Cash Converters boosts revenue amid ‘watershed’ FY2022
As spending continues to pick up, Cash Converters says the appetite for credit remains elevated.
Cash Converters (ASX: CCV) has announced what managing director Sam Budiselik describes as a “watershed year” for the 12 months ending June (FY2022), with revenue rising 22% to $245.9 million.
Earnings before interest tax depreciation and amortisation (EBITDA) was up 6% in FY2022 to $52.7 million, while operating net profit after tax increased 26% to $19 million.
Mr Budiselik said FY2022 was “watershed year” for the company as it navigated the final stages of COVID-19 related store closures and government stimulus.
“Delivering a solid operating profit in these challenging times ensures our business is well positioned to support our customers as we enter a period where cost of living pressures continue to increase in line with inflation.”
Elevated credit appetite
Mr Budiselik said that as spending continues to pick up the appetite for credits remains elevated.
This was evidenced in the company’s gross loan book figures, which were up 20% in FY2022 to $213.9 million.
The future expected loan book income (fees and interest) is sitting at $65.6 million, with a low net loss rate of 3.8%.
To fund its loan book growth, Cash Converters has $58.1 million cash on hand.
“We remain confident in our credit risk models and loan book quality, as evidenced by the superior cumulative loss rates for more recent loan vintages, when compared to prior periods,” Mr Budiselik explained.
He said the company has taken a “prudent approach” in providing its loans and takes into account any deterioration in the underlying economy.
“We continue to leverage our machine learning, credit assessment and collections capabilities, focusing on offering secured and unsecured credit options to responsibly meet the cash needs of our customers,” Mr Budiselik added.
Loan book
During FY2022, demand continued to increase for Cash Converters’ Medium Amount Credit Contract product, which is a personal loan of up to $5,000. This loan book expanded 54% over the period.
Easing of government stimulus and superannuation access drove improved credit demand for vehicles via the company’s Green Light Auto product.
In this space, Cash Converters experienced a 224% increase in loan origination and 5% rise in grow loan book growth.
Meanwhile, the Pawnbroking loan book reached pre-COVID-19 levels in FY2022 – yielding an average loan value of $192 million – up from $142 in FY2019.
Also during FY2022, the company launched its PayAdvance product, which is designed to attract a younger demographic.
Of the PayAdvance loans generated, 46% were for customers aged 18-30, and 78% were for clients under 40.
In the pipeline for launch in H2 FY2023 is Cash Converters Line of Credit product. This loan is designed to provide eligible customers with a lower cost credit facility that can be drawn over time.
Shift in consumption trend
Mr Budiselik noted that as society becomes more focused on the environmental impact of consumption, Cash Converters’ retail model has benefited.
“Our unique retail model resulted in the purchase of over 1.4 million second-hand goods that in many cases are destined for landfill.”
“A new smartphone, as an example, will generate 85 kilograms of carbon dioxide in its first year of use (and a laptop 330kg) – 95%, of which, comes from the manufacturing process,” he explained.
“In FY2022, we purchased over 45,000 smartphones and laptops throughout our network – potentially offsetting 8,300 tonnes of carbon dioxide.”
Outlook
As FY2023 advances, Cash Converters is continuing to assess new store locations, while also converting some existing ones to smaller footprints and negotiating lease reductions in others.
In FY2022, more than 60% of lending and 18% of retail sales were transacted online.
The company plans to continue growing its loan products and volumes and boost online retail turnover.
As cost-of-living pressures increase, Cash Converters is well-placed to meet higher demand across its retail and lending divisions.
Additionally, Mr Budiselik said the company would capitalise on inorganic growth opportunities as they present, as expanding loan books generate earnings momentum.