Cash Converters is returning to its roots, reducing its operations in the UK and closing its vehicle leasing arm Carboodle as it refocuses the pawnbroking business.
The company announced a significantly improved half-year profit of $15.9 million, up from a $5.3 million loss the year before.
Overall revenue was up 5.8% to $198.6 million and the company returned to paying dividends with a 2 cent per share interim payment. Revenue from the Australian personal loan business was up almost 40% to $31.4 million.
A short time ago, Cash Converters’ shares were up more than 7% to $0.52.
The company is facing a review, launched by the federal government after concerns at high interest rates charged for some short term loans, of small amount credit contract laws. The review recommendations are due to be announced soon.
Cash Converters today announced a major change in strategy.
“Our new strategy is to build on our clear brand and network strengths in Australia where we are the industry leader,” managing director Peter Cumins said.
In Australia, Cash Converters has 627,069 customers in its cash advance business, each with an average loan amount of $430.
The company will broaden its current lending products with the introduction of medium amount credit contract loans. These are government regulated and with loan periods of up to two years for amounts up to $5000.
In the UK, Cash Converters will return to its original role as a master franchisor. Among the issues faced by Cash Converters in the UK is that many people are paid monthly rather than weekly or each fortnight, reducing the number of times the company can claim payments for loans.
It is currently negotiating to sell its corporate stores to franchisees within and will also divest its UK personal loan book.
In Australia, Carboodle will cease operations with the business moving to a secured motor lending business, Green Light Auto Finance.
“We will now focus on markets where we already have a strong position, good growth prospects and relatively predictable operating and regulatory environments,” Cumins said.
“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.”