On 5 August, 2015, the company announced that Westpac Banking Corporation had written to inform it of its decision to stop providing banking and financial products and services to those customers who provide Short Term Credit Contracts or Small Amount Credit Contracts under section 5 (1) of the National Consumer Credit Protection Act 2009. The company is a licensed provider of financial services under the terms of the Act. Westpac has assured the company that the decision will be implemented in accordance with their contractual agreements and will be done in a considered and consultative way so as to allow the company to establish alternative banking arrangements. The company currently has a securitisation facility with Westpac drawn to $ 59 million which is contracted to March 2016 a run-off period of approximately 6 months. Westpac also provides transactional facilities and has agreed to provide these services until the expiry date of the securitisation facility. The company is confident that all Westpac facilities and services will be replaced in the normal course of business including the securitisation facility for personal loans. The company takes pride in the financial services that it provides to ordinary Australians who might otherwise not have access to credit. They also point out that, as recognised by successive governments, these financial services have a legitimate role to play in the economy.
Class action update
The company has announced that the class action in New South Wales has been settled but the settlement is subject to court approval of its terms and verification of the information on which the settlement is based. The company expects that all conditions will be satisfied in due course. The settlement provides for the company to pay $ 20 million into a fund for distribution to members of the class which comprises borrowers in New South Wales who took loans from the company and its franchisees during the period 1 July 2010 to 30 June 2013. The company will also pay legal costs capped at $ 3 million. Any part of the distribution fund which remains after efforts to contact and pay class members have been exhausted will be repaid to the company. The settlement will be funded from existing resources and legal expenses will be shown as a tax-deductible expense for the current financial year. The company is pleased to end the litigation without any admission of liability, prevents the further expenditure of company resources and removes the uncertainty. This lending system was used only in New South Wales during the period in question and all lending subsequently has been done under the new consolidated nationwide Federal consumers lending regime.
CCV Financial Highlights (Source - Company Reports)
The company has also been served with a writ seeking comments a class-action claim on behalf of borrowers in Queensland who took out personal loans from the subsidiaries of the company during the period 30 July 2009 to 30 June 2013. The proceedings attackd the "brokerage fees" charged to customers during the period in question which have not been charged since 30 June 2013. The proceedings only relate to loans made in Queensland to Queensland residents by subsidiaries of the company even though the action has commenced in New South Wales. The brokerage fee was charged to customers mainly by franchisees for introducing them to company subsidiaries who made the loans available. The company is satisfied that the brokerage fee is not contrary to any Commonwealth or Queensland legislation. It was a common practice in the financial services industry in Queensland and was introduced in 2009 with the knowledge of the then regulator the Office of Fair Trading. The company intends to defend the action vigorously.
CCV Daily Chart (Source - Thomson Reuters)
The company has provided a trading and performance update for the third quarter of FY 2015. Revenue was up by 9.7% to $ 93.6 million, EBITDA by 12.1% to $ 16.3 million and EBIT by 11.6% to $ 14.2 million. Overall it was a strong quarter with increases in revenue and EBITDA. However, the impressive 16.5% increase in EBITDA from the Australian operations was negatively offset by the poor performance of the UK business where EBITDA was down 94.5% from the previous year.
Australia
In financial services, the loan book was $ 110.5 million as at 31 March 2015, a growth of 10.2%. The book is down 4.5% from 31 December 2014 because of the traditional seasonal slowdown in the industry from January to March. Bad debts were approximately $ 3 million higher than the previous year. Cash advance loans increased by 2.4% to $ 60.6 million with strong growth in online transactions and loans written off grew by 29.2% to $ 2.7 million. Savings from the termination of the Kentsleigh/Cliffview license were $ 1.45 million. Corporate store revenue grew by 8.2% to $ 46.7 million driven by the ongoing expansion and EBITDA was up 1.4%. The Green Light Auto Group reported a loss of $ 694,260 compared to $ 165,043 in the previous year. A number of factors contribute such as additional investment and overhead from opening a new distribution outlet in New South Wales.
United Kingdom
In financial services, the new UK credit legislation has resulted in 12.1% decline in cash advance volumes and personal loan volumes, which have been more seriously affected, down 54.9%. Loans that were written before 2 January 2015 cannot be refinanced and need to be repaid in full by customers before a new loan can be written. The company expects to see increases in volume because the transition period is now over Corporate stores suffered from reduced margins on cash advance loans because of the interest rate cap and commission on personal loans fell because of the same reason. There was an EBITDA loss of $ 962,206.
Demand for the range of financial products continues to be strong in Australia and growth in the online cash advance product continues to be robust. The cash flow and position is strong and there is adequate funding to support growth. In the UK, operations are being reviewed for cost savings and the benefits expected will improve the business significantly. We are confident that the company will be able to replace the facilities from Westpac without any letup in business growth. We think that the recent drop in share prices has created a buying opportunity and we would rate the stock as a Buy.
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