CASH CONVERTERS HAS BIG PAY DAY
29 February 2016,
PAWNBROKER Cash Converters (ASX: CCV) has returned to profit and announced it will trade part of its UK arm to focus on a growing Australian business.
The cash loans business announced the major strategy change after posting a $15.9 million net profit for the half year to December, up from a $5.3 million loss for the December 2014 half.
Managing director Peter Cumins says the company believes it has the best prospect for sustainable growth and profits in Australia and it will strip its UK business 'back to the basics'.
More stores corporate and franchise are set to open within Australia, servicing growing demand.
Retail sales were up $11.4 million over the period and revenue rose 5.8 per cent in total to $198.6 million.
With the announcement, the company's share price rose more than 5 per cent by midday to 52c per share.
"Our latest financial results confirm our strength in Australia across retail and financial services," says Cumins.
"Despite an encouraging improvement by our businesses in the United Kingdom they still have major structural and sectoral issues our new strategy will address."
In effort to downsize UK operations, Cash Convertors is currently negotiating selling its corporate stores to franchisees within its network and will also divest the UK personal loan book.
In Australia, motor lending businesses Carboodle will be traded in for a lower overhead and less intensive business, Green Light Auto Finance.
Cash Converters will also domestically increase capabilities to cater for the rapid growth in online lending demand and introduce medium amount credit contract loans. These are government regulated with loan periods of up to two years for amounts up to $5000.
Cumins says a 6-month review determined this focus on businesses with returns well above their cost of capital and leadership in customer service and satisfaction.
"If our industry is to be fully accepted by government and community as an integral part of the financial services sector, we need to ensure we continually deliver high quality products and services while maintaining the highest compliance standards," says Cumins.
"Recent government data shows the short-term lending market in Australia is growing and the range of consumers accessing these products is broadening.
"This is driving demand for online and more sophisticated lending products.
"Cash Converters is well positioned to meet this demand and respond to industry changes."
The board will pay a dividend of 2c per share to shareholders on April 29.