Controversial payday lender Cash Converters has signalled a lower earnings this year despite reporting a significant recovery in business activity.
The ASX-listed lender yesterday revealed that its core lending businesses are growing again, with the size of its medium amount loan book (personal loans of more than A$2000) soaring 51 per cent in the five months to the end of May 2021.
The company also generated 14 per cent growth in small value loans during the same period.
Despite the volume recovery, chief executive Sam Budiselik indicated that bottom line profit for the current half was expected to be “softer”.
“The performance of our underlying business throughout FY 2021 has been extremely impressive considering the substantial impact of COVID-19 on our loan books, with Government stimulus payments impacting borrower demand and accelerating loan book repayments in the first half of FY 2021,” he told the ASX.
“Whilst borrower demand and business activity throughout the second half of FY 2021 has largely recovered, the expectation of a softer second half earnings result is due to these COVID-19 related factors.”
Cash Converters was one of the few Australian businesses to suffer as a result of the government’s stimulus package last year because it resulted in borrowers accelerating loan repayments.
The size of the company’s loan asset base contracted by more than $68 million or 31 per cent to $151 million in the 12 months to the end of December last year.
It recovered to $171 million at the end of May but remains well below pre-Covid levels.
Budiselik said executing a sensible growth strategy was a key focus of his management team.