Prospa produces industry-leading impairments

Small business lender Prospa Group, which listed on the Australian Securities Exchange in May, wrote off a remarkable 11.2 per cent of its receivables in loan impairment expenses in the year to June. And its loss was worse than forecast in its prospectus.

In its 2018/19 financial report, released yesterday, the company focused on the fact that loan originations of A$502 million were up 37 per cent on 2017/18 and a little ahead of the prospectus forecast.

Revenue of $136 million was an increase of 31 per cent and in line with the prospectus forecast. Customer numbers grew by 58 per cent to over 20,000.

Operating expenses rose 40 per cent to $129 million. The company said expenses included a number of one-off expenses in relation to the initial public offering and investment in the business.

During the reporting period Prospa launched a line of credit product to complement its term loan offering.

It also launched ProspaPay, a B2B trade payments product that allows for payments on an interest-free basis. Vendors pay Prospa a fee for providing the facility. At June 30, Prospa had accredited 70 vendors and processed $1.7 million of payments.

There wasn't much else to skite about. Loan impairment was up 30 per cent to $31 million. The bad debt expense was 11.2 per cent of gross loan receivables.

The company made a loss of $24.7 million, compared with a profit of $2.1 million in 2017/18.

Prospa promotes itself as a fintech but it most resembles an old-fashioned finance company with a high-risk portfolio. Its prospectus disclosed that its average interest rate is 24 per cent.