How Cash Converters Is Reinventing Lending and Retail with AI and Acquisitions

A Legacy of Reinvention

Cash Converters International Limited, a stalwart of the non-bank lending and retail sector since 1984, continues to evolve its business model to meet changing market demands. From its origins as a pawnbroking and second-hand goods retailer in Perth, the company has expanded globally, now operating over 340 stores across Australia, the UK, and New Zealand. This latest half-year report underscores a deliberate pivot towards sustainable growth through lower-cost lending solutions and strategic franchise acquisitions.

Financial Performance and Strategic Shifts

The company reported an operating net profit after tax (NPAT) of $15 million and an operating EBITDA of $36.5 million for the first half of fiscal 2025. These figures reflect a solid performance amid a competitive lending environment. Notably, Cash Converters has reduced its net loss rate on loans to 7.3%, down from 9.0% the previous year, signaling improved credit risk management largely driven by proprietary machine learning credit models processing approximately 780,000 loan applications annually.

Central to the company’s strategy is a move away from small and vehicle loans, which historically carried higher risk and cost. Instead, Cash Converters is focusing on longer-term, lower-cost lending products aimed at sub-prime and near-prime borrowers, a substantial market segment in Australia estimated by Equifax to generate $5 billion in credit applications annually. This shift not only aligns with responsible lending principles but also opens new growth avenues.

Growth Through Franchise Acquisitions

Cash Converters is aggressively expanding its store network through franchise acquisitions, having added 65 stores in Australia and the UK in the past two years. These acquisitions, priced attractively at less than five times EBITDA, have been earnings accretive from day one, contributing $3.4 million to NPAT in the first half of FY25. The company targets acquiring around 30 franchise stores annually across both markets, with a remaining opportunity of 74 stores in Australia and 145 in the UK.

This acquisition strategy complements the company’s pivot in product mix, with a growing emphasis on luxury inventory in retail stores. The opening of a luxury-focused store in Bondi Junction, supported by AI-driven authentication and valuation technology, exemplifies this trend. Such initiatives not only enhance customer experience but also support Cash Converters’ commitment to the circular economy by repurposing over 1.7 million items annually in Australia.

Digital Innovation and Market Positioning

Leveraging advanced data analytics and a unified digital platform, Cash Converters is streamlining its operations and customer engagement. The integration of online lending, mobile apps, and customer portals facilitates a seamless experience across its retail and lending businesses. This digital transformation underpins the company’s ability to scale its lower-cost lending products efficiently while maintaining strong credit discipline.

Geographically diversified revenue streams, with the UK now contributing 18% of consolidated EBITDA and showing 14% revenue growth in the half, further strengthen the company’s market position. Meanwhile, the company maintains a fully franked dividend yield of 8.3%, reflecting confidence in its sustainable earnings growth.