Good morning, everyone. Thank you for joining the FY 2026 Cash Converters earnings call. By way of introduction, we will run through our investor presentation, which hopefully you can see on screen. In the room with me today it's myself, Sam Budiselik, CEO and Managing Director of Cash Converters, David Rose, CFO of Cash Converters, and some of the management team. I guess just before I do start on the presentation, it's been a big 18- 24 months for the company. The investors that are on the call that have followed our story will recall that we signaled that period ago that we were making a significant strategic change in terms of our lending business. Ultimately exiting the small amount loan space, commonly referred to as payday loans in the market.
With that book, at that period, over AUD 100 million in size, a substantial contributor to our earnings profile, and fairly well established through our franchise and corporate store network. It was a huge move strategically, and as a result, there are many different outcomes that have played through, pleasingly as predicted, and we'll talk about that as we move through the earnings call. But some short-term headwinds as a result of that product change will hopefully lead the company to a position where we can refinance our securitization and banking facilities. We do still remain unbanked, largely as a function of historically offering that product.
As we look forward, as we sort of touch on the strategy and look forward, we did communicate that we were hoping to offset some of the short-term earnings impact of the lending product change by acquiring our franchise stores in the core markets of Australia and the U.K., and also New Zealand. Those three core markets we operate as the master franchisor, and we're very much committed to really corporatizing those markets and growing those markets. With the change to the small loan product, we also executed a series of other changes that meant that we really focus now on a single personal loan product. We're on the slide showing now, hopefully, the Cash Converters now. On the lending side, it's a single personal loan product that we offer in Australia. Rates ranging from 19.95% per annum up to loan sizes of about AUD 10,000.
This loan product is very different, not only from a regulatory perspective, but from a credit risk perspective. We've got much lower loss rates, a very different looking loan book, due to a very different customer now that we're focused on, and we'll talk about that as we move through the presentation. So that's been a terrific outcome for our business as we've executed what is a significant pivot. Like I say, I think the core benefit of refinancing our lending facilities is still to come. The retail network, pleasingly, the earnings mix of the business in the short term has balanced a bit more, where retail has had a terrific 12 months. We've acquired stores, like I say, predominantly in the U.K. and Australia, our franchise stores.
But we've also seen very strong same-store growth in Australia of around 13% year-on-year, and in the U.K., 6%. I think if you look in the retail market at other listed retailers and performance, our same-store growth rates are exceptionally strong. The mix of inventory and store type moving towards luxury higher end inventory has been terrific for our retail business, and we'll talk about that as we move through the results. In summary, that leaves us with 200 corporate stores across Australia and the U.K. predominantly. We still have 164 franchise stores in those markets, so we've got a strong pipeline of potential acquisitions lined up in front of us. These stores are on our point of sale. They're branded Cash Converters. It's a simple operational integration of these acquisitions.
So we're pacing ourselves through that pipeline, and our strategy remains one of acquiring those franchise stores where the seller has reasonable price expectations, and we can reach a good outcome. Just to touch on a simplified business now. We sort of think about our customers in two kind of verticals. We've got our personal loan customers, the Cashies Loan customers. That personal loan product, it's only offered in Australia. That loan book grew almost 5x in the 12 months to in excess of AUD 110 million. That loan book is, I think, demonstrating strong brand reach and trust for the Cash Converters brand, both online and in stores. It's also symbolic of a non-bank lending market in Australia that is significant.
As the banks have really exited personal loan lending, but in general, really sort of taken a more risk off approach, non-bank lenders have really managed to sort of fill that space. But we're different because we are very much focused on meeting our customers in store and online, and those customers are sub or near-prime customers. So that's typically customers with a credit score around 550. For those who do follow their credit score closely, prime credit score's around 1,000. Our customers sort of sit a bit below that. Feel very comfortable serving a growing market there, and that, based on our loss rates falling, is working very well for us. On the retail side, so in Australia, the U.K., and New Zealand, where we have our corporate stores, we've seen just a general shift in that business.
I think we've got a much better set of management reporting and operational reporting wrapped around that business now, having invested in our technology. We are certainly leveraging AI and pricing technology to grow a new range in our stores. So we've always had the capability to really buy and sell across a vast line of inventory. AI has helped us establish a new line of handbags and high-end shoes and higher-end inventory through the stores. So the two pillars of the business operate well. They're slightly different in terms of, like I say, the personal lending in Australia complimenting the store network, whereas in the U.K. it's a retail buy, sell, and pawn broking network that we've got.
Some metrics down the bottom, we just call out that we are a large business dealing with a lot of customers and we retain a lot of data that we then use to feed our credit models in particular. We have included some visuals of the new luxury store in Perth City. This store concept we piloted in Bondi about two years ago now. That first pilot was extremely successful, and we have ended up expanding across the major capital cities in Australia. The store format obviously looks very different. It is a higher end fit out. The inventory is different. It is only high-end luxury, whether that is handbags, watches, jewelry, or high-end consumer electronics. The mix of inventory is obviously different. These stores do acquire a lot of inventory that we can put out into the suburban stores.
But I think as flagship stores, we are getting a lot of really strong customer feedback about the look, the feel, and the service offering. It is so unique to have a repurpose reseller of our size and scale, with our brand strength operating in the capital cities now, and that is doing a lot of good for us, winning new customers into both parts of our business. We did just add a snapshot of some of the inventory available online, too. I think there is a perception that Cashies is still really just predominantly focused on tools and some of the traditional product lines that we have been known for. But some of these unique pieces that we are now getting and the availability, new is sometimes almost impossible to acquire. We have got these items available. This is just a standard snapshot off the website. This is not an AI-generated image.
It is stuff that we have got now that we are selling through our stores, and all the stock that is in stores is available online. I think just trying to summarize what is still a little bit of a washing machine in terms of our earnings as we finalize our transition. We have really thought about this financial year as a strategic reset year, so we are very excited about what we have achieved, considering the large strategic changes that we have made, that we touched upon at the start of the call. FY 2027, it is really a matter of powering up and investing and scaling in our core product and market mix, and continuing to execute our strategy. I think the acquisition of the stores we always thought was important, because we have got an intent to corporatize our network. And they immediately add some earnings cover for the underlying personal finance changes that we have made.
As we grow the new personal finance book, the nature of the ECL, the upfront loss provisioning means that we are expensing upfront for future losses. The growth of that book comes with a bit of drag. So I think both of those strategies together have meant that we have actually delivered a really strong result, knowing that we have the benefit now of some clear air with our lending business. Then as we turn our minds to FY 2028, as that line of credit, that new line book grows and matures and seasons, the lending business should come back online and contribute to our overall earnings profile. Just to move forward to the financial highlights. I might just ask David to touch on a few key call-outs. Relatively new to the business, probably around for nearly nine months now.
It has been great having David on the team, and David, if you would like to just carry us through the financial highlights.
Yeah. Thank you, Sam, and good morning to everybody. Just on, I am talking to slide eight at the moment in the deck, and leading with a couple of record numbers. The record revenue of AUD 429 million, up 11% on the prior period and feeding into an operating EBITDA, which is a record number of AUD 67 million, also up 11%. Showing how our expanded store network is now carrying our earnings in the business, as we have completed the lending change that Sam alluded to earlier on. The operating NPAT figure of AUD 23.2 million , although down, is a deliberate impact of our strategic change rather than a deterioration. With our legacy books running off faster than the new Cashies Loan scaled, and the increase of depreciation and amortization and some more finance cost from the expanded store network. Statutory NPAT was at just a shade under AUD 20 million.
That includes a charge of AUD 3.5 million in relation to transition and acquisition costs. If you strip those out and you add them back, you are at AUD 23.2 million of operating result. Those are the same items that we disclosed at the half. The Cashies Loan book, Sam has already touched on, at AUD 114 million, is up 5x from where it was this time last year. That is the future growth engine, and it is in place and it is seasoning nicely. Cash of AUD 37.2 million is down. That simply reflects the cash that we deployed into the accretive store acquisitions, not any underlying cash burn issue. We are paying a six consecutive fully franked AUD 0.02 per share dividend. For the whole year, we have undrawn facilities still in place on our securitization, and overall that dividend leads to a 6.7% yield on the stocks at a 30% share price.
Moving now to the next slide, and really this chart is the story of the year in a single chart. The rundown loan books were 40% of our revenue back in FY 2022, and they are now 15%, as you can see from the chart on the left. The U.K. and New Zealand have gone from 4% of our book to 30%, and the AU stores have similarly increased, now at 56% of the total from 49%. The Australian stores and the U.K. EBITDA has tripled since FY 2022, and that is a broader high-quality base, which has been deliberately built to replace that legacy lending run off and the exit from payday. The EBITDA composition is now heavily weighted to Australian stores at AUD 46.8 million. The PF or personal finance and the legacy lending is now under AUD 20 million.
U.K. and N.Z. stores are 26, and then you have the head office costs, which pleasingly you can see over the last five years are representing a very flat trend. The legacy book now represents a relatively small proportion of the total gross loan book, meaning the highest risk tail in our business is largely gone. The NPAT step down from the AUD 25.1 million peak last year, we believe is this sort of near term cost of that transition. The legacy runoff outpacing the realization of the new book earnings. It is simply a timing issue as we go through this year. Turning to the next slide. Slide 10 illustrates that transition really neatly, and you will see, working from the left-hand side, the bridge in NPAT from last year to this year.
The store revenue and the lower bad debts are largely offsetting the planned AUD 18.1 million of financial services decline. Net store revenue is nicely up. Really, really pleasingly, 10 points of that next store revenue that was up 35% came from existing stores, like for like basis, 25 points came from the new stores. Pawn income continues to be an important part of our business model and was up 31%, largely from the new stores, and helps to offset the personal finance and vehicle rundown on that payday vehicle lending exit. Employee costs were up, but the new stores add AUD 16.2 million of that, because like for like costs in the stores dropped by AUD 2.8 million. The existing base is getting more efficient.
Bad debts were down 52% on those smaller legacy books and improved credit quality, meaning our overall net loss rate was 11% versus the previous 16%. Our finance costs increased on the cost of the Lloyds Bank facility in the U.K., funding our new stores, and also largely on the U.K. facility. Moving quickly to slide 11. The balance sheet. Loan receivables are flat on the year, but the composition has been transformed as part of this strategic pivot. The core loan book has increased 165% and has fully offset the rundown books, which are now sitting at AUD 72.8 million of our total book. Goodwill and intangible growth has been significant, and it is a direct result of the M&A work that we have done in the U.K. and Australian acquisitions. That same M&A lifted inventories, lifted PP&E and right-of-use assets.
The cash, as I mentioned before, is down 50%, AUD 37.2 million. But is the mirror simply of the acquisition outlay. Borrowings are down very slightly, the Fortress facility reduced by a single percentage point to AUD 140 million, and that is as the legacy SACC and vehicle finance transitions into the Cashies Loan. All up, net assets increased to AUD 253.8 million. Strengthening of the balance sheet through the transition, not a stretching of the balance sheet. Two more quick slides on the cash flow. Slide 12, the operating cash flow sat at AUD 33.5 million. Free cash flow, importantly, was AUD 20.3 million after allowing for our CapEx on our stores, meaning that the dividend is self-funded. Customer receipts increased, and the business acquisition outflow that I have referenced a couple of times there is clearly shown as the primary driver of the cash movement, a deliberate road choice on our part.
The net personal loans advanced were reduced by just under AUD 10 million, and that reflects the capital that is running into growing the new Cashies book. Financing was AUD 24.1 million, which was the November 2025 raise to support the CCI IG acquisition in Australia, offset by dividends, offset by the borrowings and the lease, and you see the net cash position. The last slide I will touch on before I hand back to Sam is the segment performance. The store segments really have carried the group this year, as is the story. The Australian store's EBITDA is just a shade under 50%, U.K. at 21.7%, and New Zealand at 4.4%. Same store sales increased 13%. We have called this out a number of times, and I think it will come up further in our conversations. In the U.K., up 6%.
The growth is underlying in the business, not just acquired growth. Personal finance, as we have discussed, is the transition drag with the revenue down 40% and PBIT down 60%, but that is a deliberate legacy runoff of that book and the earnings rebuild is expected in FY 2027 as the new Cashies Loan seasons and continues to grow. Vehicle financing revenue, that reduction is the tail of that strategic exit. The origination was actually ceased in June 2024. It is not any reflection of any demand issue. In New Zealand, we also ceased payday loans in Q4 of this year and are redeploying the capital, so you will see a PBT swing of AUD 2 million. Group PBT at AUD 28.8 million includes AUD 2.2 million of that non-operating M&A and transition cost that I referred to earlier on.
With that, I will hand back to Sam just to finish off with a view on growth prospects and outlook.
Thank you, David. I think as we touched upon on the way into the call, we are very confident in the strategy that we have executed to date, particularly over the last 12 months. Our focus really remains on leveraging what is a uniquely positioned retail offering through our store network. As cost of living is increasing, and as the acceptance of repurposed inventory and the aspirational affluent segment that we service is growing, we remain committed to growing our store network. So we will be acquiring target store numbers of something around 15 to 20 stores in FY 2027 across the major markets of Australia and the U.K. We look to open five to 10 greenfields across those markets. We still see strong store network growth this year occurring, off the 200 base, up 10% or 15%, 20%, something like that.
In terms of the lending business, we do still carry some additional overheads to where we will end up once we have fully exited the legacy book runoffs, and we wind down the associated operations teams. Going forward, we will be talking solely about the Cashies Loan, the new flexible line of credit product that we are offering with lower loss rates and a lower cost to serve over time as the customers that are won into that book continue redrawing as they have needs of credit going forward. I think, overall, when we are looking at our loss rates, we are targeting obviously a reduction on where we were in the past. Whilst the SACC small loan product was high yield, it was high loss, and it brought, as I said at the start of the call, some other impediments such as funding onshore and accessing the banking system.
With the exit of that loan book now largely complete, we turn our minds to refinancing our business, optimizing our balance sheet, as David touched on, and really executing on the pipeline of franchise acquisitions that we have got in front of us and in terms of growing our loan book. I think we have had questions over time in terms of the metrics around the store acquisition, so we have added some slides. Slide 17 talks about some of the standard metrics across our store network. For those that are looking at the store network from a retail perspective, our inventory turnover at around 2.4x in Aus is blended, with jewelry being a little bit lower and general merchandise being a little bit higher.
I think as you see the mix of inventory changing to that higher end luxury inventory mix that we touched on, the turn rate will increase. I think it is safe to say we have really got good scorecards in place now and a good view on the global store network. As we compare the stores across the network, we are seeing opportunity to continue to optimize, and in particular, the same store sales growth is a strong lever for us across the network. We have on the next slide 18, included just some general metrics to outline how we look about the acquisition pipeline. We are still buying in a very disciplined way when we are striking these deals, even for the bigger networks, which would be at the higher end of that multiple range.
They are pretty compelling opportunities when you think about the lower level of risk on integration, and obviously the view of the business that we have with those stores being on our platform. So we do remain committed to focusing really predominantly on the AU and U.K. markets due to the size of the residual franchise networks. Just to close out, like we said with the outlook, we are very much focused on continuing to execute in FY 2027. We will be really starting now to turn our minds to funding and our balance sheet and ensuring we are well capitalized to continue taking advantage of the opportunities that are in front of us. But doing so in a steady way, as we have done over the past few years.
I think as we are looking through, whilst we are probably on a three-year timeline here in this slide, we are very comfortable with the way that the new loan book is growing, that that is going to have a great future benefit for our business that we are not seeing in these numbers. We feel pretty comfortable. We have got a pretty good catalyst in our refinancing, then we have got some great growth levers that are really yielding results. We finish on our investment highlights slide, which I think hopefully underlines all that. We were planning on taking some questions. I do not think we have had any come through. I do appreciate everybody dialing in and listening to the call. We are obviously happy to take questions direct if you do have anything that comes up.
Hopefully, we look forward to seeing many of you over the next week or two, either on investor calls through the brokers or at the meetings. Thank you very much for your time, and we look forward to being in touch again soon.