Cash Converters (ASX: CCV) is like that great friend who lends you money (few questions asked) and gives you their hand-me-downs and takes things you no longer want. As a bonus, Cash Converters gives you money for taking things you no longer want. With more interest rate hikes anticipated and people reeling under financial stress, the second-hand goods retailer and lender is seeing more takers for its services.
In Q1 FY24, the Company’s revenue shot up to $101.4 million, marking a 47% increase on Q1 FY23 and up 24% on the prior quarter. In FY23, its personal financing segment brought in $114 million in revenue, with more and more people demanding medium-term and vehicle loans. Cash Converters also began integrating its New Zealand acquisition and cementing its base in the UK, which is also witnessing a rising cost of living.
Cash Converters Managing Director, Sam Budiselik, expounded, “The robust demand for credit experienced throughout FY23 has carried over into Q1 FY24. Our gross loan book closed Q1 FY24 at another record high, reaching $278.5 million, [representing] an uplift of 30% on the prior comparative period. Combined Principal Advanced (new funds lent out) across all loan products for the quarter was $82.5m, up 13% on PCP.”
The Company has been departing from Small Amount Credit Contracts (SACC) following its FY23 report. Though its overall loan book grew, the costly SACCs accounted for only 23% of the total loan book, down from 34% at the end of Q1 FY23. To avoid the liability of bad debts as a result of short-term, payday-type loans, Cash Converters is switching to offering longer-term, lower-cost loan options instead. The strategy seems to be working so far, with the growth of its vehicle and medium-term loans and the uptake of its line of credit products. Besides that, Cash Converters is also emphasising the growth of its acquisitions.
Budiselik added, “During the quarter, we successfully completed the settlement of the Capital Cash Ltd acquisition in the United Kingdom, which has added significant value to our European franchise operation. This acquisition is a key part of our strategy to expand our global footprint, diversifying our geographic operation and revenue streams, and provides a base for continued expansion in the region. Integration of the acquired New Zealand master franchise into the wider business is also well underway, with work in progress to realise operational efficiencies by leveraging operational assets within the Australian business.”
Its store network performed well, with Australian corporate store retail sales up 12% on Q4 FY23. Its medium loan book, which includes MACC, grew 31% from 30 September 2022 and it is anticipated this loan book growth trend will continue. Though in its infancy, the Company forecasts its new Line of Credit products to grow strongly. Small and medium loan applications increased 4% on the prior comparative period, to over 162,000, representing strong and growing underlying demand.
In Q1 FY24, the Company continued the integration of its New Zealand acquisition and settled the acquisition of Capital Cash in the UK. Capital Cash is the largest franchise store network in the UK comprising 42 Cash Converters branded stores. This acquisition provides a base for growth in Europe.
Cash Converters’ balance sheet remains strong with cash in hand of $58.4 million after funding loan book growth and settlement of the UK franchise acquisitions. As inflation pressures worsen, Cash Converters might just become one of the closest pals for Aussies.
Alinda is a Business Reporter for The Sentiment
Latest posts by Alinda Gupta (see all)
- Ovanti’s iSentric signs contracts worth $14.4m with Malaysian commercial bank - June 27, 2024
- Baby Bunting fights back from retail downturn with 5-year strategy, includes Gen-Z focus and self-funded growth - June 27, 2024
- CLEO meets with US FDA to develop strategy for ovarian cancer test launch - June 26, 2024
Leave a Comment
You must be logged in to post a comment.