 2020 results based on Board approval
The Board reserves the right to amend, vary or revoke the terms of any incentive plan from
time to time, at its sole and absolute discretion
30
Cash Converters International Limited | Annual Report 2020
Remuneration report (continued)
Following the end of the Measurement Period (the financial year) the Board assessed the extent to which target levels of
performance had been achieved in relation to each KPI and determined the total award payable.
Executive
Mr S Budiselik
Mr B Edwards
Mr P Egan *
Target STI
opportunity
% of fixed
remuneration
STI
outcome
%
achieved
%
forfeited
$525,000
$150,000
$62,500
100%
50%
50%*
100%
50%
21%
100%
100%
100%
-
-
-
* Mr Egan’s target STI opportunity was a pro rata portion of his full year entitlement based on his period of employment during FY 2020.
Long-Term Incentives (LTI)
At the Annual General Meeting held on 18 November 2015, shareholders approved the Cash Converters Rights Plan (Plan).
The Plan was reapproved by shareholders at the Annual General Meeting on 29 November 2018.
The Plan provides eligible participants with an incentive plan that recognises ongoing contribution to the achievement by
the Company of its strategic goals, and to provide a means of attracting and retaining skilled and experienced employees.
Participation in the LTI Plan is at the discretion of the Board.
Subject to the achievement of performance conditions, participants may be entitled to be granted Performance Rights
and / or Indeterminate Rights as approved by the Board.
LTI payments are delivered in Performance Rights which vest into Shares on the achievement of certain performance
criteria or, Indeterminate Rights, where the Board, in their absolute and unfettered discretion, make a cash payment
equivalent to the number of vested Indeterminate Rights multiplied by the then value of the Company’s share price.
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.
Balance at
1 July 2019
Granted as
remuneration
Received on
exercise of rights
Net other
change
Balance at
30 June 2020
Number
Number
Number
Number
Number
Directors
Mr S Grimshaw
Mr P Cumins
Mr K Dundo
Ms J Elliott (1)
Mr L Given
Mr R Hines (1)
-
7,575,694
-
-
-
422,000
Other key management personnel
Mr S Budiselik
Mr L Crocket (1)
Mr B Edwards
Mr P Egan (1)
Mr B Cox (2)
Mr M Jenkins (2)
Mr B White (2)
116,875
-
166,203
-
-
3,375
-
8,284,147
(1) Opening balance at date of becoming KMP.
(2) Closing balance at date of ceasing to be KMP.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
600,000
8,175,694
-
-
-
-
-
-
-
422,000
131,500
248,375
-
-
680,476
846,679
-
-
-
-
3,375
-
1,411,976
9,696,123
Directors’ report 31
Remuneration report (continued)
Balance at
1 July 2018
Granted as
remuneration
Received on
exercise of rights
Net other
change
Balance at
30 June 2019
Number
Number
Number
Number
Number
Directors
Mr S Grimshaw
Mr P Cumins
Ms E Comerford (2)
Mr K Dundo
Mr L Given
Ms A Waters (2)
-
7,575,694
-
-
-
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
Total
-
116,875
-
-
-
166,203
3,375
7,930,897
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) Opening balance at date of becoming KMP.
(2) Closing balance at date of ceasing to be KMP.
Performance rights of Cash Converters International Limited.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,575,694
-
-
-
68,750
-
116,875
-
-
-
166,203
3,375
7,930,897
Balance at
1 July 2019
Granted as
remuneration
Rights
exercised
Rights lapsed
/ forfeited (3)
Balance at
30 June 2020
Balance vested
at 30 June 2020
Number
Number
Number
Number
Number
Number
Directors
Mr S Grimshaw
Mr P Cumins
Mr K Dundo
Ms J Elliott (1)
Mr L Given
Mr R Hines (1)
-
-
-
-
-
-
-
-
-
-
-
-
Other key management personnel
Mr S Budiselik
1,513,760
5,379,098
Mr L Crockett (1)
-
Mr B Edwards
1,411,336
Mr P Egan (1)
Mr B Cox (2)
Mr M Jenkins (2)
Mr B White (2)
Total
-
682,826
1,206,488
3,687,266
8,501,676
-
2,049,180
1,639,344
-
-
-
9,067,622
(1) Opening balance at date of becoming KMP.
(2) Closing balance at date of ceasing to be KMP.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(387,096)
6,505,762
-
(387,096)
-
(409,072)
(1,206,488)
(3,687,266)
-
3,073,420
1,639,344
273,754
-
-
(6,077,018)
11,492,280
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3) Rights that were issued in FY 2018 relating to Mr Budiselik and Mr Edwards lapsed as a result of not meeting the required vesting
measurement thresholds during the period. A total of 409,072 rights issued to Mr Cox and 3,687,266 rights issued to Mr White in
FY 2019, and 1,206,488 rights issued to Mr Jenkins in FY 2018 and FY 2019 were forfeited during the period.
32
Cash Converters International Limited | Annual Report 2020
Remuneration report (continued)
Balance at
1 July 2018
Granted as
remuneration
Rights
exercised
Rights lapsed
/ forfeited (3)
Balance at
30 June 2020
Balance vested
at 30 June 2019
Number
Number
Number
Number
Number
Number
Directors
Mr S Grimshaw
-
Mr P Cumins
4,572,920
Mr K Dundo
Mr L Given
Ms A Waters (2)
Ms E Comerford (2)
-
-
-
-
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)
-
3,687,266
387,096
1,126,664
-
682,826
387,096
494,000
106,452
387,096
1,024,240
819,392
300,444
-
-
Mr M Reid (2)
2,412,640
Total
8,747,300
7,640,832
(1) Opening balance at date of becoming KMP.
(2) Closing balance at date of ceasing to be KMP.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,572,920)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,687,266
1,513,760
682,826
1,411,336
(106,904)
1,206,488
(293,852)
(387,096)
113,044
-
(1,263,354)
1,149,286
(6,624,126)
9,764,006
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(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.
Terms and conditions of share-based payment arrangements affecting remuneration of KMP in the current or future
financial years are set out below:
Grant date fair value (i)
Exercise price
Tranche
Tranche 21
Tranche 22
Tranche 23
Tranche 24
Tranche 25
Tranche 26
Tranche 27
Tranche 28
Grant date
14 Feb 2018
14 Feb 2018
19 Dec 2018
19 Dec 2018
26 Mar 2019
26 Mar 2019
9 Jun 2020
9 Jun 2020
$
0.22
0.33
0.15
0.24
0.06
0.19
0.17
0.19
$
-
-
-
-
-
-
-
-
Expiry date
Vesting date
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
30 Jun 2022
30 Jun 2022
30 Jun 2022
30 Jun 2022
(i) The grant date fair value is calculated as at the grant date using a Monte Carlo pricing model for tranches 21, 23, 25 and 27 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.
Directors’ report 33
Remuneration report (continued)
The following table outlines the value of equity granted to KMP during the year that may be realised in the future:
Name
Tranche
Mr S Budiselik
Mr B Edwards
Mr P Egan
Total
27
28
27
28
27
28
Number
of rights
2,689,549
2,689,549
1,024,590
1,024,590
819,672
819,672
9,067,622
Value at grant
Per right
$
0.171
0.195
0.171
0.195
0.171
0.195
Value
expensed in
current year
Value to be
expensed in
future years
$
12,861
14,665
4,899
5,587
3,919
4,470
$
447,052
509,797
170,306
194,208
136,245
155,366
Total
$
459,913
524,462
175,205
199,795
140,164
159,836
1,659,375
46,401
1,612,974
6 Non-Executive Director fee policy rates for FY 2020 and FY 2021 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 2021.
The following table outlines the Non-Executive Director Remuneration policy rates that were applicable as at the end
of FY 2020.
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
34
Cash Converters International Limited | Annual Report 2020
Remuneration report (continued)
7 Remuneration records for FY 2020 (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 2020 and 2019, prepared according to statutory disclosure requirements and
applicable accounting standards:
Short-term
employee benefits
Post-
employment
benefits
Salary
and fees
Cash
bonus
Non-
monetary
benefits
Termi-
nation
benefits
Super-
annuation
Other
long-
term
benefits
Share-
based
payments
2020
$
Non-Executive Directors
Mr S Grimshaw
170,000
Mr K Dundo
109,134
Ms J Elliott (1)
Mr L Given
Mr R Hines (1)
18,732
95,000
18,732
Executive Director
Mr P Cumins
378,027
Other executives
$
-
-
-
-
-
-
$
-
-
-
-
-
54,905
Mr S Budiselik (2)
457,006
650,000
11,910
Mr L Crockett (3)
31,778
-
Mr B Edwards
295,922
340,000
Mr P Egan (4)
134,724
142,500
Mr B Cox (5)
Mr M Jenkins (6)
56,250
44,877
Mr B White (7)
488,589
-
-
-
992
2,457
824
1,985
$
-
-
1,779
-
1,779
$
-
-
-
-
-
24,691
7,307
$
-
-
-
-
-
-
Total
$
170,000
109,134
20,511
95,000
20,511
464,930
25,019
1,642
(22,132) 1,123,445
2,771
21,003
10,001
4,901
-
-
35,541
959
(40,310)
620,031
-
-
21,466
309,515
(4,258)
58,878
$
-
-
-
-
-
-
-
-
-
-
-
1,985
182,500
5,251
(33,927)
(95,208)
105,478
788,711
120,000
15,752
-
(53,931) 1,359,121
Total
2,298,771
1,132,500
863,769
302,500
112,947
(24,019)
(194,373) 4,492,095
(1) Appointed 14 April 2020.
(2) Appointed CEO 26 February 2020.
(3) Appointed 2 June 2020.
(4) Appointed 3 February 2020.
(5) Resigned 13 September 2019.
(6) Resigned 2 September 2019.
(7) Resigned 26 February 2020.
Directors’ report 35
Remuneration report (continued)
Short-term
employee benefits
Post-
employment
benefits
Salary
and fees
Cash
bonus
Non-
monetary
benefits
Termi-
nation
benefits
Super-
annuation
Other
long-
term
benefits
Share-
based
payments
2019
$
Non-Executive Directors
Mr S Grimshaw
Mr K Dundo
Mr L Given
Ms E Comerford (8)
Ms A Waters (9)
170,000
102,500
95,000
25,114
49,958
Executive Director
Mr P Cumins
590,144
Other executives
$
-
-
-
-
-
-
Mr B White (10)
227,372
649,823
Mr S Budiselik
337,720
250,000
Mr B Cox
Mr B Edwards
Mr M Jenkins
Mr M Reid (11)
258,379
320,416
312,253
91,004
Mr N Carbone (12)
102,286
Ms M Cutten (13)
123,556
-
-
-
-
-
-
$
-
-
-
-
-
70,465
-
11,759
11,759
-
11,759
$
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
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
1,924
575,154
3,849
100,000
6,796
71,923
5,868
10,266
15,399
-
-
-
(79,031)
594,919
(16,878)
199,523
21,913
239,587
Total
2,805,702
899,823
118,311
747,077
152,708
22,580
(466,658) 4,279,543
(8) Resigned 30 September 2018.
(9) Resigned 14 December 2018.
(10) Appointed 18 March 2019.
(11) Resigned 27 August 2018.
(12) Resigned 9 November 2018.
(13) Resigned 25 January 2019.
The cash bonus values reported in this table include the STIs awarded for the performance period described in section
4 above, which will be paid in the financial year following the year to which they relate (i.e. the value shown for 2020 is
the value earned and accrued for in FY 2020 and will be paid during FY 2021). In November 2019 retention bonuses of
$125,000 to Mr Budiselik and $190,000 to Mr Edwards were awarded and paid in addition to these STIs, and contracted
compensation was accrued for Mr Egan in relation to incentives foregone with his previous employer, which will be paid in
FY 2021.
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.
For further detail on non-monetary benefits received by Mr White, refer to section 10 below.
36
Cash Converters International Limited | Annual Report 2020
Remuneration report (continued)
The following table shows the relative proportions of remuneration for the year that are linked to performance
and those that are fixed, based on the amounts disclosed as statutory remuneration expense:
Name
Mr S Budiselik
Mr L Crockett *
Mr B Edwards
Mr P Egan
At risk remuneration
Year
2020
2020
2020
2020
Fixed remuneration
41%
100%
47%
49%
STI
54%
-
49%
48%
LTI
4%
-
4%
3%
* Mr Crockett commenced with the Company on 2 June 2020 and accordingly was ineligible for at risk remuneration in FY 2020.
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. However, 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:
NameName
Mr P Cumins
Mr S Budiselik
Mr L Crockett
Mr B Edwards
Mr P Egan
Period of notice
Period of notice
Position held
Position held
From Company
From Company
From KMP
From KMP
Executive Deputy Chairman
Chief Executive Officer
Chief Financial Officer
General Counsel and Company Secretary
Chief Risk Officer
12 months
12 months
3 months
6 months
6 months
6 months
12 months
3 months
6 months
6 months
Mr Budiselik commenced as Chief Executive Officer on 26 February 2020 on a permanent basis with the termination
notice periods as outlined above. A base salary of $525,000 plus minimum statutory superannuation contribution is
payable. Mr Budiselik participates in the incentive programmes outlined at the discretion of the Board with a target STI
set as 100% of base salary and LTI set as 75% of base salary.
For all participants, termination of employment will trigger a forfeiture of all unearned incentive entitlements except under
certain limited circumstances defined in the Plan. Amounts that are not forfeited will be tested and potentially paid based
on actual performance relative to the performance goals, following the end of the Measurement Period. Under the Plan
rules the Board retains discretion to trigger or accelerate payment or vesting of incentives, provided that the limitations on
termination benefits as outlined in the Corporations Act are not breached (except in the case that shareholder approval has
been obtained to do so).
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.
Directors’ report 37
Remuneration report (continued)
9 Loan to KMP
Mr Brendan White, former Chief Executive Officer, received unsecured loans from the Company during the year ended
30 June 2019 totalling $441,216 to assist with the transfer of financial arrangements necessitated from his departure
from Bank of Queensland. The loan accrued interest at 5.65% per annum and the outstanding balance at the date of his
resignation on 26 February 2020 of $415,045 was forgiven as part of his agreed exit arrangements. As part of his exit
arrangements, Mr White agreed that he would not receive and would forego, any further payments or share allocations
pursuant to the Company Incentive Schemes.
Further details are as follows:
Amounts loaned
Interest accrued at 5.65% per annum
Repayments received
Balance forgiven – 26 February 2020
Balance of loan at 1 July 2019
Highest amount of indebtedness during the reporting period (26 September 2019)
Balance of loan at 30 June 2020
$
441,216
25,829
(52,000)
415,045
451,065
457,261
-
Included in the remuneration table in section 7 above as a non-monetary benefit is the amount of the loan forgiven as
outlined above and related fringe benefits tax of $373,666.
10 Other remuneration-related matters
The Company appointed Michael Murphy in the role of Chief Financial Officer, commencing on 10 February 2020, and
announced on 16 March 2020 that Mr Murphy’s contract would cease at the end of a 6 month contractual notice period.
From that date Mr Murphy worked only on discrete special-purpose projects, and his service with the Company ceased
on 18 May 2020. During the period of his service he was paid $223,441 in salary, including payment in lieu of notice
to September 2020, and superannuation of $10,238. The Company does not consider that Mr Murphy met the Key
Management Personnel definition during this period.
There were no other relevant material transactions involving KMP other than compensation and transactions concerning
shares, performance rights/options as discussed in this report.
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 Jenkins – payment in lieu of notice under contract – $150,000, ex gratia payment – $32,500
• Mr B White – payment in lieu of notice under contract – $120,000
Entitlements under the STIP for the FY 2020 year were forfeited upon termination. Performance rights under the LTIP
outstanding to Mr Jenkins and Mr White lapsed, and a portion of those outstanding to Mr Cox relating to his uncompleted
vesting period lapsed.
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
Peter Cumins
Director
Perth, Western Australia
27 August 2020
38
Cash Converters International Limited | Annual Report 2020
Corporate governance
For the year ended 30 June 2020
The Company’s most recent Corporate Governance Statement can be found on the Company’s website at
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 2019-20
• 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
Consolidated statement of profit or loss and other comprehensive income 39
Consolidated statement of profit or
loss and other comprehensive income
For the year ended 30 June 2020
Notes
2020
$’000
2019
$’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
Depreciation and amortisation expense
Other expenses
Finance costs
Share of net profit of equity accounted investments
Loss before income tax
Income tax benefit
Loss 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 for the year
(Loss) 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
2.2
5.1
2.3
2.4
2.4
13,215
174,362
88,238
3,193
279,008
(60,116)
(48,759)
(2,287)
(111,162)
167,846
(72,246)
(8,647)
(6,780)
(4,485)
(42,500)
(19,861)
(15,058)
(12,607)
1,038
(13,300)
2,809
(10,491)
15,400
186,462
75,807
3,896
281,565
(78,104)
(45,992)
(2,146)
(126,242)
155,323
(71,266)
(9,033)
(7,735)
(15,795)
(16,400)
(13,222)
(15,253)
(10,598)
1,613
(2,366)
674
(1,692)
376
376
524
524
(10,115)
(1,168)
(1.70)
(1.70)
(0.27)
(0.27)
The accompanying notes form an integral part of the consolidated statement of profit or loss and other comprehensive income.
40
Cash Converters International Limited | Annual Report 2020
Consolidated statement
of financial position
As at 30 June 2020
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
Right-of-use assets
Deferred tax assets
Goodwill
Other intangible assets
Prepayments
Investments in associates
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Borrowings
Provisions
Total current liabilities
Non-current liabilities
Lease liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Notes
4.1
3.1
3.2
3.3
3.4
3.1
3.2
3.5
3.6
2.3
3.7
3.8
5.1
3.9
4.2
4.3
3.10
4.2
4.3
3.10
4.5
2020
$’000
106,548
6,700
93,687
15,221
4,959
1,425
2019
$’000
81,101
7,794
128,374
20,370
7,766
1,897
228,540
247,302
4,930
35,929
4,628
50,523
18,181
106,967
21,371
2,129
6,636
251,294
479,834
23,316
6,922
60,618
8,055
98,911
46,121
27,174
1,257
74,552
173,463
306,371
248,714
7,068
50,589
306,371
6,293
46,226
6,173
-
14,820
106,967
26,924
3,083
6,452
216,938
464,240
15,296
-
87,826
7,044
110,166
-
35,510
1,712
37,222
147,388
316,852
248,714
7,238
60,900
316,852
The accompanying notes form an integral part of the consolidated statement of financial position.
Consolidated statement of changes in equity 41
Consolidated statement of
changes in equity
For the year ended 30 June 2020
Notes
Issued
capital
$’000
248,714
1(b)
-
Foreign
currency
translation
reserve
$’000
5,830
-
Share-
based
payment
reserve
$’000
1,177
Retained
earnings
$’000
Total
$’000
66,687
322,408
-
(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
-
248,714
6,354
884
60,900
316,852
-
-
-
-
-
-
376
376
-
-
-
-
-
(366)
(180)
(10,491)
(10,491)
-
376
(10,491)
(10,115)
-
180
(366)
-
248,714
6,730
338
50,589
306,371
Balance at 1 July 2018
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
Balance at 30 June 2019
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
Balance at 30 June 2020
The accompanying notes form an integral part of the consolidated statement of changes in equity.
42
Cash Converters International Limited | Annual Report 2020
Consolidated statement
of cash flows
For the year ended 30 June 2020
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)
Net cash flows provided by / (used in) operating activities
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
Payment of borrowing costs
Repayment of lease liabilities
Net cash flows 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
Notes
2020
$’000
2019
$’000
2.2
2.7
3.8
5.1
199,209
(165,960)
(32,500)
539
67,811
13,757
(12,597)
(148)
70,111
(2,961)
409
(1,212)
1,329
659
(1,776)
134,500
(169,750)
(1,500)
(6,810)
190,041
(188,395)
(16,400)
1,169
73,973
(73,052)
(13,257)
(5,867)
(31,788)
(6,634)
164
(739)
14,251
680
7,722
202,500
(237,500)
-
-
(43,560)
(35,000)
24,775
81,101
672
(59,066)
139,991
176
Cash and cash equivalents at the end of the year
4.1
106,548
81,101
The accompanying notes form an integral part of the consolidated statement of cash flows.
Notes to the financial statements 43
Notes to the financial statements
For the year ended 30 June 2020
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 2020 was authorised for issue in accordance with a
resolution of directors dated 27 August 2020.
(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’).
The financial statements have been prepared on a going concern basis. To assess the appropriateness of the Group’s
going concern assumption including as a consequence of COVID-19, management have:
• Prepared cash flow forecasts that extend to 30 September 2021 that demonstrate the Group will have access to
sufficient liquid resources to meet forecast operational expenditure, working capital and loan originations over that period:
• The Group has access to unrestricted cash of $95.439 million as at 30 June 2020;
• The Group has $60.750 million in available undrawn securitisation facilities at 30 June 2020;
• Evaluated the net asset position of the group, with the current and non-current classification of loans and receivables and
borrowings appropriately disclosed;
• Re-evaluated material areas of judgement and uncertainty;
• Re-evaluated the Group’s strategy and the resources required to successfully execute it; and
• Assessed current cash resources and funding sources available to the Group consistent with the expected future cash
requirements.
(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 16 Leases.
44
Cash Converters International Limited | Annual Report 2020
1 Basis of preparation (continued)
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 2020 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 16 ‘Leases’
The Group has adopted AASB 16 from 1 July 2019. AASB 16 replaced prior leases guidance, including AASB 117 Leases
and IFRIC 4 Determining whether an Arrangement contains a Lease.
Under AASB 16, a contract is a lease or contains a lease if the contract conveys the right to control the use of an identified
asset for a period in exchange for consideration. Under AASB 117, a lease was either a finance lease (on balance sheet)
or an operating lease (off balance sheet). AASB 16 requires lessees to recognise a lease liability reflecting future lease
payments and a ‘right-of-use asset’ if the recognition requirements of a lease are met.
Lessor accounting under AASB 16 is substantially unchanged. Lessors will continue to classify leases as either finance or
operating leases using similar principles as in AASB 117, therefore AASB 16 did not have an impact for leases where the
Group is the lessor. However, when the Group is an intermediate lessor, it accounts for the head lease and the sub-lease
as two separate contracts. The sub-lease is classified as a finance or operating lease by reference to the right-of-use asset
arising from the head lease.
The Group adopted AASB 16 using the modified retrospective method on 1 July 2019 by using the option to recognise
right-of-use assets at the value of lease liabilities, adjusted for any related prepaid and accrued lease payments for
all leases. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the
standard recognised as an adjustment to the opening balance of retained earnings at the date of initial application, with no
restatement of comparatives.
The Group also applied the available practical expedients wherein it:
• relied on its assessment of whether leases are onerous immediately before the date of initial application;
• applied the short-term leases exemptions to leases with lease term that ends within 12 months of the date of initial
application; and
• excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application.
Effect of adoption of AASB 16
The adoption of AASB 16 has primarily affected the accounting for the Group’s operating leases, including property leases
at the corporate store network of 69 stores and head office leases.
For leases previously classified as operating leases under AASB 117, the adoption of AASB 16 resulted in the recognition
of a lease liability at the date of initial application by measuring the lease liability at the present value of the remaining lease
payments, discounted using the lessee’s incremental borrowing rate at the date of initial application and the recognition of
a right-of-use asset at the date of initial application. The right-of-use assets were recognised based on the amount equal to
the lease liabilities, adjusted for any related prepaid and accrued lease payments previously recognised.
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. A balance of $152 thousand of these arrangements related to
short-term leases and leases of low-value assets. As at 30 June 2019, management assessed the incremental borrowing
rate to be applied to present value calculations and the Group disclosed an estimated impact of right-of-use asset and
lease liability in the range of $57 million to $64 million in respect of leases.
A lease liability of $61.716 million was recognised on 1 July 2019 which was within the range disclosed in the financial
statements as at 30 June 2019. The Group’s weighted average incremental borrowing rates applied to the lease liabilities
on 1 July 2019 were 7.60% for leases in Australia and 7.03% for leases in the United Kingdom.
The adoption of AASB 16 impacts the consolidated statement of profit or loss from 1 July 2019 onwards as follows:
• the elimination of operating rental expenses, except for low-value and short-term leases;
• an increase in depreciation and amortisation expenses; and
• an increase in finance cost (interest expense).
The adoption of AASB 16 had the following material impacts on the consolidated statement of financial position:
• recognition of right-of-use assets;
Notes to the financial statements 45
1 Basis of preparation (continued)
• recognition of current and non-current lease liabilities; and
• recognition of deferred tax assets and liabilities.
The adoption of AASB 16 has no net impact on the consolidated statement of cash flows, however impacts the
classification of payments between payment for operating and financing activities from 1 July 2019 onwards with the
following offsetting changes:
• a decrease in cash paid to suppliers and employees (operating activities);
• an increase in payments for lease liabilities (financing activities); and
• an increase in finance costs (operating activities).
The following table summarises the impact of transition to AASB 16 on 1 July 2019:
Right-of-use assets
Buildings
Lease liabilities
Current
Non-current
Deferred tax
Deferred tax asset on lease liabilities
Deferred tax liability on right-of-use assets
30 June 2020
1 July 2019
$’000
$’000
50,523
61,904
6,922
46,121
53,043
15,563
(15,042)
521
5,968
55,748
61,716
17,851
(18,085)
(234)
The statement of profit or loss shows the following amounts relating to leases subject to AASB 16:
Depreciation expense on right-of-use assets (buildings)
Interest expense (included in finance costs)
2020
$’000
9,153
4,223
13,376
The above has no cash effect to the Group and the changes are for financial reporting purposes only.
The statement of cash flows shows the following amounts relating to leases subject to AASB 16:
Interest and costs of finance paid (operating activities)
Repayment of lease liabilities (financing expenses)
(4,212)
(6,810)
(11,022)
Lease deferrals and reductions received by the Group associated with COVID-19 were immaterial during the current year.
Summary of new accounting policy
The Group assesses whether a contract is or contains a lease, at inception of the contract. A contract is, or contains
a lease, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses
whether:
• The contract involves the right of use of an identified asset – this may be specified explicitly and should be physically
distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive
substitution right, then the asset is not identified;
46
Cash Converters International Limited | Annual Report 2020
1 Basis of preparation (continued)
• The Group has the right to obtain substantially all of the economic benefits from the use of the asset throughout the
period of use; and
• The Group has the right to direct the use of the asset.
At inception or reassessment of a contract that contains a lease component, the Group allocates the consideration in
the contract to each lease component based on their relative stand-alone prices.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease i.e. the date the underlying asset
is available for use. Right-of-use assets are subsequently measured at cost, less any accumulated depreciation and
impairment losses and adjusted for any remeasurement of lease liabilities.
The cost of the right-of-use asset comprises the initial lease liability amount, initial direct costs incurred when entering
into the lease less lease incentives received and an estimate of the costs to be incurred in dismantling and removing
the underlying asset and restoring the site on which it is located to the condition required by the terms and conditions of
the lease.
Unless the Group is reasonably certain of obtaining ownership of the leased asset at the end of the lease term, the
recognised right-of-use asset is depreciated on a straight-line basis over the shorter of its estimated useful life and the
lease term.
An impairment review is undertaken for any right-of-use asset that shows indicators of impairment and an impairment
loss is recognised against any right-of-use asset that is impaired.
Lease liabilities
The lease liability is initially measured at the present value of the fixed and variable lease payments to be made over the
lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives
receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be
exercised by the Group. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot
be readily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used,
being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value
to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
Lease payments to be made under reasonably certain extension options are also included in the measurement of
the liability.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability
(using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset)
whenever:
• the lease term has changed or there is a significant event or change in circumstances resulting in a change in the
assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised
lease payments using a revised discount rate;
• the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed
residual value, in which case the lease liability is remeasured by discounting the revised lease payments using an
unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case
a revised discount rate is used); and
• a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease
liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a
revised discount rate at the effective date of the modification.
The Group adjusted the lease liability due to changes in lease payments and lease terms during the year ended
30 June 2020.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases i.e. those leases that have a lease
term of 12 months or less. It also applies the lease of low-value assets recognition exemption to leases that are considered
of low value (less than $7,500). Payments associated with short-term leases (buildings, equipment and vehicles) and
all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Low-value assets
comprise IT equipment and small items of office furniture.
Notes to the financial statements 47
1 Basis of preparation (continued)
Incremental borrowing rate
To determine the incremental borrowing rate, the Group:
• where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect
changes in financing conditions since third party financing was received; and
• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group,
which does not have recent third-party financing, and adjustments specific to the lease (eg term, country, currency
and security).
Extension and termination options
Extension and termination options are included in several property leases across the Group. These are used to maximise
operational flexibility in terms of managing the assets used in the Group’s operations. Most of the extension and termination
options held are exercisable only by the Group and not by the respective lessor.
In determining the lease term, management considers all facts and circumstances that create an economic incentive to
exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options)
are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
Most extension options in head office leases have not been included in the lease liability, because the Group could replace
the assets without significant cost or business disruption.
The lease term is reassessed if an option is exercised (or not exercised) or the Group becomes obliged to exercise (or
not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in
circumstances occurs, which affects this assessment, and that is within the control of the lessee. During the current
financial year, the financial effect of revising lease terms to reflect the effect of exercising extension and termination options
was a decrease in recognised lease liabilities and right-of-use assets of $1.907 million.
IFRIC 23 ‘Uncertainty over Income Tax Treatments’
The Group adopted IFRIC 23 for the first time during the year ended 30 June 2020. IFRIC 23 sets out how to determine
the accounting tax position when there is uncertainty over income tax treatments, under AASB 12 Income Taxes.
The Interpretation requires the Group to:
• determine whether uncertain tax positions are assessed separately or as a Group; and
• assess whether it is probable that a tax authority will accept an uncertain tax treatment used, or proposed to be used,
by an entity in its income tax filings:
• if yes, the Group should determine its accounting tax position consistently with the tax treatment used or planned to be
used in its income tax filings.
• if no, the Group should reflect the effect of uncertainty in determining its accounting tax position using either the most
likely amount or the expected value method.
There were no adjustments to the amounts recognised in the financial report as a result of adopting IFRIC 23.
(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
48
Cash Converters International Limited | Annual Report 2020
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 3.7 and 3.8
• Incremental borrowing rate used in calculating lease asset and liability values – see note 1(b)
• Impairment of equity investment in associate – see note 5.1
• Useful lives of other intangible assets – see note 3.8
• 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.
Notes to the financial statements 49
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
2020
$’000
2019
$’000
112,292
120,853
28,767
12,500
20,488
315
30,490
17,742
16,679
698
174,362
186,462
88,034
204
88,238
329
231
2,633
3,193
75,538
269
75,807
929
1,005
1,962
3,896
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 fees
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.
50
Cash Converters International Limited | Annual Report 2020
2.2 Expenses
Financial services cost of sales
Net bad and doubtful debt expense
Commissions
Other financial services cost of sales
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
Depreciation and amortisation expense
Depreciation
Depreciation of right-of-use assets
Amortisation of other intangible assets
Loss on write down of assets
Other expenses
Legal fees
Professional and registry costs
Auditing and accounting services
Bank charges
Other expenses from ordinary activities
Finance costs
Interest
Interest expense on lease liabilities
Notes
3.2
2020
$’000
41,493
13,045
5,578
60,116
67,525
(366)
5,087
72,246
3,291
955
3,620
781
8,647
260
2,144
2,081
4,485
2,118
9,154
5,967
2,622
19,861
1,171
8,159
507
986
4,235
15,058
8,384
4,223
12,607
2019
$’000
60,409
13,644
4,051
78,104
65,990
281
4,995
71,266
2,883
1,478
3,723
949
9,033
11,221
1,975
2,599
15,795
2,903
-
6,242
4,077
13,222
3,742
6,772
565
831
3,343
15,253
10,598
-
10,598
Notes to the financial statements 51
2.2 Expenses (continued)
Class Action settlement expense
On 21 October 2019, the Company announced that it had reached a settlement in relation to the Lynch Class Action,
under the terms of which the Company would pay $42.500 million in two tranches into a fund for distribution to members
of the class. The first tranche of $32.500 million was paid in November 2019, and the second tranche of $10.000 million is
to be paid on or before 30 September 2020.
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 3.10. The policy relating
to share-based payments is set out in note 6.5.
Impairment
Impairment expenses are recognised to the extent that the carrying amount of assets exceeds their recoverable amount.
Refer to note 3.7 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
Profit / (loss) before tax from continuing operations
Income tax at the statutory rate of 30% (2019: 30%)
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
2020
$’000
(2,874)
(341)
(136)
542
(2,809)
(13,300)
(3,990)
201
(21)
980
(110)
131
2019
$’000
3,622
(143)
(4,177)
24
(674)
(2,366)
(710)
(119)
(19)
66
84
24
Income tax (benefit) / expense on profit before tax
(2,809)
(674)
52
Cash Converters International Limited | Annual Report 2020
2.3 Taxation (continued)
(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
Leases
Other
Carry forward losses
Deferred tax liabilities
Fixed assets
Intangible assets
Other
2020
$’000
9,128
686
2,322
415
688
178
6,566
19,983
(687)
(1,097)
(18)
(1,802)
2019
$’000
11,553
612
2,137
108
-
270
2,799
17,479
(1,440)
(1,181)
(38)
(2,659)
Net deferred tax assets
18,181
14,820
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
Transfer current year tax benefit
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
14,820
136
-
(542)
3,792
(25)
8,614
4,177
2,001
(24)
-
52
18,181
14,820
4,312
4,254
Carry forward losses of $2.758 million (2019: $2.799 million) have been recognised in relation to the Group’s UK
operations, which were not profitable in the current year and have had a recent history of losses. Carry forward losses of
$3.945 million (2019: Nil) have been recognised in relation to losses in the Group’s Australian operations during the current
year. 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.
Notes to the financial statements 53
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 $18.181 million (2019: $14.820 million) has been recognised in the consolidated statement of
financial position. This includes $2.758 million (2019: $2.799 million) of carried forward tax losses in relation to the Group’s
UK operations, which have a recent history of losses. The UK tax losses have an indefinite availability period subject to
satisfaction of the continuity of ownership or same 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 2020.
Continuing operations in Australia made a loss during the current year however the Australian tax group is expected to be
profitable in future years, therefore supporting the recognition of net deferred tax assets arising from temporary differences
in Australia.
54
Cash Converters International Limited | Annual Report 2020
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.
Reconciliation of earnings used in calculating earnings per share
Basic and diluted earnings per share
(Loss) / profit attributable to shareholders of the Company used in
calculating earnings per share
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
2020
$’000
2019
$’000
(10,491)
(1,692)
Number
Number
616,437,946
616,437,946
8,970,232
12,210,611
625,408,178
628,648,557
The number of potential ordinary shares not included in the above calculation is 14,110,146 (2019: 10,973,771), equating
to a weighted average dilutive effect of 8,970,232 (2019: 12,210,611).
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 four 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.
Notes to the financial statements 55
2.5 Segment information (continued)
Personal
finance
Vehicle
financing
Store
operations
Franchise
operations
Corporate
head office (iv)
$’000
$’000
$’000
$’000
$’000
Year ended 30 June 2020
Interest revenue (i)
Other revenue
Gross revenue
117,703
20,526
-
435
46,038
87,981
117,703
20,961
134,019
Less inter-company sales
(2,308)
-
(8,570)
Segment revenue
115,395
20,961
125,449
External interest revenue (ii)
-
-
-
972
17,258
18,230
(1,356)
16,874
-
115,395
20,961
125,449
16,874
Total revenue
EBITDA (iii)
Less inter-company eliminations
Segment EBITDA
Depreciation and amortisation
EBIT
Interest expense
Profit / (loss) before tax
Income tax benefit
Loss for the year
Year ended 30 June 2019
Interest revenue (i)
Other revenue
Gross revenue
51,084
(1,913)
49,171
(1,309)
47,862
(5,864)
41,998
2,876
6
2,882
(152)
2,730
(2,689)
41
23,017
2,732
25,749
(9,641)
16,108
(3,814)
12,294
128,241
52
16,886
1,274
52,677
75,496
128,293
18,160
128,173
Less inter-company sales
(3,157)
-
(9,957)
Segment revenue
125,136
18,160
118,216
External interest revenue (ii)
10
-
-
10,943
(825)
10,118
(1,790)
8,328
(51)
8,277
1,771
18,895
20,666
(1,542)
19,124
-
Total
$’000
185,239
105,674
290,913
(12,234)
278,679
329
279,008
-
-
-
-
-
329
329
(68,752)
19,168
-
-
(68,752)
19,168
(6,969)
(19,861)
(75,721)
(693)
(189)
(12,607)
(75,910)
(13,300)
2,809
(10,491)
199,575
95,717
295,292
(14,656)
280,636
929
281,565
-
-
-
-
-
919
919
Total revenue
EBITDA (iii)
Less inter-company eliminations
Segment EBITDA
Depreciation and amortisation
EBIT
Interest expense
Profit / (loss) before tax
Income tax expense
Loss for the year
125,146
18,160
118,216
19,124
41,291
(2,767)
38,524
(166)
38,358
(7,213)
31,145
921
7
928
(322)
606
(2,590)
(1,984)
10,235
3,662
13,897
(2,762)
11,135
-
12,322
(902)
11,420
(1,532)
9,888
-
(43,315)
21,454
-
-
(43,315)
21,454
(8,440)
(13,222)
(51,755)
8,232
(795)
(10,598)
11,135
9,888
(52,550)
(2,366)
674
(1,692)
(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.
(iv) Class Action settlement expense of $42.500 million (2019: $16.400 million) has been included in the Corporate head office segment.
56
Cash Converters International Limited | Annual Report 2020
2.5 Segment information (continued)
Group assets by reportable segment
Personal finance
Vehicle financing
Store operations
Franchise operations
Total of all segments
Unallocated assets
Consolidated total assets
2020
$’000
2019
$’000
196,915
213,365
53,100
96,693
15,609
362,317
117,517
479,834
63,256
75,282
33,709
385,612
78,628
464,240
89,144
39,475
8,008
6,075
142,702
4,686
147,388
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
Personal finance
Vehicle financing
Store operations
Franchise operations
Total of all segments
Unallocated liabilities
Consolidated total liabilities
71,938
32,457
57,014
5,618
167,027
6,436
173,463
Unallocated liabilities include Group borrowings not specifically allocated to the underlying segments.
Other segment information
Personal finance
Vehicle financing
Store operations
Franchise operations
Total of all segments
Unallocated
Total
Depreciation, amortisation
and impairment
Additions to
non-current assets
2020
$’000
183
98
1,919
1,359
3,559
4,526
8,085
2019
$’000
166
258
2,597
1,532
4,553
5,795
10,348
2020
$’000
203
2,231
815
314
3,563
610
4,173
2019
$’000
2,098
1,471
782
1,452
5,803
1,449
7,252
Notes to the financial statements 57
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
2020
$’000
268,998
9,259
751
2019
$’000
269,246
11,744
575
2020
$’000
97,727
35,239
-
2019
$’000
138,167
2,037
-
279,008
281,565
132,966
140,204
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%
2020
Per share
cents
2019
Total
$’000
Per share
cents
Total
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Company did not pay a dividend in respect of the financial year ended 30 June 2019.
On 27 August 2020 the Company resolved that there would be no final dividend in respect of the financial year ended
30 June 2020.
The Company has Australian franking credits available of $68.379 million on a tax paid basis (2019: $69.339 million).
58
Cash Converters International Limited | Annual Report 2020
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
2020
$’000
(10,491)
5,967
11,281
(366)
2,623
(957)
2019
$’000
(1,692)
7,445
2,903
281
2,873
(1,632)
46,632
(29,324)
5,125
2,907
9,493
811
(2,914)
70,111
301
(2,520)
(3,684)
(219)
(6,520)
(31,788)
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.
Notes to the financial statements 59
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
Other receivables
Total trade receivables
Non-current
Vendor finance loans
Loan to associate
Other receivables
Total trade and other receivables
2020
$’000
1,862
(154)
1,708
-
1,797
3,195
6,700
2,060
2,848
22
4,930
2019
$’000
1,151
(26)
1,125
128
1,817
4,724
7,794
3,358
2,913
22
6,293
(i)
(ii)
(iii)
(v)
(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 may be charged 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 was four years. The Group ceased entering into such finance lease
arrangements from March 2016 and as at 30 June 2020 the Group no longer holds any lease receivables.
(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 six 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 2020 (2019: 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 (2019: 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
509
235
343
621
154
688
109
32
296
26
1,862
1,151
60
Cash Converters International Limited | Annual Report 2020
3.1 Trade and other receivables (continued)
Accounting policy
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 2020, trade receivables and instalment credit loans of $154 thousand (2019: $26 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
Foreign currency exchange differences
Balance at end of year
3.2 Loan receivables
Current
Personal short-term loans (unsecured)
Allowance for impairment losses
Total personal short-term loans (net)
Vehicle finance loans (secured)
Allowance for impairment losses
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
Total vehicle finance loans (net)
Total loan receivables
2020
$’000
26
131
(3)
154
97,245
(17,922)
79,323
18,908
(4,544)
14,364
93,687
4,444
(817)
3,627
39,398
(7,096)
32,302
35,929
2019
$’000
136
(109)
(1)
26
142,308
(27,143)
115,165
15,451
(2,242)
13,209
128,374
5,998
(992)
5,006
47,429
(6,209)
41,220
46,226
(i)
(ii)
(i)
(ii)
(i) The credit period provided in relation to personal short-term unsecured loans varies from 30 days to 24 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
3.2 years (2019: 3.5 years) and the average interest rate is 24.9% (2019: 25.0%).
Notes to the financial statements 61
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
Allowance for impairment losses
2020
$’000
75,828
2,421
2,315
2,386
18,739
101,689
32,632
4,525
2,491
7,018
11,640
58,306
2019
$’000
107,730
6,899
3,363
2,179
28,135
148,306
41,231
3,872
2,543
6,783
8,451
62,880
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 2019
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
Written off and settled loans
Total net change during the period
Balance at 30 June 2020
Stage 1
Stage 2
Stage 3
12 month ECL
Lifetime ECL
Lifetime ECL
$’000
9,756
$’000
10,088
$’000
8,291
(714)
(730)
76
-
39
-
3,391
(1,100)
261
(7,418)
(6,195)
3,561
714
-
(76)
(801)
-
455
4,109
(2,396)
1,593
(8,642)
(5,044)
5,044
-
730
-
801
(39)
(455)
6,596
(1,233)
2,150
(6,707)
1,843
10,134
Total
$’000
28,135
-
-
-
-
-
-
14,096
(4,729)
4,004
(22,767)
(9,396)
18,739
62
Cash Converters International Limited | Annual Report 2020
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 2019
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 outstanding balance
Written off and settled loans
Total net change during the period
Balance at 30 June 2020
Stage 1
Stage 2
Stage 3
12 month ECL
Lifetime ECL
Lifetime ECL
$’000
105,032
$’000
26,451
$’000
16,823
Total
$’000
148,306
(5,813)
(5,075)
305
-
118
-
62,135
(5,500)
(89,638)
(43,468)
61,564
5,813
-
(305)
(2,303)
-
1,314
15,893
(5,560)
(22,577)
(7,725)
18,726
-
5,075
-
2,303
(118)
(1,314)
14,219
(2,260)
(13,329)
4,576
21,399
-
-
-
-
-
-
92,247
(13,320)
(125,544)
(46,617)
101,689
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
12 month ECL
Lifetime ECL
Lifetime ECL
Stage 1
Stage 2
Stage 3
Loss allowance
Balance at 1 July 2019
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
Written off and settled loans
Total net change during the period
Balance at 30 June 2020
$’000
1,998
(286)
(185)
637
-
329
-
660
(3,519)
2,442
(319)
(241)
1,757
$’000
2,537
286
-
(637)
(611)
-
160
1,033
499
1,475
(736)
1,469
4,006
$’000
3,916
-
185
-
611
(329)
(160)
924
379
2,483
(2,132)
1,961
5,877
Total
$’000
8,451
-
-
-
-
-
-
2,617
(2,641)
6,400
(3,187)
3,189
11,640
Notes to the financial statements 63
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
12 month ECL
Lifetime ECL
Lifetime ECL
Stage 1
Stage 2
Stage 3
Gross carrying amount
Balance at 1 July 2019
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 outstanding balance
Written off and settled loans
Total net change during the period
Balance at 30 June 2020
$’000
47,566
$’000
7,451
$’000
7,863
(6,354)
(3,280)
2,036
-
705
-
15,589
(7,627)
(7,743)
(6,674)
40,892
6,354
-
(2,036)
(1,824)
-
351
2,445
(1,200)
(2,311)
1,779
9,230
-
3,280
-
1,824
(705)
(351)
1,169
(350)
(4,546)
321
8,184
Total
$’000
62,880
-
-
-
-
-
-
19,203
(9,177)
(14,600)
(4,574)
58,306
Changes in the loss allowance between the beginning and end of the year were attributable to the following items:
• Transfers to/(from) stages: movements due to transfers of credit exposures between Stage 1, Stage 2 and Stage 3.
• New financial assets originated: movements in credit exposures and provisions for impairment due to new financial assets
originated.
• Changes in PDs/LGDs/EADs: movements due to changes in probability of default, loss given default and exposure at
default. Expected loss rates are based on payment profiles, age and expected lifetime of the receivables, changes in
underlying credit quality and historic loss experience.
• Changes to model assumptions and methodologies: movements in provisions for impairment due to adjustments
reflecting forward-looking macro-economic information or other assumptions.
• Written-off and settled loans: derecognition of credit exposures and provisions for impairment upon write-off or repayment
of receivables.
Accounting policy
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.
64
Cash Converters International Limited | Annual Report 2020
3.2 Loan receivables (continued)
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 July 2020 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.
The full impacts of the COVID-19 pandemic have yet to result in anticipated increases in delinquencies due to the
government stimulus packages supporting consumers. As these likely future delinquencies are not currently captured in the
modelled outcome, the Group has specifically considered the likely customer impacts through an economic risk reserve.
The ECL model is adjusted to reflect forward-looking macro-economic information to allow for additional risk in compliance
with AASB 9.
An assessment was undertaken to determine the most relevant and reliable economic indicator on which to base a
forward-looking assessment of expected credit loss. The unemployment rate was chosen as a key indicator of impairment
levels for the portfolios. Using publicly available forecasts for unemployment rates over the next year, alternate scenarios,
outlined below, were determined. A probability weighting was attributed to each scenario with the highest weighting being
applied to the downside case reflecting the significant uncertainty regarding the impact to loan loss rates once government
support packages cease. The outcome of this is an additional $4.282 million provision for personal loan receivables and a
$2.910 million provision for vehicle finance loan receivables.
The following provides an overview of the scenarios chosen as well as the expected change to the total overlay were the
individual scenarios to be given a 100% weighting and holding all other assumptions constant:
Scenario
Baseline
Upside
Downside
Forecast basis
Sensitivity
Central bank forecast for
unemployment rates baseline case.
A 100% weighting to this scenario would reduce the total
expected credit loss provision by circa $766 thousand.
Central bank forecast for
unemployment rates upside case.
A 100% weighting to this scenario would reduce the total
expected credit loss provision by circa $2.434 million.
Central bank forecast for
unemployment rates downside case.
A 100% weighting to this scenario would increase the total
expected credit loss provision by circa $1.829 million.
The table below provides a summary of the unemployment rate forecasts used in the baseline, upside and downside
scenarios:
Unemployment rate
FY 2021
FY 2022
Baseline
Upside
Downside
Loss given default
9.3%
8.8%
9.8%
8.2%
7.3%
9.9%
Loss given default is estimated based on historical data related to amounts recovered post write off.
Notes to the financial statements 65
3.2 Loan receivables (continued)
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
2020
$’000
16,272
(1,051)
15,221
-
15,221
2019
$’000
21,904
(1,563)
20,341
29
20,370
Inventories are valued at the lower of cost and net realisable value. Costs, including purchase costs are assigned to
individual inventory items on hand. Net realisable value represents the estimated selling price less all estimated costs of
completion and costs necessary to make the sale.
3.4 Prepayments
Current
Prepaid commissions
Other prepayments
Non-current
Prepaid commissions
Accounting policies
1,498
3,461
4,959
4,878
2,888
7,766
2,129
3,083
Prepayments for goods and services which are to be provided in future years are recognised as prepayments and
amortised over the period in which the economic benefits are received. Prepaid commissions relating to loan receivables
are amortised over the life of the related loan receivable at the effective interest rates which match the revenue recognition
from the loan receivable.
66
Cash Converters International Limited | Annual Report 2020
3.5 Plant and equipment
Cost
Balance at 1 July 2018
Additions
Disposals
Foreign currency exchange differences
Balance at 30 June 2019
Additions
Disposals
Foreign currency exchange differences
Balance at 30 June 2020
Depreciation
Balance at 1 July 2018
Disposals
Depreciation expense
Foreign currency exchange differences
Balance at 30 June 2019
Disposals
Depreciation expense
Foreign currency exchange differences
Balance at 30 June 2020
Net book value
As at 30 June 2019
As at 30 June 2020
Accounting policies
Leasehold
improvements
Plant and
equipment
$’000
$’000
13,449
72
(608)
1
12,914
462
(513)
-
12,863
8,216
(461)
1,514
1
9,270
(389)
1,156
-
10,037
3,644
2,826
12,073
544
(2,746)
14
9,885
749
(2,736)
(2)
7,896
8,165
(2,209)
1,389
11
7,356
(2,220)
962
(4)
6,094
2,529
1,802
Total
$’000
25,522
616
(3,354)
15
22,799
1,211
(3,249)
(2)
20,759
16,381
(2,670)
2,903
12
16,626
(2,609)
2,118
(4)
16,131
6,173
4,628
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
Years
8
5
5
8
3.6 Right-of-use assets
Cost
Balance at beginning of year
Additions
Terminations
Remeasurements
Foreign currency exchange differences
Balance at end of year
Depreciation
Balance at beginning of year
Terminations
Depreciation expense
Foreign currency exchange differences
Balance at end of year
Net book value
Notes to the financial statements 67
2020
$’000
61,904
499
(122)
(2,661)
26
59,646
-
-
9,153
(30)
9,123
50,523
2019
$’000
-
-
-
-
-
-
-
-
-
-
-
The Group right-of-use assets relate to property leases. The average lease term is 5.42 years. The corresponding lease
liability analysis is presented in note 4.2.
Amounts recognised in profit and loss
Depreciation expense on right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term leases
3.7 Goodwill
Gross carrying amount
Goodwill
Accounting policies
9,153
4,223
259
13,635
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.
68
Cash Converters International Limited | Annual Report 2020
3.7 Goodwill (continued)
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
2020
$’000
90,561
16,406
2019
$’000
90,561
16,406
106,967
106,967
Impairment losses recognised
No impairment losses have been recognised in the years ended 30 June 2020 or 30 June 2019.
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 industry growth rates and 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. There is inherent uncertainty associated with the
key assumptions supporting the cash flow projections including the duration of the economic downturn associated with
COVID-19 and the recovery period.
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 3.5) and other
intangible assets (note 3.8) is assessed using the impairment testing as outlined in this note.
Impact of COVID-19
The impact of COVID-19 on the general economy is sufficiently pervasive to be considered an impairment indicator.
Impairment testing undertaken has considered alternative scenarios to the base case assumptions whereby lending
recovery is both slower and faster than the base case.
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 2020, as well as forecasts for the impact of future regulatory changes planned but not yet legislated.
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.
Notes to the financial statements 69
3.7 Goodwill (continued)
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 potential 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.
In assessing the recoverable value, alternative cash flow projection scenarios were considered on a probability basis.
The alternative scenarios considered include varying projections for lending volume recovery reflecting slower and faster
projections from the base forecast. Additionally, the alternative scenarios reflected application of the PEA legislation to all
customers at both the existing 20% and proposed 10% of customers.
Forecast revenue and expense growth rates in the table below reflect the range of assumptions in the scenarios developed
spanning varying lending recovery rates post COVID-19 in FY2021 and FY 2022 as well as the impact of PEA legislation
changes in FY 2023 (impacting cash flows beyond year 2). Probability weightings were applied to the scenarios. Revenue
growth projections for FY 2022 reflect returns to pre-COVID-19 lending volumes from a diminished revenue base forecast
for FY 2021. Revenue is not forecast to return to pre-COVID-19 levels until FY 2024. Revenue and expense growth
projections beyond year 2 reflect the range of impacts under PEA legislation changes.
The following key assumptions were used in the impairment testing:
Assumption
Personal finance
Store operations
2021 budget revenue growth / (reduction)
2021 budget expense growth / (reduction)
2022 forecast revenue growth / (reduction)
2022 forecast expense growth / (reduction)
Revenue growth rate beyond year 2
Expense growth rate beyond year 2
Terminal growth rate > 5 years
Post-tax discount rate applied to cash flows
(26%) to (30%)
(8%) to (14%)
29% to 37%
13% to 16%
(20%) to 5%
(22%) to 3%
2%
10.6%
(8%) to (9%)
(6%)
7%
2%
(5%) to 1%
(2%) to 1%
2%
10.6%
For the year ended 30 June 2019 the key assumptions used included:
• 2020 growth rates for revenue and expenses in Personal Finance of -5% and -11% respectively, in the following years
growth rates ranged from +1% to +5% for revenue and -4% to +2% for expenses;
• 2020 growth rates for revenue and expenses in Store Operations of -5% and -11% respectively, in the following years
growth rates ranged from +1% to +2% for revenue and -4% to +2% for expenses;
• Post-tax discount rates of 9.8% and terminal growth rates of 2.5%.
3.8 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. Intangible assets with indefinite lives included within other intangible assets are tested for impairment annually.
Refer to note 3.7 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 2020 (2019: nil).
70
Cash Converters International Limited | Annual Report 2020
3.8 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 2018
Additions
Disposals
Impairment
Foreign currency exchange differences
Balance at 30 June 2019
Additions
Disposals
Foreign currency exchange differences
Balance at 30 June 2020
Amortisation
Balance at 1 July 2018
Disposals
Amortisation expense
Foreign currency exchange differences
Balance at 30 June 2019
Disposals
Amortisation expense
Foreign currency exchange differences
Balance at 30 June 2020
As at 30 June 2019
As at 30 June 2020
2020
$’000
5,085
1,722
8,053
3,363
3,148
21,371
Reacquired
rights
Trade names
& customer
relationships
$’000
$’000
Software
$’000
7,604
16,850
-
-
-
18
7,622
-
(746)
(9)
6,867
-
-
-
-
16,850
-
-
-
16,850
4,961
8,712
-
500
5
-
141
-
5,466
8,853
-
329
(4)
5,791
2,156
1,076
-
127
-
8,980
7,997
7,870
26,609
6,636
(6,782)
(1,192)
21
25,292
2,962
(5,584)
6
22,676
7,240
(4,320)
5,600
1
8,521
(3,776)
5,511
(5)
10,251
16,771
12,425
2019
$’000
5,715
3,096
11,897
4,271
1,945
26,924
Total
$’000
51,063
6,636
(6,782)
(1,192)
39
49,764
2,962
(6,330)
(3)
46,393
20,913
(4,320)
6,241
6
22,840
(3,776)
5,967
(9)
25,022
26,924
21,371
Notes to the financial statements 71
3.8 Other intangible assets (continued)
Accounting policies
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.
Intangible assets are amortised as follows:
Asset
Amortisation period
Reacquired rights
The remaining life of each franchise agreement as at the acquisition date
Customer relationships
Useful life of 5 years based on historic average customer relationships
Trade names
Software
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.
3.9 Trade and other payables
Current
Trade payables
Accruals
Class Action final settlement payment
2020
$’000
1,952
11,364
10,000
23,316
2019
$’000
2,014
13,282
-
15,296
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.
72
Cash Converters International Limited | Annual Report 2020
3.10 Provisions
Current
Employee benefits
Fringe benefits tax
Onerous lease contracts
Other
Non-current
Employee benefits
Onerous lease contracts
(i)
(i)
(i) The provision for onerous lease contracts relates to the Group’s previously discontinued UK operations.
Movements in the provisions were as follows:
Balance at beginning of year
Arising during the year
Utilised during the year
Foreign currency exchange differences
Balance at end of year
Accounting policies
2020
$’000
2019
$’000
6,942
6,235
54
82
977
8,055
798
459
1,257
8,756
824
(263)
(5)
9,312
41
518
250
7,044
887
825
1,712
8,423
1,045
(747)
35
8,756
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.
Notes to the financial statements 73
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
2020
$’000
2,050
104,498
106,548
2019
$’000
2,407
78,694
81,101
Cash at bank includes restricted cash of $4.839 million (2019: $6.592 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 $6.270 million (2019: $5.730 million) on deposit as security for banking facilities.
4.2 Lease liabilities
Current
Lease liabilities
Non-current
Lease liabilities
Maturity analysis
Year 1
Year 2
Year 3
Year 4
Year 5
Onwards
Less: unearned interest
6,922
46,121
10,694
9,295
7,840
7,284
6,381
34,650
76,144
(23,101)
53,043
-
-
-
-
-
-
-
-
-
-
-
The Group does not face a significant liquidity risk with regard to its lease liabilities. Lease liabilities are monitored within
the Group’s treasury function.
74
Cash Converters International Limited | Annual Report 2020
4.3 Borrowings
Current
Securitisation facility
Insurance premium funding
Non-current
Securitisation facility
2020
$’000
60,576
42
60,618
2019
$’000
87,826
-
87,826
27,174
35,510
(i)
(i)
(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 18 December 2022.
Reconciliation of liabilities arising from financing activities
2019
$’000
123,336
Non-cash changes
Cash flows
Borrowing costs
$’000
(35,250)
$’000
(336)
2020
$’000
87,750
Securitisation facility
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.
4.3 Borrowings (continued)
Financing arrangements
Unrestricted access was available at balance date to the following lines of credit:
Total facilities
Securitisation facilities
Used at balance date
Securitisation facilities
Unused at balance date
Securitisation facilities
Notes to the financial statements 75
2020
$’000
2019
$’000
150,000
150,000
89,250
124,500
60,750
25,500
Refer to note 4.4 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.
4.4 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.
(a) Categories of financial instruments
Financial assets
Cash and cash equivalents
Trade and other receivables
Loan receivables
Financial liabilities
Trade and other payables
Borrowings
The Group has no material financial assets or liabilities that are held at fair value.
106,548
11,630
129,616
247,794
23,316
87,792
111,108
81,101
14,087
174,600
269,788
15,296
123,336
138,632
76
Cash Converters International Limited | Annual Report 2020
4.4 Financial risk factors (continued)
(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 (2019: 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 $129 thousand (2019: increase/decrease by approximately
$446 thousand).
(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. Refer to
note 3.2. 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 4.3 is a listing of additional undrawn facilities that the Company / Group has
at its disposal to further reduce liquidity risk.
Notes to the financial statements 77
4.4 Financial risk factors (continued)
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.
2020
Non-interest bearing
Variable interest rate instruments
2019
Non-interest bearing
Variable interest rate instruments
Financial assets
1 year or
less
$’000
1 to 5
years
$’000
More than
5 years
$’000
23,316
60,618
83,934
15,296
87,826
103,122
-
27,174
27,174
-
35,510
35,510
-
-
-
-
-
-
Total
$’000
23,316
87,792
111,108
15,296
123,336
138,632
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.
2020
Non-interest bearing
Fixed interest rate instruments
Variable interest rate instruments
2019
Non-interest bearing
Fixed interest rate instruments
Variable interest rate instruments
41,109
180,674
63,469
285,252
27,862
236,815
35,201
299,878
-
60,518
-
60,518
-
96,654
-
96,654
-
-
-
-
-
-
-
-
41,109
241,192
63,469
345,770
27,862
333,469
35,201
396,532
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.
78
Cash Converters International Limited | Annual Report 2020
4.4 Financial risk factors (continued)
(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 2020 and 30 June 2019, 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 2020 and 30 June 2019, 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.
4.5 Issued capital
2020
Number
2019
Number
2020
$’000
2019
$’000
Balance at beginning of year
616,437,946
616,437,946
248,714
248,714
Issued during the year
Balance at end of year
-
-
-
-
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.
Notes to the financial statements 79
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
Provision for impairment of investment
Return on investment received
Foreign exchange adjustment in value of investment
Balance at end of year
2020
$’000
6,452
3,338
(2,300)
(659)
(195)
6,636
2019
$’000
5,282
1,613
-
(680)
237
6,452
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.
80
Cash Converters International Limited | Annual Report 2020
5.1 Investment in associates (continued)
Impairment
The Company’s investment in the Cash Converters Holding Limited Partnership has been tested for impairment, as
required, under the accounting standards at 30 June 2020.
Recent changes to consumer credit laws in New Zealand triggered an impairment test of the investment’s carrying value.
The changes introduced new rules for loans that have an annual interest rate of 50% or more, which are deemed “high-
cost” under the legislation. The new rules for “high-cost” loans include limits to cap the total cost of borrowing on the
loan and a cap on the rates of interest and fees charged. These changes have necessitated the New Zealand enterprise
developing and distributing a new product with substantially different interest rates. No impairment indicators were present
in the prior period.
Financial forecasts were developed for the New Zealand enterprise and these forecasts were used to assess the
recoverable value of the investment based on a value in use calculation. Financial forecasts were projected for five years
including a terminal year value and discounted using an appropriate discount rate. The growth rate used to extrapolate
cashflow projections beyond the period covered by the most recent budgets/forecasts was 2% and the post-tax discount
rate used was 10.6%.
Key assumptions within the cashflow projections supporting the value in use calculation include forecast lending volumes
and forecast bad debt rates for the new lending products. Forecast lending volumes have been based on past experience
with lending products.
Review of the financial forecasts identified assumptions regarding the forecast bad debt rates as being a critical judgement
area. In assessing the recoverable value alternative bad debt rate scenarios, including a historic bad debt rate, an improved
bad debt rate and a more pessimistic forecast for bad debt rates, were considered on a probability weighted basis.
This assessment identified that the recoverable value was below the carrying amount and hence an impairment provision
of $2.300 million has been reflected against the value of the investment.
It is reasonably possible, on the basis of existing knowledge, that outcomes within the next financial year that are
different from the assumptions could require a material adjustment to the carrying amount of the asset. To the extent that
the recoverable amount of the investment subsequently increases any reversal of the impairment loss is recognised in
accordance with ASB 136 Impairment of Assets.
The recoverable value of the investment in the Cash Converters Holding Limited Partnership is sensitive to changes
in its discount rate and earnings before tax forecasts. When applying the same probability weighted assessment a
100 basis point increase in discount rate or a 10% reduction in its forecast earnings before tax would result in a further
$727 thousand and $676 thousand impairment respectively.
Summarised financial information
Summarised financial information in respect of the Group’s interest in Cash Converters Holdings Limited Partnership is set
out below. The summarised financial information below represents amounts before intragroup eliminations.
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
2020
$’000
7,943
4,266
(425)
(2,848)
8,936
2019
$’000
5,349
4,885
(629)
(3,153)
6,452
Notes to the financial statements 81
5.2 Controlled entities
(a) Composition of the Group
Controlled entities of Cash Converters International Limited:
Name of entity
BAK Property Pty Ltd (4)
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)
CC Acquisitions Pty Ltd (2)
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 (2)
Safrock Finance Corporation WA Pty Ltd (1) (2) (4)
CCPF Receivables Trust No 1
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
UK
USA
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ownership interest
2020
0%
100%
2019
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%
0%
100%
0%
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 2020.
(2) These companies are members of the tax consolidated group.
(3) Non-controlling interest is not considered material in these subsidiaries.
(4) These dormant entities were deregistered during the year ended 30 June 2020.
(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 2020 and consolidated Statement of Financial Position as
at 30 June 2020, comprising the members of the Closed Group after eliminating all transactions between members are set
out on the following pages.
82
Cash Converters International Limited | Annual Report 2020
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
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
Right-of-use assets
Deferred tax assets
Goodwill
Other intangible assets
Prepayments
Investments in associates
Other financial assets
Total non-current assets
Total assets
2020
$’000
(12,841)
2,824
(10,017)
2019
$’000
(2,200)
674
(1,526)
98,295
103,916
-
180
(10,017)
88,458
102,897
1,912
93,688
14,900
4,720
1,424
(4,669)
574
(1,526)
98,295
69,227
4,318
128,374
20,364
7,165
1,897
219,541
231,345
13,412
35,929
4,535
50,139
15,423
106,967
20,299
2,128
6,636
30,250
285,718
22,236
46,226
6,022
-
12,021
106,967
24,687
3,083
6,452
30,250
257,944
505,259
489,289
5.2 Controlled entities (continued)
Statement of financial position (continued)
Current liabilities
Trade and other payables
Lease liabilities
Borrowings
Provisions
Total current liabilities
Non-current liabilities
Lease liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Notes to the financial statements 83
2020
$’000
20,051
6,092
60,618
7,329
94,090
45,783
27,174
798
73,755
2019
$’000
10,564
-
87,826
6,526
104,916
-
35,510
887
36,397
167,845
141,313
337,414
347,976
248,714
248,714
242
88,458
337,414
967
98,295
347,976
84
Cash Converters International Limited | Annual Report 2020
5.3 Parent entity disclosures
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)
2020
$’000
1,476
251,986
253,462
41
-
41
2019
$’000
1,904
252,565
254,469
9
-
9
253,421
254,460
248,714
248,714
337
4,370
884
4,862
253,421
254,460
(492)
-
(492)
(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)
2,327
2,348
(1) Cash Converters International Limited has provided a cross guarantee to HSBC for a BACS facility provided to CCUK.
Notes to the financial statements 85
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.
Following an AUSTRAC assessment, the Group continues to engage with AUSTRAC with respect to concerns expressed
on the Group’s compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (“the Act”).
On 7 August 2020, AUSTRAC issued a Notice on Cash Converters Pty Ltd, a wholly-owned subsidiary of the Group
requiring information and documents be given and produced on or before 2 October 2020. The relevant period to which
the required information is to be provided is 14 February 2014 to 14 February 2020.
The Group is co-operating fully with AUSTRAC and intends to comply by responding to the requirements outlined in the
Notice on or before the requested due date. Additionally the Group is continuing to strengthen its Anti-Money Laundering
and Counter-Terrorism Financing Program.
At the date of this report the outcome is unknown as AUSTRAC have not completed their investigation and therefore it is
not possible to determine the extent of any potential financial impact to the Group. Consequently, no amounts have been
included as contingent liabilities at the date of this report.
The directors are not aware of any other material contingent liabilities in existence as at 30 June 2020 requiring disclosure
in the financial statements.
6.2 Commitments
Operating leases
Non-cancellable operating lease commitments payable:
Within one year
One to five years
Later than five years
2020
$’000
-
-
-
-
2019
$’000
11,223
26,136
1,267
38,626
As a result of the adoption of AASB 16 Leases during the current year, $38,320 million of operating lease commitments
recognised at 30 June 2019 were recognised as lease liabilities on 1 July 2019.
Capital expenditure
As at 30 June 2020, capital expenditure commitments were nil (2019: nil).
86
Cash Converters International Limited | Annual Report 2020
6.2 Commitments (continued)
Other contractual commitments
Within one year
One to five years
2020
$’000
295
1,098
1,393
2019
$’000
785
450
1,235
6.3 Related party disclosures
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 (2019: $120,000) was paid for consulting services to an entity controlled by
Mr P Cohen, the beneficial owner of EZCORP Inc, the Company’s largest shareholder.
Mr Brendan White, former Chief Executive Officer, received unsecured loans from the Company during the year ended
30 June 2019 totalling $441,216 to assist with the transfer of financial arrangements necessitated from his departure
from Bank of Queensland. The loan accrued interest at 5.65% per annum and the outstanding balance at the date of his
resignation on 26 February 2020 of $415,045 was forgiven. Further details are provided in the Remuneration Report.
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.
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)
• Ms Julie Elliott (Non-Executive Director, appointed 14 April 2020)
• Mr Lachlan Given (Non-Executive Director)
• Mr Robert Hines (Non-Executive Director, appointed 14 April 2020)
• Mr Sam Budiselik (Chief Operating Officer to 26 February 2020, Chief Executive Officer from 26 February 2020)
• Mr Leslie Crockett (Chief Financial Officer from 2 June 2020)
• Mr Brad Edwards (General Counsel and Company Secretary)
• Mr Peter Egan (Chief Risk Officer from 3 February 2020)
• Mr Ben Cox (General Manager Corporate Distribution to 13 September 2019)
• Mr Martyn Jenkins (Chief Financial Officer to 2 September 2019)
• Mr Brendan White (Chief Executive Officer to 26 February 2020)
6.4 Key management personnel disclosures (continued)
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
Cash Converters rights plan
Notes to the financial statements 87
2020
$
2019
$
4,295,040
3,823,836
112,947
(24,019)
(194,373)
302,500
152,708
22,580
(466,658)
747,077
4,492,095
4,279,543
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 37,063,109 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 10,201,088 performance rights were granted in Tranches 27 and 28 to senior
executives of the Company.
The following arrangements were in existence during the current reporting period:
Tranche
Grant date
Number of rights
Grant date
fair value
Exercise price
Expiry date
21
22
23
24
25
26
27
28
14 Feb 2018
14 Feb 2018
19 Dec 2018
19 Dec 2018
26 Mar 2019
26 Mar 2019
9 Jun 2020
9 Jun 2020
999,380
999,380
2,643,872
2,643,872
1,843,633
1,843,633
5,100,544
5,100,544
$0.22
$0.33
$0.15
$0.24
$0.06
$0.19
$0.17
$0.19
$0.00
$0.00
$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
30 Jun 2022
30 Jun 2022
Fair value of performance rights granted during the year
The weighted average fair value of the performance rights granted during the financial year is $0.18 (2019: $0.17).
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 27
Tranche 28
9 Jun 2020
Monte Carlo
$0.195
$0.00
50%
9 Jun 2020
Binomial
$0.195
$0.00
50%
2.06 years
2.06 years
0.00%
0.28%
0.00%
0.28%
88
Cash Converters International Limited | Annual Report 2020
6.5 Share-based payments (continued)
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.
2020
Number
10,973,770
10,201,088
2019
Number
9,819,506
9,218,162
(7,064,712)
(8,063,898)
-
-
14,110,146
10,973,770
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
No share options were exercised during the years ended 30 June 2019 or 2020.
Share options forfeited / lapsed during the year
Tranche
Grant date
Number lapsed
Year ended 30 June 2020
21
22
23
24
25
26
Year ended 30 June 2019
17
18
19
20
21
22
23
24
14 Feb 2018
14 Feb 2018
19 Dec 2018
19 Dec 2018
26 Mar 2019
26 Mar 2019
23 Nov 2016
23 Nov 2016
12 Dec 2016
12 Dec 2016
14 Feb 2018
14 Feb 2018
19 Dec 2018
19 Dec 2018
999,380
999,380
689,343
689,343
1,843,633
1,843,633
7,064,712
2,286,460
2,286,460
892,649
892,649
731,264
731,264
121,576
121,576
8,063,898
Notes to the financial statements 89
6.5 Share-based payments (continued)
Share options outstanding at year end
The total number of options outstanding at 30 June 2020 was 14,110,146 (2019: 10,973,770).
Tranche
Grant date
Number of rights
23
24
27
28
19 Dec 2018
19 Dec 2018
9 Jun 2020
9 Jun 2020
1,954,529
1,954,529
5,100,544
5,100,544
14,110,146
Grant date
fair value
$0.15
$0.24
$0.17
$0.19
Exercise price
Expiry date
$0.00
$0.00
$0.00
$0.00
30 Jun 2021
30 Jun 2021
30 Jun 2022
30 Jun 2022
The weighted average remaining contractual life for the performance rights outstanding at 30 June 2020 was 1.7 years
(2019: 1.8 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.
90
Cash Converters International Limited | Annual Report 2020
6.6 Auditor’s remuneration
Auditor of the parent entity
Audit / review of the financial report
Other non-audit services
Related practice of the parent entity auditor
Audit
Taxation services
2020
$
539,530
-
50,160
18,310
608,000
2019
$
466,399
26,083
46,974
15,176
554,632
The auditor of Cash Converters International Limited is Deloitte Touche Tohmatsu.
6.7. Events subsequent to the end of the year
Victoria entered Stage 4 pandemic restrictions with effect from Thursday 6 August 2020 for a minimum six-week period,
impacting 19 metropolitan corporate stores and 9 franchise stores. The ongoing impact is not able to be estimated by the
directors at this point in time.
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.
Directors’ declaration 91
Directors’ declaration
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
Peter Cumins
Director
Perth, Western Australia
27 August 2020
92
Cash Converters International Limited | Annual Report 2020
Auditor’s independence declaration
Liability limited by a scheme approved under Professional Standards Legislation Member of Deloitte Asia Pacific Limited and the Deloitte Network. 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 11, 37 St Georges Terrace Perth WA 6000 27 August 2020 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 2020, 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 Independent auditor’s report
Independent auditor’s report 93
Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Network. 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 2020, 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 2020 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 & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (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. 94
Cash Converters International Limited | Annual Report 2020
Independent auditor’s report (continued)
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 3.7 and 3.8, the carrying value of goodwill and other intangible assets as at 30 June 2020 relating to the personal finance and store operations was $107.0 million and $11.4 million respectively. Management undertakes impairment testing to test the recoverability of goodwill and intangible assets annually. Additionally, an assessment is made as to whether any non-current asset or cash generating unit (‘CGU’) may be impaired at balance date. The assessment of the recoverable value requires significant judgement in respect of assumptions and estimates in preparing a value in use model (‘VIU’) such as: • discount rates; • forecast retail growth rates; • forecast loan volumes; • forecast bad debt levels; and • weighted probability scenario’s in relation to the uncertainty surrounding the timing of COVID-19 recovery. Our procedures included, but were not limited to: • evaluating 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: • our independently determined range of reasonable discount rates was compared to the rates used by management; • we compared forecast loan volumes for personal loans against recent actual levels of lending and the historic growth rates in lending; • we compared forecast bad debt levels for personal loans to historic bad debt levels; • we compared forecast retail and pawn broking revenue growth rates to historic grow rates as well as external data on expected industry growth rates; • evaluating the probability weighted scenarios applied by management for the impacts of COVID-19 and potential legislation changes on future personal loan volumes; • sample testing management’s models for mathematical accuracy; and • assessing the appropriateness of the disclosures in the Notes to the financial statements. Independent auditor’s report (continued)
Independent auditor’s report 95
Key audit matter How the scope of our audit responded to the Key Audit Matter Allowance for impairment losses – loan receivables As disclosed in Note 3.2, the carrying value of loan receivables as at 30 June 2020 was $129.6 million, net of allowances for impairment losses of $30.4 million. The assessment of the recoverable value of loans requires significant judgements in determining the approach for estimating expected credit losses. Management uses an expected credit loss model taking into account the historical losses observed, current conditions of the loan receivables and forecast future economic conditions. Significant judgement has been applied to assess the likely future economic conditions resulting from the COVID-19 pandemic using a macroeconomic model overlay incorporating publicly available forecasts for unemployment rates and probability weighted scenarios focused on the rate of economic recovery. 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; • assessing the impact of COVID-19, including the Melbourne lock down on the loan recovery assumptions; 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 for the year ended 30 June 2020, 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. 96
Cash Converters International Limited | Annual Report 2020
Independent auditor’s report (continued)
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. 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 fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • 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. Independent auditor’s report (continued)
Independent auditor’s report 97
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, actions taken to eliminate threats or safeguards applied. 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. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 26 to 37 of the Directors’ Report for the year ended 30 June 2020.In our opinion, the Remuneration Report of Cash Converters International Limited, for the year ended 30 June 2020, 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, 27 August 2020 98
Cash Converters International Limited | Annual Report 2020
Additional security
holder information
As at 21 September 2020
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
687
1,197
707
1,243
312
4,146
Fully paid
ordinary shares
Number
298,888
3,356,806
5,541,003
41,498,080
565,743,169
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 1,423, given a share price of $0.165 per share.
(d) Substantial shareholders
Ordinary shareholder
EZCORP Inc
Perpetual Limited
FMR LLC
Carol Australia Holdings Pty Limited
Number of shares
% of issued shares
214,183,714
60,848,809
43,023,094
41,397,986
34.75
9.87
6.98
6.72
2 Twenty largest equity security holders
Ordinary shareholder
1. EZCORP Inc
2. HSBC Custody Nominees (Australia) Limited
3. Citicorp Nominees Pty Limited
4. JP Morgan Nominees Australia Pty Limited
5. Sandhurst Trustees Ltd
6. Mrs Lilian Jeanette Warmbrand
7. National Nominees Limited
8. Riolane Holdings Pty Ltd
9. Vadina Pty Limited
10. Mr Frederick Benjamin Warmbrand
11. Consvest Pty Ltd
12. Cash Converters Franchisees Association Inc
13. Acres Holdings Pty Ltd
14. Rocsange Pty Ltd
15. Mr Peter Cumins
16. NCH Pty Ltd
17. Mr Kamil Umit Yesilyurt
18. Kamala Holdings Pty Ltd
19. BNP Paribas Noms Pty Ltd
20. Dorran Pty Ltd
Additional security holder information 99
Number of
shares
% of issued
shares
214,183,714
113,395,106
40,055,821
34,883,267
17,042,736
6,837,452
6,653,950
6,275,226
2,863,750
2,765,774
2,600,000
2,595,040
2,500,000
2,500,000
1,900,468
1,705,423
1,700,000
1,654,896
1,651,087
1,500,000
34.75
18.40
6.50
5.66
2.76
1.11
1.08
1.02
0.46
0.45
0.42
0.42
0.41
0.41
0.31
0.28
0.28
0.27
0.27
0.24
465,263,710
75.50
cashconverters.com