On July 6, 2009, Dollar Financial Corp. (DLLR) announced the acquisition of four stores in Northern Ireland for £550,000 including £160,000 for the loan books. Three of the stores reside in central Belfast whereas the fourth store is situated in the town of Lisburn, the third largest city in Northern Ireland.
The acquired stores are multi-product locations offering check cashing, payday lending and pawn broking services. The company plans to expand the stores to include all of its services, including Western Union money transfers, foreign exchange and debit cards and others.
The EBITDA contribution for the acquired stores for the twelve months following the acquisition is expected to be in the range of £0.3 million and £0.4 million.
Acquisitions of similar entities and franchised locations allow Dollar Financial to leverage its corporate infrastructure while acquisitions of complementary businesses have helped leverage the company’s existing store footprint by including supplementary services. We believe that the recent acquisitions will allow Dollar Financial to further expand and strengthen its global store footprint and hence improve its profitability.
Dollar Financial is an international financial services company providing a range of consumer financial products and services primarily consisting of check cashing, short-term consumer loans, Western Union money orders and money transfers, along with other conveniences such as utility bill payments, currency exchange, and tax preparation. As of March 31, 2009, the company operated 1,264 stores representing the largest network in Canada and the U.K. and the second largest in the U.S.
Dollar Financial’s customer base mainly comprises service sector workers, working in low-income, non-discretionary jobs, which are relatively resistant to the economic slowdown. The service sector is expected to stabilize faster than other sectors once the economy starts recovering. However, the top line will be impacted by the strengthening of U.S. dollar against the Canadian dollar and the pound sterling.
Therefore, we are maintaining our Hold recommendation on the stock.
Read the full analyst report on “DLLR”
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