Silver Chef bad debts up three-fold

Small business equipment finance company Silver Chef has suffered a bad debt blowout, increasing its bad debt charge three-fold during the year to June.

The company's bad debt charge rose from A$1.5 million in 2013/14 to $4.5 million in the year to June, increasing the ratio of bad debts to rental income from 1.1 per cent to 2.6 per cent.

The bad debt ratio has only reached 2.6 per cent or higher on two other occasions in the past ten years.

The company's view is that provisioning for doubtful debts and impairments has been abnormally low in recent years and that it is now "normalising" in a range of two per cent to three per cent.

It said its client base was highly diversified, with the largest client representing less than one per cent of its rental income.

Apart from the big increase in bad debts, Silver Chef had a good year. Revenue was up 21 per cent to $171 million, and net profit was up 22 per cent to $15.5 million.

Rental assets and lease receivables increased by 20 per cent to $358 million.

The hospitality division, which provides equipment rental finance to restaurants and other parts of the hospitality industry, increased pre-tax profit by 0.4 per cent to $29.8 million.

The GoGetta division, which provides equipment rental finance to other industries, increased pre-tax profit by 22 per cent to $11.4 million.

The fledgling New Zealand and Canadian businesses contributed a combined $8 million to total revenue - up from $3.6 million in 2013/14.