Cash Converters’ lending momentum continues in June quarter

Cash Converters ASX CCV 2022 loan book growth operating leverage
Cash Converters expects the rebound in credit demand in FY2022 will continue in the first half of FY2023.

Cash Converters (ASX: CCV) has continued its strong lending momentum through another three-month period, unveiling a 20% growth in its loan book for the June quarter (Q4 FY2022) compared to Q4 FY2021.

The unaudited fourth quarter results released by the Perth-based personal finance and secondhand retail company highlighted its total gross loan book increased to close-out FY2022 at $214 million – up 20% on the previous corresponding period and 4.2% on Q3 FY”2022’s figure of $203.7 million.

Driving this rise was once again Cash Converters medium amount credit contract (MACC) loan book, which rose 54% to $76.1 million compared to $49.4 million in Q4 FY2021.

Cash Converters now forecasts a future expected loan book income of over $65.6 million.

Managing director Sam Budiselik said the company is pleased the momentum from its third quarter carried through to the last quarter, despite anticipating a quieter lending period.

“We are pleased to report that the elevated credit demand observed in Q3 FY2022 has continued into Q4 FY2022,” he said.

“The final three months of the financial year are traditionally our quietest lending period; however, record outgoings indicate strong underlying borrower demand.”

Net losses for the quarter also remained stable at just 4.2%, an increase of just 0.7% on Q4 FY2021.

Cash Converters expects the rebound in credit demand observed during FY2022 to continue into the first half of the FY2023, with rising interest rates and inflation putting pressure on household spending.

Mr Budiselik said he remains confident in Cash Converters’ ability to service the rising demand “responsibly” using its machine learning and credit assessment capabilities.

PayAdvance product development

The company reported in the unaudited trading update that its new PayAdvance product pilot was progressing well, with more than 72% of approved loan applicants new to the business and 78% under the age of 40.

More than 14% of customers have also already migrated to longer term products within the Cash Converters ecosystem.

Cash Converters aims for the PayAdvance Earned Wage Access (“EWA”) pilot to be a cost-effective customer origination channel – transitioning customers into longer-term, lower-cost products, which has proven to be the case.

Being able to facilitate the transition has been central to the ongoing success of the product and highlights the importance of Cash Converters’ broader product suite in meeting the needs of Australian borrowers.

Retail store outlook and other product development

During Q4 FY2022, retail sales through the company’s WebShop remained prominent, with an average of $1.4 million in monthly sales, compared to just $700,000 over the same period in 2019.

The company believes its physical store presence has been the backbone of the WebShop’s effectiveness.

Cash Converters’ new Line of Credit product is said to be tracking well. It was developed to boost customer retention – improving “lifetime value”.

The company plans to have the product in its pilot phase by Q3 FY2023, before commercial release later that year.

Financial position

On 16 June, Cash Converters announced the renewal of the company’s $150 million securitisation facility with Fortress Investment Group – giving it the necessary capacity to continue expanding its loan book.

The company also has $58.1 million in cash and equivalents as well as the facility, which is currently drawn to $70.3 million.

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