Cash Converters buys 8 Victorian outlets

Perth-based Cash Converters International Ltd has moved further towards having mainly company-owned stores, rather than franchises, after agreeing to purchase eight Victorian outlets for $12.5 million.

The full text of a company announcement is pasted below

Cash Converters International Limited is pleased to announce that it has entered into a Sale Agreement to purchase eight Cash Converters stores in Victoria from the Hosking Financial Group (HFG). It is expected that completion of this acquisition will occur as soon as the various landlords of the stores have consented to the assignment of the leases.

The purchase price is $12.5 million and this will be funded from cash reserves and bank borrowing. No shares will be issued in connection with this acquisition. The price includes the loan book (approximately $2.2 million), stock (approximately $1.5 million), plant and equipment and fixtures and fittings (approximately $1.3 million) and all other assets employed in the businesses. The price is based upon a historical EBIT for the stores, for the financial year to 30 June 2007 of $3 million as verified by audit. The Company will incur additional costs going forward of approximately $600,000 per annum associated with maintaining the HFG head office and existing management team. These costs will be diluted as we add store numbers to the network.

Upon completion of this transaction, the Company will own 20 corporate stores - 11 in the United Kingdom and nine in Australia. This acquisition is a vital step towards the expansion of the corporate store network, a program which the Company is now firmly committed to. This will be achieved by a combination of both new store openings and the acquisition of existing stores from franchisees. The eight store network in Victoria together with its existing management team will form the core of our Australian corporate store network.

Each Company store in Australia will contribute to the collective advertising fund and pay training levies and IT fees on the same basis as every franchise store.

This acquisition is a strong vote of confidence by the Company in the future prospects of the Cash Converters store business model.