Cash Converters takes a hit

Payday lender Cash Converters had a dramatic turnaround in its fortunes during the year to June, making a large payout to settle a class action in New South Wales, as well as paying a cash consideration on a terminated agency agreement and taking a one-off impairment charge after consumer credit rules were changed in the United Kingdom.

As a result the company made a loss of A$21.5 million for the year to June, compared with a profit of $21.2 million in 2013/14.

Cash Converters paid $20 million to settle the class action and $3 million in legal costs. Termination of the agency agreement had an after-tax impact of negative $16.8 million.

And following the introduction of Consumer Credit (Cost Cap) Regulations in the UK in January the company recognised an impairment charge of $7.6 million in relation to UK operations.

Cash Converters said normalised group EBITDA of $62.7 million was up 12.2 per cent on the previous corresponding period.

The value of the Australian loan book grew 53.2 per cent to $74.6 million. The company said its online cash advance business was particularly strong.

However, the UK loan book shrank after the introduction of the new regulations.

The value of the total loan book fell slightly from $109.2 million in 2013/14 to $107.4 million in the year to June.

The company said it was restructuring the UK business "to ensure the cost base better matches the size of the UK business today."

Cash Converters managing director Peter Cumins said in a statement that several UK competitors had closed and the Cash Converters business was starting to recover.

The company has a couple of other issues to deal with. In July a class action was launched on behalf of borrowers in Queensland, who claim they were overcharged.

And earlier this month Westpac announced that it would stop providing Cash Converters with banking facilities.

The company said it was confident that all Westpac facilities and services would be replaced in the ordinary curse of business.