The company recently tested a ‘mobile showroom’ in Sydney to assess the potential of taking a casual lease in major shopping centers where a full time store operation could not be justified. The trial exceeded expectations.

Radio Rentals Australia operates 66 locations in 5 states - Western Australia, Northern Territory, Queensland, New South Wales, and Victoria. The company operates 5 stores on the island of Tasmania.

Radio Rentals Australia operates 66 locations. Since raising $56 million in its initial public offering (IPO) in December, 2006 (see story), the company has seen significant growth - moving away from rent-to-rent and expanding its Rent-Try-Buy (RTB) program - what we yanks call Rent to Own.

John Hughes, Managing Director of Radio Rentals, said the 2006 addition of furniture to the lineup has boosted revenue. "Solid gains were realized through the national roll-out of furniture and the growth of large screen plasma and LCD televisions and personal computers which represented 26% of revenue." Radio reported a 15% same store sales increase for the most recent quarter. 

Radio Rentals opened its first store in Sydney, Australia in 1937, making it the oldest company in the sector worldwide. The company now operates 66 locations and had nearly 200,000 units on rent as of July, 2007 - a whopping 3000 plus BOR per location. Over 60% of Radio Rental's revenue is collected via automated direct debits.

The average contract term has increased from 14 months to 19.1 months. That number will continue to increase as Radio Rentals focuses more on its 36 month Rent-Try-Buy program. Company officials report a keep-rate of over 40% for 36 month RTB customers.

John Hughes, Managing Director of Radio Rentals.

59% of Radio Rentals agreements are for 18 months. 36 month agreements account for 20%. Units on rent breakdown - Appliances 33.3%, Electronics 25.9%, Computers, 15.4%, Furniture (launched in April 2006) 12.3%. Flat panel displays account for 10.4%.

Radio Rentals has three distinct programs;

Standard Rental – traditional rental agreement.

Rent, Try, Buy – either an 18 or 36 month rental contract, which includes an option to buy a similar product after 36 months for $1. Alternatively, the customer can make an offer to purchase the product being rented at the end of the rental term which the company can either accept or deny.

Rent, Try, Buy Plus – which is available on range of products and is similar to the 18 month RTB, except the customer pays a premium for additional flexibility which includes the ability to return the product any time after 6 months, incurring an early termination fee. The customer can also reinstate the rental at any time during the next 12 months.

Bernard Carrasco, Radio Rentals Chairman of the Board.

The company makes prolific use of print, mailing 6.2 million catalogs every month which is reinforced with national TV campaign with a strong call-to-action message.

The company recently tested a ‘mobile showroom’ in Sydney to assess the potential of taking a casual lease in major shopping centers where a full time store operation could not be justified. The trial exceeded expectations and Radio Rentals plans to expand the program to other cities.

Over the past few years there has been a decline in Radio Rentals customer base due in part to the change from a higher “churn” on rent-to-rent contracts, to a more stable longer term rent-try-buy (RTB) base. Hughes said this decline has ended and there is a solid level of growth being achieved across all areas of the business and most particularly in metropolitan centers which have previously lagged in performance compared to rural locations. "This growth is being driven by our new more aggressive ‘call to action’ marketing style and increased advertising expenditure as well as the demand for flat panel televisions and PC’s."

Hughes said the company has increased emphasis on risk management. "New initiatives such as centralized credit acceptance and compulsory direct debit payments have now been rolled out nationally and we expect positive returns to be generated both short and long term that will enable us to further improve upon our already low risk position."

Hughes noted that employee turnover has reduced significantly in the past six months as the company refines its recruitment and training processes. Radio Rentals has also increased focus on salaries to insure the company remains competitive. "We have a strong core of experienced staff across the nation and it is our objective to build on this and be an employer of choice that has a positive and challenging ‘can do’ culture," Hughes said.

click image to enlarge

left to right: Paul Lahiff, Peter Henley, Bernard Carrasco, John Hughes and David Carter.

Company officials note a trend in the Australian market showing a higher level of acceptance of rental as an "acceptable means of acquiring products."

Radio Rentals will add payday loans to its offering. "We are planning to commence a trial of cash loans in Tasmania in October, with the potential for a national rollout during the first quarter of the 2008 calendar year," Hughes said. In May Peter Henley and Paul Lahiff joined the Board of Directors. Both Peter and Paul bring with them considerable experience in the consumer finance industry.

The company posted net profit of $6.5 million for its fiscal year ended March 31st 2007, exceeding the IPO prospectus forecast by 6.5%.

Bernard Carrasco, Radio Rentals Chairman of the Board, added, "Following the successful IPO last December and the subsequent repayment of loans, the Group had a strong balance sheet at year end as shown by the conservative debt to equity ratio of 1.9%."