Tuesday 28 February 2017 by FIIG Research ripples_on_water Company updates

CCV records disappointing 1H17

Cash Converters recorded disappointing 1H17 results as it exits from small amount credit contracts and signalled that FY17 net profit after tax would be at the low end of the previously advertised range. However as the loan book is run down, cash is released which helped reduce net debt by $24.7m over the half to $35.7m

Summary results

Source: Company reports

Credit metrics (underlying)

$m LTM to Dec 2016 FY16
EBITDA 59.9 69.1
Interest 10.6 9.7
Net debt 35.7 60.4
EBITDA interest cover 5.6x 7.1x
Net debt/EBITDA 0.6x 0.9x

Source: FIIG Securities, Company reports

Key points:

  • In August 2016, CCV announced it would reduce its exposure to the lower end of the small amount credit contracts (SACC) segment. As a results, the personal loan book in Australia reduced by 25.6%, from $115.8m as at 31 December 2015, to $86.2m as at 31 December 2016
  • EBITDA for the period was down 31.8% to $25.7m
  • However, as loan volumes fall so does CCV’s funding requirements releasing cash back to the business. Net debt therefore has reduced to $35.7m compared to $60.4m at FYE16. Net debt to EBITDA has reduced to 0.6x from 0.9x at FYE16
  • We note the group faces two class actions which the litigators estimate may be worth ~$47m and an ASIC settlement of $12.5m. If these items were paid out in full, leverage would increase to 1.6x based on the above figures (all other variables held constant)
  • CCV did not give any meaningful detail as to the progress of its medium amount credit contracts (MACC) product, launched in in November 2016 to offset the exit from the SACC sector
  • The Board has resolved not to pay an interim dividend for the six months to 31 December 2016
  • FY17 NPAT remains in the previous guidance of $20-23m, however it is now expected to be at the lower end of the range