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Cuscal moves into top gear
7th September, 2006
Cuscal has reported a record operating profit and announced an unbundling of its agreement with credit unions, putting the company onto a more commercial footing and opening avenues to new capital for expansion.
Cuscal Limited1, the leading provider of wholesale and transactional banking services to over 150 specialist retail financial institutions, today announced a 25% increase in operating profit to $17.6m for the year to June 30, 2006. A $2.4m gain on the settlement of a warranty claim over the sale of Bridges Financial Services, brought the net profit to a record $20.0m.
Cuscal has announced a 15% increase in the dividend for the year to 7.5 cents per share. Combined with a $22.4m capital repatriation in January 2006, Cuscal has provided a 9.9% return-on-equity (ROE) to its credit union shareholders, which represent 85% of the industry. The ROE has almost doubled since 2004.
| Full Year Results | 2005 $m | 2006 $m | Change $m |
| Operating profit before tax | 20.7 | 25.1 | 4.4 |
| Tax expense | (6.6) | (7.5) | (0.9) |
| Operating profit after tax | 14.1 | 17.6 | 3.5 |
| Significant items after tax | - | 2.4 | 2.4 |
| Total profit after tax | 14.1 | 20.0 | 5.9 |
| Return on Equity | 7.1% | 9.9% | |
| Dividend | 6.5c | 7.5c |
Cuscal CEO, John Gilbert, said the strong results are the culmination of a three-year plan that has seen quality earnings grow by three times those in 2003, and ROE improve from 3.3% to 9.9% over the same period. Improved operational efficiency and the disposal of non-core products have been key drivers of the result.
"Cuscal's 25% increase in net profit this year delivers on the promise we made to credit unions three years ago to turn Cuscal around," Mr Gilbert said. "Both earnings and dividends have tripled in three years, and credit unions will continue to benefit as Cuscal brings new products to market for an increasingly broad range of financial institutions."
Cuscal shareholders agreed today, at a Special General Meeting, to reform the company’s constitution. The reforms effectively "unbundle" the relationship between Cuscal and credit unions. Among other changes2, credit unions are no longer required to be shareholders of Cuscal in order to use banking services, with shares to be traded at a negotiated price between credit unions and, for the first time, other mutual ADIs may also become Cuscal shareholders.
Cuscal, which has previously only been able to raise capital from credit unions through an annual review of commercial shareholdings, will now also have access to external capital. Under the changed rules, Cuscal now has the ability to raise additional capital through preference shares and other instruments. Cuscal will also be able to raise up to 10% of its issued voting capital from non-mutual shareholders, and other mutual ADIs will also be able to purchase shares without limitation.
Cuscal will remain a non-listed private company with shares to be traded at a negotiated price instead of a fixed price set by Cuscal.
"This is a vote for the future. It provides credit unions with freedom of choice, and Cuscal with access to capital to grow new customers and new markets," Mr Gilbert said.
"A strong Cuscal means a strong credit union industry, and these changes will in turn make Cuscal stronger."
Mr Gilbert said Cuscal’s pursuit of new customers is showing promise with a range of new contracts and new products already in place, including:
- the launch of bopo, Australia’s first fully-reloadable pre-paid Visa card in a joint venture with Bill Express;
- the provision of debit card facility for Interstar Wholesale Finance, a member of the Challenger Financial Services Group;
- the introduction of a market-leading reverse mortgage product.
Mr Gilbert said further new business opportunities were being explored, including the introduction of a range of new card products and moving into new customer markets such as other non-banks, smaller ADIs and significant mortgage originators.
Mr Gilbert has been CEO of Cuscal since July 2002. He has recently extended his contract to remain as CEO of Cuscal until late 2008.
1 Formerly the Credit Union Services Corporation (Australia) Limited.
2 A full summary of the constitutional changes is available on request
Further information:
Julie Sheather
Media Relations Manager
Cuscal Limited
t: 02-8299 9024