Company's pre-tax profit turns positive in H1 2024, offsetting the previous period's loss
Small business lender Prospa Group experienced a decrease in total originations, which fell by 27.4% to $308.3 million in the first half of 2024 compared to the same period last year.
The decline is attributed to the non-bank lender’s strategic tightening of credit settings in response to market conditions.
Closing gross loans decreased by 5.6% to $807.4 million, and revenue before transaction costs saw a modest increase of 7.4% to $145.4 million, supported by a steady yield in a high-cost funding environment.
The company’s financial health showed signs of improvement, with a reduction in the expected loss provision to 11.4%, resulting in a $17.5 million non-cash benefit. However, net bad debts remained high at $53.7 million, marking a slight increase in annualised terms.
Prospa, in its half-year results announcement, also reported a decrease in total employee and operating expenses as a percentage of revenue, indicating efficiency improvements and cost-saving measures.
For the half-year, Prospa’s statutory profit before tax turned positive at $9 million, reversing a loss from the previous comparable period. This was largely due to the non-cash expected credit loss provision release.
Earnings before interest, taxes, depreciation, and amortisation (EBITDA) also improved, reporting a profit of $13.7 million, although adjusting for the non-cash provision release, the figure stands at a $3.8 million loss.
The company’s operating cash flow declined by 19.5% to $37.9 million, with total cash reserves ending at $117.2 million, of which $30.9 million was unrestricted.
“Prospa has continued to uplift its credit risk management to help navigate a challenging economic environment,” said Greg Moshal (pictured), co-founder and chief executive at Prospa. “We are also delivering on our product and technology roadmap, with all new customers now originating on our new platform.
“We’re pleased to acquire Zip Business’s Australian performing loan book, which enables us to execute on opportunities that further unleash the potential of small business.”
Salter Brothers Tech Fund has recently announced its intention to acquire Prospa Group Limited for approximately $74 million – a substantial decrease from the $610 million valuation that the SME-focused financial technology firm commanded at its listing in 2019 by venture fund Entree Capital.
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