EDMONTON — Government rate caps in a number of provinces and costs associated with expansion were cited Wednesday by The Cash Store Financial Services Inc. (TSX:CSF) for a decrease in first-quarter profits despite higher revenue.
The Edmonton-based short-term lender to consumers who may not be able to obtain such advances from traditional banks, also said it was increasing its quarterly dividend by two cents to 12 cents per share. The dividend will be payable Feb. 21 to shareholders of record on Feb. 7.
Meanwhile, The Cash Store said it earned net income of $3.4 million or 19 cents per diluted share in the three months ended Dec. 31, down from $5.5 million or 32 cents in the same period the previous year.
Revenue in the quarter was up 16.5 per cent to $49.3 million from $42.3 million in the prior-year period.
Same branch revenues for the 446 locations opened since Oct. 1, 2009, increased two per cent to $95,400 from $93,500.
The overall branch count as of Dec. 31 was 570, up from 544 at the end of September. The net increase of 26 branches included 28 new ones added or acquired in the quarter, two of them in the United Kingdom.
“We are confident that our continued focus on expanding other revenue from our banking product line and continued branch expansion will drive revenue growth,” said chairman and CEO Gordon J. Reykdal.
“However, growth in revenue from loan fees was constrained by compression on rates related to the implementation of rate caps in the provinces of British Columbia, Alberta, Ontario and Nova Scotia, over the past year, and specifically Manitoba which implemented its caps in October,” he added.
“Other factors impacting earnings in the period include an increased drag on earnings from a total of 101 net new branches added over the 12 months ended Dec. 31, 2010, and an increase in selling, general and administrative costs linked to new regulatory processes,” he said.
Reykdal said the company’s focus in the coming quarters will be to offset the impact of rate compression with increased loan volumes and increased revenue from ancillary financial products.
The company’s stock was up seven cents at $16.88 Wednesday on the Toronto Stock Exchange.