Cash Converters On The Downtrend

Cash Converters International Limited (“Cash Converters”, ASX: CCV) made an announcement that the class action in relation to cash advance lending in Queensland is settled now, as at October 22, 2018.  The other class action with regards to the personal loan lending in Queensland is in the list of hearing and was slated for commencement on 22 October 2018 while being defended vigorously. The settlement against McKenzie is subjected to the approval from the court as per the terms and condition. Also, settlement will be done based on the verification of the information of the settlement. Cash Converters assumes that all the conditions will be satisfied in the due course of time. As per the settlement, the group has been identified to make a payment of $ 10.6 million for funding the distribution to the respective class members. Particularly, the borrowers in Queensland who took cash advances during the period of April 28, 2010 to June 30, 2013 from CCV were clubbed under the name, class members. In addition, Cash Converters has to pay legal, administration, and other costs that might amount to about $ 5.8 million. There were also minor costs related to verification of customer data which is expected to not exceed $50,000. The mode of settlement will be done through the existing resources of the company. The key aspect to note is that the expenditure related to the settlement will be counted in current financial year and has been slated for deduction in accordance with requisite tax purpose. While Cash Converters is happy to bring the court case to a closure without any entry of liability, the investors seem to be having a mixed view. The settlement has nonetheless prevented from any cost with regards to litigation. 

The overall performance of the company since listing in terms of stock price movement is 7.87%. The one year and 5 years’ performance of the company’s stock is -16.58% and -74.04%, respectively. For the past 10 years the performance of the company’s stock is 18.04%. For the year ended 30 June 2018, the total revenue generated by the company was $260.345 million. The net profit of the company for the period is $22.503 million. The total asset of the company is $509.129 million, and the total liabilities of the company account to $186.721 million. This is indicative that the company has capacity to clear its long term obligations. The total current asset of the company is $309.155 million and total current liabilities is $165.874 million. This indicates that the company is capable of paying its short term obligations. The total shareholders equity is worth $322.408 million. The net cash used in the operating activities is worth $21.549 million. The major cash outflow under operating activities was due to the payments which were made to the suppliers and employees. The net cash outflow from the investing activities was $8.200 million. The company made a repayment of $135.028 million. As a result, the net cash inflow from the financing activities was $88.859 million. The cash and cash equivalent at the end of the year was $139.991 million.

The market price of the share as on 22 October 2018 was $0.310 with the market capitalization of $165.15 million and PE ratio 5.82x; but on 23 October 2018, the share price dropped by 4.8% to $0.295 (1:33 PM AEST).

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