Radio Rentals to offer cash loans to customers

Radio Rentals has announced it will trial cash loans to customers, with annualised interest costs pitched below statutory capped rates and that of competitors.

In a statement to the ASX, MD John Hughes said the trial would commence in Tasmania in January 2008 and would utilise the company’s current infrastructure and systems, providing it with a competitive advantage.

Hughes told The Australian the loans would be offered for 12 to 36 month terms, and range between $1000 and $3000.

The company announced revenue growth from $49.6 million to $59.2 million in the half year to 30 September – a 19.4% improvement on the previous corresponding period.

Hughes said growth was principally driven by demand for flat panel TVs and PCs, which was reflected in the increase of 36 month “Rent Try Buy” contracts, accounting for 36% of total installation rental income, up from 19% for the same period last year.

The boost in revenues generated a gross profit of $34.4 million (a 12.5% improvement) which flowed through to a 49.5% increase in earnings before interest and tax at $6.8 million and resulted in a net profit after tax increase to $4.5 million – up from $1.8 million.

Hughes said the company was well positioned to produce a solid full year result consistent with analyst expectations, regardless of interest rate rises.

“While a majority of our customers are financially constrained, the impact of any interest rate rise is expected to be minimal, particularly for those receiving welfare benefits, and therefore we anticipate continuing buoyant demand through 2008.”

Inside Retail