For personal use only Annual Report 2020 B est. Our business 198 4 16 Meeting the needs Diversified Unique, integrated, Countries of a growing and product range multi-channel under-serviced across lending store and online market and retail network 705 Stores 83 Corporate stores 622 Franchise stores Over 36 years Consistent Supportive of operation track record financier and through various of solid a strong balance 4 business cycles earnings sheet Business units Personal finance Vehicle finance Significant Proprietary technology delivering Store operations domestic growth high customer satisfaction and Franchise operations opportunities bad debt optimisation Corporate directory Directors Registered and principal office Auditors Mr Jason Kulas Level 11, Citibank House Deloitte Touche Tohmatsu Non-Executive Chairman 37 St Georges Terrace Brookfield Place, Tower 2 Mr Peter Cumins Perth WA 6000 123 St Georges Terrace Executive Deputy Chairman Australia Perth WA 6000 Tel: +61 8 9221 9111 Australia Mr Kevin Dundo www.cashconverters.com Non-Executive Director Ms Julie Elliott Stock Exchange Share registrar For personal use only Non-Executive Director Australian Securities Exchange Mr Lachlan Given Computershare Investor Level 40, Central Park Non-Executive Director Services Pty Ltd 152-158 St Georges Terrace Level 11 Perth WA 6000 Mr Robert Hines 172 St Georges Terrace Australia Non-Executive Director Perth WA 6000 Australia ASX code: CCV Company Secretary Tel: 1300 850 505 Mr Brad Edwards Contents Chairman’s report 2 Chief Executive Officer’s report 4 GEM 6 Cashies online 7 Company highlights 8 Financial highlights 11 Operating and financial review 12 Directors’ report 20 Remuneration report (audited) 26 Corporate governance 38 Consolidated statement of profit or loss and other comprehensive income 39 Consolidated statement of financial position 40 Consolidated statement of changes in equity 41 Consolidated statement of cash flows 42 Notes to the financial statements 43 Directors’ declaration 91 Auditor’s independence declaration 92 Independent auditor’s report 93 Additional security holder information 98 These financial statements have been Each section sets out the accounting organised into the following six sections: policies applied in producing the relevant notes, along with details of any key For personal use only 1. Basis of preparation judgements and estimates used or 2. Financial performance information required to understand the note. 3. Assets and liabilities The purpose of this format is to provide 4. Capital structure and financing costs readers with a clearer understanding of 5. Group structure what drives the financial performance and financial position of the Group. 6. Other items 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 During that time, Stuart was instrumental in providing businesses to remain nimble and pivot with new challenges the Board with the leadership and commercial and opportunities as they arise remains key to future judgement necessary to oversee and resolve a number success – an ability Cash Converters has demonstrated of significant challenges, including class actions, in the most recent financial year. regulatory matters and most recently, the business impact of COVID-19. Stuart continued the Board’s The Board has endorsed management’s strategy led focus on rebasing the Company’s approach to sound by Chief Executive Officer, Sam Budiselik, who has fundamentals around customer service, responsible outlined a simple but effective plan to build upon the lending, and appropriate risk-based parameters, with Company’s already strong domestic operations, optimise a view to rewarding shareholders in a sustainable its current product and service offerings, and identify new manner in the long term. We thank Stuart for his opportunities for expansion. These three strategic pillars of valuable contribution. Operational Excellence, Product Development and Network Expansion will allow Cash Converters to consolidate and I would also like to convey the Board’s gratitude to Kevin grow its position as the lender and retailer of choice for its Dundo, who retires from the Board after this year’s Annual customers now and into the future. General Meeting. During the year, the Company settled the remaining class Kevin served on the Board for six years and made a action and looks forward to focusing on delivery of its valuable contribution as an Independent Non-Executive strategic objectives. Director, having served as Chair of the Audit and Risk Committee and as a member of the Remuneration and I look forward with confidence to Cash Converters growing Nomination Committee. sustainably into the future to the benefit of its customers, employees, and shareholders. For personal use only 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. Jason Kulas Chairman 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 For personal use only 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- At the same time, we are excited to welcome our new funded and supportive of its Customers we could have Chairman Jason Kulas and I look forward to leveraging been more severely impacted. We continued trading Jason’s retail and consumer finance experience. through all corporate stores across Australia during this period while maintaining exemplary hygiene and Operational Performance distancing measures. Continuity across the broader Our Customer-centricity enabled Cash Converters to business was enabled through the strength of our report a pleasing set of full-year results. While our digital assets, facilitating record online retail sales revenue ($279.0 million) was down 0.9% on the previous among other achievements. corresponding period, on an underlying basis the Company We did not require the support of Job Keeper and true outperformed across many of our key metrics. to the spirit of the Company I am proud say that we were Adjusted for the final class action settlement, Cash there for our Customers when they needed us most. Converters reported an Operating NPAT of $19.6 million Although our underlying result for the year ended and Operating EBITDA of $62.1 million, up 63.2% and 30 June 2020 (FY 2020) was strong, the previous six 51.5% respectively on the previous corresponding months have been arguably the most challenging period period. These headline results were driven by earnings in Cash Converters’ 36-year history. It is during these improvements across each of the Company’s segments periods when team capability is truly tested. Observing – most notably a reduction in Net Bad Debt Expense the way the team came together and the effort of as a proportion of personal finance revenue and a our front-line colleagues to ensure a COVID-19-free year-on-year increase in retail profit margin. While we environment in stores makes me so proud to work experienced a temporary reduction in lending demand, for Cash Converters. It is a privilege to lead such a our stores demonstrated counter-cyclical retail behaviour passionate group of individuals. complemented by particularly strong online sales of home For personal use only entertainment and technology items. This strong in-store Although it occurred after FY 2020 it would be remiss retail turnover was facilitated, in part, by all Australian of me not to acknowledge the departure of our previous corporate Cash Converters stores remaining open chairman Stuart Grimshaw. Stuart has – and continues throughout the financial year ensuring that we maintained to be – a valuable source of guidance and counsel to the a vital presence within the community in their time of Company. His ability to consider both the strategic and greatest need. Our stores demonstrated the strategic tactical implications of complex issues while