Business lender Prospa posts $24.9 million loss as loans fall while revenue climbs

  • FY20 loan originations of $450.9 million, down 10.1% on FY19
  • FY20 total revenue of $142.1 million, up 4.2%
  • EBITDA loss of $19.5m (FY19: -$0.8m)
  • EBITDA $4m, excluding Covid-19 provision, and a one-off loan receivable adjustment of $5.5m
  • Total ANZ customers up 43.5% over 30 June 2019
  • Customer repayments since June 30 better than expected
Prospa Group (ASX:PGL) has posted a net profit after tax (NPAT) loss of $24.9 million for FY20, 0.8% lower than 12 months ago.

The impact of covid-19 on the Sydney-based business lending fintech was clear in loan originations over the financial year.

Lending increased to $429 million for the nine months to March 31, up 31.6% on the same period 12 months earlier, then  evaporated in Q4 as coronavirus lockdowns hit, falling 88% to $21.9m.

That saw total loans for the year drop 10.1% to $450.9 million compared to FY19, however, the bright spot was an overall increase in group total revenue to $142.1 million for FY20, up 4.2%.

Revenue growth for the first nine months of FY20 was up 12.1%.

Statutory EBITDA was a $19.5 million loss for FY20.

Source: Prospa investor presentation

 

Prospa said an adjusted risk appetite, and the full roll out of products supported by the Federal Government’s Coronavirus SME Loan Guarantee Scheme saw a recovery in loan originations in June 2020 to $12.8 million, up from $6.2m in May and $2.9m in April.

Average gross loans grew to $433.3 million, an increase of 35.7% on the prior corresponding period, aided by the launch of its Line of Credit product and full launch in New Zealand. New Zealand originated NZ$46.6 million of loans in FY20.

The company reduced costs by 32% in its fourth quarter, including a restructure.

It has set aside $18 million for potential bad debts, a $2m reduction on the $20m provision noted in the preliminary results on July 31, noting that customer repayments since June 30 have been better than expected.

The total allowance for expected credit losses as a percentage of receivables was increased to 11.1% at June 30, up from 6.1% 12 months earlier, hitting EBITDA, which, prior to the additional provisioning together with a $5.5 million adjustment in loan receivables, was $4 million.

At August 20, a total of 1,769 Australian customers are on full deferral or partial deferral arrangements, which compares to 4,701 at the peak, and 3,904 at June 30, and 1,899 at  July 31.

Announcing the results, CEO Greg Moshal said the FY20 result reflects the strength and resilience of Prospa’s business model.

“Early on, we took swift, decisive action to mitigate the impact of COVID-19 on our business and put in place measures to support our people and our customers.

“We will continue to leverage our industry leading knowledge of the small business economy, and we’re confident the actions taken over the last twelve months have positioned Prospa well to support the recovery in this sector.”

In October 2019, Prospa launched its enhanced Line of Credit product, increasing the maximum line size to $100,000. In FY20, Prospa originated $56.5 million of Line of Credit facilities (FY19: $2.8m), with an average drawn balance of $21,000 and an average utilisation rate of 56%.

Prospa said it will update the market on a quarterly basis from the end of Q1 FY21, but due to ongoing uncertainty, no guidance is provided. That position will be reviewed in February 2021.

Moshal said that the company has an intimate understanding of how our customers trade during periods of supressed economic activity.

“Coupled with financial scale this allows us to quickly pivot to support the recovery across Australia and New Zealand,” he said.

“We continue to manage the business prudently given the current uncertain environment, and we face the future with some great strengths. We are well funded, have a strong balance sheet and we have the flexibility to respond quickly to challenges.”

Despite the positives in the result, the market remained unimpressed, sending the share price down nearly 8% to $0.83.