Australian Microcap Investor Presentation
Summary
- Cash Converters International Limited (ASX: CCV) is a global retail lender and repurposer of pre-owned goods with 669 stores across 15 countries.
- In FY24, the company achieved a 26% increase in revenue, reaching $382.6 million, and a 21% increase in operating EBITDA, reaching $69.1 million.
- The company's gross loan book increased by 6% to $288.0 million, while the net loss rate decreased to 3.7% from 4.8% in the previous corresponding period.
- Cash Converters declared its eighth consecutive half-year dividend, paying 1 cent per share.
- The company's market capitalization is approximately $138 million, and its share price is $0.22.
- Cash Converters acquired 42 stores in July 2023, contributing $3.4 million to profit before tax (PBT) in FY24, and a further 5 stores in June 2024.
- The company has a pipeline of 12 stores under immediate consideration for acquisition in Australia and 39 in the UK.
- In Q1 FY25, revenue increased by 1% year-on-year to $95.8 million, driven by strong UK trading results and continued momentum in the Australian business.
- The company's new Line of Credit product grew by 29% in Q1 FY25, increasing from $14.6 million to $18.8 million.
Sentiment
Score: 8
Explanation: The results show strong financial performance and positive growth across key metrics. The company's strategic initiatives are yielding positive results, and the outlook is optimistic.
Positives
- Significant revenue and EBITDA growth in FY24.
- Successful acquisition of franchise stores in Australia and the UK.
- Decreased net loss rate, indicating improved portfolio quality.
- Strong growth in the new Line of Credit product.
- Eighth consecutive half-year dividend declared.
- Strong underlying customer demand for personal finance products.
- Expansion of company-owned store network.
Negatives
- Slight decrease in Q1 FY25 gross loan book compared to Q1 FY24.
- Run-down of the GLA (auto) portfolio and transition away from SACC loans.
Risks
- Continued regulatory changes in the lending industry.
- Competition from other lenders.
- Economic downturn impacting customer demand.
- Potential challenges in integrating acquired franchise stores.
Future Outlook
Cash Converters expects continued strong underlying credit demand in an under-serviced customer segment, further franchise store acquisitions in Australia and the UK, and growth in profits and free cash flow. The company plans to continue refining its secondhand luxury goods segment and optimizing capital allocation.
Management Comments
- Revenue momentum positions us well to achieve our strategic goals
- Our strategy of continuing to acquire stores in our franchise network is yielding results
- Loan Book resilience adapting to regulatory changes and GLA wind-down
- Enhancing portfolio quality transitioning product mix
Industry Context
Cash Converters operates in a competitive lending and secondhand goods market. The company's focus on near-prime and sub-prime borrowers positions it in a segment with significant demand, but also higher risk. The company's strategic shift towards longer-term, lower-cost loans reflects broader industry trends towards responsible lending practices.
Next Steps
- Additional franchise store acquisitions in Australia and the UK
- Continued growth of the Line of Credit product
- Further refinement of the secondhand luxury goods segment
- Optimization of capital allocation
Key Dates
- 30 Jun-24: Financial Snapshot date
- Jul-23: 42 stores acquired
- June 2024: 5 stores acquired
- 29 October 2024: Date of Australian Microcap Conference presentation
- 30 Sep-24: Gross Loan Book date
Keywords
Filings with Classifications
Strategic Acquisition and Funding Announcement
- The company secured a new 12 million pound growth funding facility with attractive bank rate pricing and terms.
- The acquisition of 10 UK franchise stores for 7.5 million pounds is expected to be earnings accretive.
Half-Year Trading Update
- The company's operating NPAT increased by 24%, indicating improved profitability.
- Australian store profit before tax was up 60% and the UK was up 4%.
Investor Presentation
- The company's Operating EBITDA and NPAT increased significantly compared to the previous corresponding period.
- The net loss rate decreased, indicating improved credit quality and risk management.
Annual Report
- The reported revenue and EBITDA significantly exceeded expectations, driven by strong loan book growth and successful store acquisitions.
Investor Presentation
- Revenue and EBITDA exceeded expectations due to successful store acquisitions and a shift towards higher-quality lending.
Quarterly Trading Update
- Revenue exceeded expectations with a 1% increase year-on-year, driven by strong performance in both the UK and Australian markets.
- The net loss rate significantly decreased to 3.7%, exceeding expectations and demonstrating the effectiveness of the company's credit risk models.
Disclaimer: This summary was generated by artificial intelligence and its accuracy is not guaranteed. The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.