Strong demand for used vehicles helped automotive finance specialist Money3 increase its assets and earnings by more than 20 per cent in the year to June, but “normalisation” following the period of COVID stimulus meant there was a big increase in bad debts.
New car sales remain lower than pre-pandemic levels due to supply issues, including disruptions at manufacturing facilities and microprocessor shortages. This has led to an increase in demand for used vehicles, which is Money3’s main area of activity.
The value of the loan book rose 22.1 per cent to A$733.4 million in the year to June.
The company said one of the year’s highlights was its improved funding position. The company operates under the Money3, Go Car Finance and Automotive Financial Services brands.
Go Car Finance doubled its facility, AFS had a facility limit increase and added a mezzanine facility, and the Money3 business unit also increased its facility limit and added a mezzanine facility.
Money3 chief executive Scott Baldwin said the current facility limits will allow its loan book to grow “well beyond” $1 billion. And with growing scale, the company has also been able to reduce its cost of funds.
The company reported net profit of $51.6 million for the year to June – an increase 31.6 per cent over the previous year. Revenue rose 29.5 per cent to $187.8 million.
Australian operations contributed $60.9 million to pre-tax profit and New Zealand operations $21.4 million.
Originally a lender to borrowers with impaired credit histories, it now covers the full spectrum of credit quality.
The bad debt expense rose 49.5 per cent to $27.2 million. The company said the bad debts trended down in the second half, from 3.9 per cent of the loan book in the December half to 3.7 per cent in the June half.
It expects bad debts to be between 3.5 and 4.5 per cent in 2022/23.
It also reported a $5.3 million movement in the allowance for impairment losses – up from $878,000 the year before. The impairment provision is $39.1 million.
Money3 provides commercial loans in Australia and will launch commercial lending in New Zealand in the year ahead. It is also increasing its activity in the new car market.