Cash Converters closes December half-year with strong balance sheet to pursue acquisition opportunities

Cash Converters ASX CCV acquisition revenue balance sheet
Cash Converters managing director Sam Budiselik says the company looks forward to a new phase of inorganic growth in 2022.

Despite ongoing challenges posed by the pandemic, Cash Converters (ASX: CCV) has revealed a strong December half (H1 FY2022) – posting a 23% rise in revenue to $115.2 million, resulting in strong cash flow to pursue acquisition opportunities.

This 23% revenue growth was compared to the prior corresponding period (H1 FY2021), which brought in $93.9 million.

The company also achieved a 23% increase in its loan book, which swelled to $192.1 million.

Meanwhile, loan originations were up 36% to $134 million for the period.

Net profit after tax rose slightly to $7.7 million for H1 FY2022, compared to $7.6 million in H1 FY2021.

Resilient business model

Commenting on the H1 FY2022 results, Cash Converters managing director Sam Budiselik said the strong revenue and operating profit demonstrates the resilience of the company’s business model despite COVID-19 causing “extensive” government-mandated store closures during the period.

“Whilst these closures resulted in a loss of over 24% of trading days across our network, the most of any COVID-19 impacted period, we remained focused on supporting our customers and our team members and ensuring our financial position remained strong.”

He said the company’s ability to “significantly increase” loan originations and, as a result, its gross loan book was further evidence of the value of its investment in its digital strategy and assets.

“The growth in origination resulted in a net expected credit loss allowance charge variance of $7.7 million in the half, with the revenue benefit from this lending growth now due to flow throughout the second half of the financial year,” Mr Budiselik noted.

Diversified finance offering

Cash Converters is currently diversifying its personal finance offerings, which including transitioning its loan book to longer duration and lower cost loan products.

This has led to the company’s medium amount credit contract (MACC) gross loan book increasing 111% to $65.1 million.

Mr Budiselik said the large rise in MACC loans showed the Cash Converters was winning market share in this vertical.

The company also remains focused on establishing new loan products to attract more customers.

Launching the PayAdvance loan has won over a younger cohort of customers with almost 80% of those taking up this product aged under 40.

This compares to the company’s legacy loans where customers have an average age of 44.

Meanwhile, the vehicle loan division financed $9.6 million during H1 FY2022, which was up 543% compared to H1 FY2021 and is continuing to expand.

Looking ahead

Despite Cash Converters retail and pawnbroking section taking a hit due to the pandemic, Mr Budiselik said this division of the business “remained important”.

He said this network will continue to evolve to “accommodate a smaller footprint and lower lease expense format in commercially attractive locations”.

This will involve converting to smaller stores and negotiating lease reductions in others to ensure sustainable long-term returns from all locations.

In parallel, Cash Converters will continue to invest in technology to ensure it can serve customers without interruption, while reaching new and existing customers with fresh products.

Additionally, due to the free cash flow generated in H1 FY2022, Mr Budiselik said the company would “continue to sensibly evaluate acquisition opportunities”.

“We look forward to a new phase of inorganic growth ahead of the company.”

With a combination of a strong balance sheet and underlying operating profitability, Cash Converters has declared a fully franked interim dividend of $0.01 per share for shareholders.

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