On the back of a 56.3 per cent increase in loan originations, automotive finance specialist Money3 reported a 34.5 per cent increase in revenue in the six months to December and a 29.6 per cent increase in net profit to A$25.8 million.
Money3 chief executive Scott Baldwin told investors at a briefing yesterday that the company could maintain its current momentum. He expects the loan book to grow from $690.8 million at the end of December to $800 million by June 30 and full-year profit to be more than $50 million.
One negative was a 78.9 per cent increase in the bad debt expense to $13.6 million.
Baldwin said bad debts in the previous corresponding period were affected by COVID stimulus measures and the latest figure was a return to a more normal level.
“The bad debt charge represents 3.9 per cent of receivables. We expect a level of 3.5 to 4.5 per cent over time,” he said.
Other measures show the loan book quality improving. Impaired credit has fallen from 1 per cent of receivables in2019/20 to 10 basis points currently, and watch list loans have fallen from 18 per cent to 13 per cent over the same period.
Another issue for the company was the weak performance of its New Zealand division, GoCarFinance. Baldwin said originations were down because of the impact of COVID lockdowns.
He has forecast a rebound in the June half as the New Zealand government eases restrictions.
In January last year, Money3 acquired Automotive Financial Services, a funder of consumer and commercial vehicle purchases in the prime and near-prime segments.
At the time of the acquisition, Baldwin said the deal was aimed at extending Money3’s product offering along the credit quality curve into prime lending.
Baldwin said the AFS loan book had grown 79.6 per cent to $83.7 million since January.
One constraint the company faces is that it has only $122 million of headroom under its four debt facilities ($200 million if free cash on the balance sheet is included).
Baldwin said the company’s funding partners had an appetite to increase their exposure and he expected to have more funding to work with.