Cash Converters has booked stronger revenues for the half-year despite losing a quarter of its trading days to the pandemic, but a revaluation of its stores has hindered the Perth-founded franchise's bottom line.
Cash Converters International has booked stronger revenues for the half-year despite losing a quarter of its trading days to the pandemic, but a revaluation of its stores has hindered the Perth-founded franchise's bottom line.
The company delivered a $7.7 million operating after tax profit for the six months to December, while revenues were higher by 23 per cent on the prior corresponding period to reach $115.2 million.
But a $10.9 million impairment and provision expense raised against the carrying value of some of Cash Converters' stores was reflected in its bottom line, resulting in a statutory net profit after tax of $2,000.
Broadly however, managing director Sam Budiselik told Business News that the results demonstrated the company's resilience in the context of COVID-19.
“Putting the accounting treatment and the impairment aside, the underlying operating result was really strong,” Mr Budiselik said.
“We lost 24 per cent of our store trading days and still managed to deliver an operating profit that was similar to the previous half.”
About $9.9 million of the $10.9 million impairment related to its leased storefronts, of which it has over 150 nationally and around 20 in Western Australia.
Cash Converters said most stores had managed to weather government mandated lockdowns, but certain individual stores had been impacted by restricted trading conditions in the first quarter of the financial year.
Over 50 per cent of Cash Converters' earnings comes through its personal finance business, which is split approximately 60:40 between store and online in terms of lending.
The company says a “store network review” is progressing on the back of the impairment.
“Our stores remain important to the Company’s distribution strategy and the network continues to evolve to accommodate a smaller footprint and lower lease expense format in commercially attractive locations,” its statement read.
Mr Budiselik said locale also contributed to the success of a store.
“The performance of a store is closely tied to the demographics of the region they service," he said.
"It’s interesting, a store that may have been really successful previously, as those areas gentrify and the demographics change, the size or format of that store needs to change in turn,” Mr Budiselik explained to Business News.
Looking ahead, Mr Budiselik said the company’s second half was traditionally stronger but acknowledged that Omircon could impact trading conditions in WA.
“The fear that’s been created in the community has discouraged people from going out and spending,” he said.
“But positively, we’re looking at the eastern states coming out (of COVID-19) strongly.”
Cash Converters also launched its PayAdvance product pilot during the period, which it hopes will offer younger consumers a more responsible lending platform to that of its BNPL counterparts.
Cash Converters shares were down 3.92 per cent at the time of writing to trade at 24 cents.