A slowly sinking ship......The long awaited results showing a true 'apples-to-apples' comparison for the Australian/New Zealand operations have arrived! I previously stated the importance of the Q4 results, as Australian ATM operations account for the majority of ATM Gross Profits (Q4 $16.46 Million for Australia compared to $10.30 Million for Canada/UK combined).
As noted, the Canadian ATM operations have seen a steady decline, periodically propped up by expensive acquisitions. Therefore, in my opinion, the future of the company rests on the new International acquisitions.
Via today's press release, the CEO stated "Our Australian operations continue to perform consistently and in line with expectations". Well, let's have a look......
Q4 2013 vs Q4 2012:
Operational ATMs decreased by 1.3%
Transactions decreased by 6.2%
Revenue decreased by 8.1%
Gross profit decreased by 8.4%
Q4 is an important quarter for comparison, as the Australian acquisiton was completed in early Q3 2012, and, to be fair, DCI needed a few months to make changes.
So.....the $220 Million spent to purchase the foothold into the Australian market doesn't seem to be progressing as hoped. Instead of year-over-year growth, there is notable year-over-year declines. Is this really 'in line with expectations'?
Also, let's review a number of other general Q4 metrics:
- Overall EBITDA decreased 3.4% despite the two months of positive contributions from the Threshold acquisition that occured on Nov 1st, 2013, as well as the earlier (and smaller) acquisition of WestCoast Cash in Kelowna (202 ATMs).
- DCI recorded a loss of $1.268 Million for the quarter as a result of a decline in net income of $2,940 Million from Q4 2012.
- The dividend payout ratio increased to an historic high of 72%, a dramatic increase from Q4s ratio of 48%.
- In 2013, DCI bought a company in Kelowna, BC that added 202 ATMs. They also bought Threshold, which added 1,475 ATMs. Despite this, they are only recording an additional 935 ATMs at the end of 2013. This means not only are they not expanding through internal growth, contrary to the stated goals of DCI for the past number of years, but they are actully losing a significant amount of ATMs.
- The prepaid card business continues to decline, from $11,658 Million in Revenue in Q4 2012 to $5,615 Million in Revenue in Q4 2013. It gets worse though, as the Cash Store ceased operations in Ontario in Q1 2014, and that represents 30% of their overall volume. Expect things to get worse in the Pre-paid business before it levels out.
Therefore, I don't think we can expect an announcement of a Dividend Increase anytime soon. If the Australian business continues to decline (and I believe that it will), DCI will have a difficult time to replace the lost revenue, even with additional acquisitions.
Watch those Dividends!