Cash Converters share price edges higher on FY 2020 results

The Cash Converters International Ltd (ASX: CCV) share price is climbing higher this morning as the company announced its full year results. At the time of writing, the Cash Converters share price has risen to 22 cents, which is 4.76% above yesterday’s close.

Cash Converters has been severely impacted this year by COVID-19 with the pandemic decimating the company’s ability to open its 705 stores around the globe. Customers have also been impacted by the financial fallout from COVID-19 which has negatively affected the company’s lending demand and revenue. Surprisingly, however, lockdown restrictions have lead to an uptick in loan settlement rates and retail revenue, which has seen the Cash Converters share price recover strongly from its March lows.

Cash Converters full year results

Despite the obvious headwinds caused by the pandemic, Cash Converters posted revenue of $279 million, down only 0.9% on the prior year.

The most significant impact to revenue and earnings occurred in the final quarter of the financial year, with personal and vehicle finance demand reducing as customers benefitted from government stimulus measures. Early settlements occurred at a higher rate than prior quarters and a decline in demand and eligibility impacted origination volumes. This resulted in gross loan books falling 24.2% year on year to $160.0 million.

Conversely, store operations demonstrated counter cyclical retail behaviour complimented by particularly strong online sales of home entertainment and technology items. Although store sales trended lower in the final months of FY 2020 as inventory levels decreased, turnover remained above the monthly average of the prior year’s, as did the gross profit margin.

This resulted in the merchant actually increasing its operating net profit before tax (NPAT) to $19.6 million which was an increase of 63.2% on the year before. Earnings before interest, taxes, depreciation and amortisation (EBITDA) also increased as it finished the year 51.5% higher at $62.1 million. Despite this, Cash Converters still posted a statutory net loss after tax of $10.5 million.

Outlook

With a strong balance sheet and a diversified store network, Cash Converters aims to consolidate its position as a lender and retailer of first choice for customers moving forward.

However, with Victoria recently entering stage 4 restrictions to combat COVID-19 infections, the company’s Melbourne metropolitan stores have been temporarily closed. Nonetheless, Cash Converts believes it is well set up as a result of the significant investment made into the Company’s online retail and lending operations.

The company also believes that “the ultimate impact of COVID‐19 is yet to be fully realised by Australia’s economy. And as Australia emerges from ‘lock‐down’, Cash Converters remains well positioned to benefit from a wider economic recovery.”

With today’s rise, the Cash Converters share price has recovered 120% from its March low but is still down by 8.3% in year-to-date trading.