Cash Converters (ASX:CCV) announced what chief executive Sam Budiselik describes as a “pivotal year” for the 12 months ending June (fiscal 2022), with revenue up 22% to 245.9 million of dollars.
Earnings before interest, amortization, and amortization (EBITDA) increased 6% in fiscal 2022 to $52.7 million, while net operating income after tax increased 26% to $19 millions of dollars.
Budiselik said fiscal 2022 was a “pivotal year” for the company as it navigated the final stages of COVID-19-related store closures and government stimulus measures.
“Delivering a strong operating profit during these difficult times ensures that our business is well positioned to support our customers as we enter a period where cost of living pressures continue to rise alongside the inflation.”
Increased appetite for credit
Mr. Budiselik said that as spending continued to rise, the appetite for credit remained high.
This was demonstrated in the company’s gross loan book numbers, which grew 20% in fiscal 2022 to $213.9 million.
Expected future income from the loan portfolio (fees and interest) is $65.6 million, with a low net loss rate of 3.8%.
To fund the growth of its loan portfolio, Cash Converters has $58.1 million in cash.
“We remain confident in our credit risk models and the quality of our loan portfolio, as evidenced by higher cumulative loss rates for the most recent loan vintages, compared to prior periods,” Budiselik explained. .
He said the company had taken a “cautious approach” in making its loans and was taking into account any deterioration in the underlying economy.
“We continue to leverage our machine learning, credit scoring and collections capabilities, focusing on offering secured and unsecured credit options to responsibly meet the cash flow needs of our customers. customers,” added Budiselik.
In fiscal 2022, demand continued to increase for Cash Converters’ mid-size credit agreement product, which is a personal loan of up to $5,000. This loan portfolio increased by 54% over the period.
The easing of government stimulus and pension access has led to improved demand for vehicle credit through the company’s Green Light Auto product.
In this space, Cash Converters saw a 224% increase in loan origination and a 5% increase in loan portfolio growth.
Meanwhile, Pawnbroking’s loan portfolio reached pre-COVID-19 levels in fiscal year 2022 — giving an average loan value of $192 million — up from $142 in fiscal year 2019.
Also in fiscal 2022, the company launched its PayAdvance product, designed to appeal to a younger demographic.
Of the PayAdvance loans generated, 46% were for customers between the ages of 18 and 30 and 78% for customers under 40.
The Cash Converters Line of Credit product is being prepared for launch in the second half of fiscal 2023. This loan is designed to provide eligible customers with a lower cost credit facility that can be drawn down over time.
Change in consumption trend
Budiselik noted that as the company focuses more on the environmental impact of consumption, Cash Converters’ retail model is benefiting.
“Our unique retail model has resulted in the purchase of over 1.4 million used goods which in many cases are destined for landfill.”
“A new smartphone, for example, will generate 85 kg of carbon dioxide in its first year of use (and a laptop 330 kg) – 95% of which comes from the manufacturing process,” he explained.
“In fiscal year 2022, we purchased over 45,000 smartphones and laptops across our network, potentially offsetting 8,300 tonnes of carbon dioxide.”
As fiscal 2023 progresses, Cash Converters continues to evaluate new store locations, while converting some of the existing ones to smaller footprints and negotiating lease reductions in others.
In fiscal 2022, more than 60% of loans and 18% of retail sales were made online.
The company plans to continue to grow its lending products and volumes and grow online retail revenue.
As cost of living pressures increase, Cash Converters is well positioned to meet increased demand in its retail and lending divisions.
In addition, Budiselik said the company will capitalize on inorganic growth opportunities as they arise, as expanding loan portfolios generate earnings momentum.