Prospa’s lending rates are beginning to bounce back, but 2020’s Covid hit delivers the fintech a $3.2 million loss

• Originations grew 265.3% from 4Q20 to 1Q21 and a further 25.9% from 1Q21 to 2Q21
• NZ originations surpassed $100m in total loans
• H1 FY21 loan originations of $180.7m below pre-pandemic levels
• Revenue (before transaction costs) of $55.7m, down 26.4%
• H1 FY21 EBITDA of $4.1 million

Lending by small business fintech Prospa Group remains below pandemic levels but began to show signs of improvement in the second half of 2020, with the company posting net loss after tax of A$3.2 million for the six months to December 31, 2020 (H1 FY21). 

Loan originations by the Sydney fintech (ASX: PGL) improved over the period, with Q2 FY21 originations at $100.7 million, up 25.9% on the prior quarter ($80m), but the total for the first half of FY21 of $180.7 million, down 41.1% on the previous corresponding period (H1 FY20: $306.8m).

The company said that the improvement continued in January to sit at 75% of pre-Covid volumes, but there were weak spots such as Victoria, due to its extended lockdown in the second half of 2020.

Revenue (before transaction costs) for the half was down 26.4 on 12 months ago at $55.7 million, but the company says that’s a consequence of a “deliberately restrained risk appetite at the height of the pandemic “

Active customer numbers fell by 2000 to 11,300 compared to the first half of 2020 and average gross loans of $343.5 million was down 22.3% on the prior half

Prospa reported an EBITDA of $4.1 million for H1 FY21, a drop of $1.5 million on 12 months earlier.

The net loss after tax for H1 FY21 was $3.2 million (H1 FY20 profit: $0.6 million).

The company cut operating expenses by 36.5% to $12.5 million in the December half compared to the first half of 2020, with employee expenses also cut by 26.3% to $16.6 million

Prospa’s New Zealand operations performed above expectations with originations in H1 of A$24 million, although that figure was down 11.1% on the corresponding six months of FY20 (A$27m). Prospa recorded its highest monthly originations volume in New Zealand to date in December 2020, and in January surpassed $100 million in loans originated in total.

Prospa CEO Greg Moshal said an accelerated recovery in originations has continued into 2021.

“Our first half result clearly demonstrates the resilience of Prospa’s business model. Leveraging the strength of our data, insights, and multi-channel distribution network, we have been able to rapidly scale to meet and capitalise on increasing demand,” he said.

“We have significant funding capacity with trusted partners and our efficient management of expenses and cash during the half has enabled a solid foundation to support future growth.”

The average loan size in Australia is A$36,000 at an average term of 15 months, while the average loan size in NZ is NZ$30,000 at a 14 month average term in New Zealand.

Prospa’s Line of Credit product has average facility limit on the Line of Credit is $40,000 with an average utilisation rate of 48.4%.