The plight of Australia’s listed fintech sector has been a dominant theme of the current profit reporting season.
As the profit season draws to a close the latest financial disclosures confirm that almost 90 per cent of the financial services companies to list on the ASX in the last five years continue to lose money.
And in most cases, the losses are getting bigger as funding costs escalate.
On Wednesday three more loss-making fintechs – MoneyMe, Butn and Novatti – highlighted the strategic challenges facing the industry.
MoneyMe, which is in the middle of another capital raising, reported a 500 per cent blowout in its bottom line loss to A$50.3 million.
The non-bank personal lender more than doubled interest revenue in the 12 months to the end of June, but like many other fintechs most of its cost lines soared at much faster rates.
A critical issue for MoneyMe was the blowout in impairment expenses which increased threefold from $28 million to $91 million.
For a business that raked in interest revenue of only $127.8 million last year, a measure of doubt hangs over the sustainability of the company’s business model given the size of its impairments.
The poor result has forced MoneyMe to issue more shares, which according to an ASX filing yesterday will be heavily discounted – at least 28 per cent below the last trading price of 69.5 cents per share.
Butn Ltd, a small business finance solutions company, also unveiled a disappointing set of results on Wednesday although the deterioration in bottom line performance was less marked than MoneyMe.
Butn’s net loss increased by around 35 per cent to $8.6 million following tepid revenue growth during the year.
The company’s chief executive Rael Ross is promising a material increase in revenue in 2023.
“We have already seen early signs in FY23, that while the macro environment presents challenges for SMEs, it also means they are increasingly looking for more flexible ways to manage their cash flow and growth,” he said.
“We expect the need and attractiveness of our funding, which integrates directly into invoicing and payments workflows, will continue to grow and be even more relevant to our partners and their business customers.”
Ross’ upbeat outlook commentary did not appear to win over investors who drove the company’s share price to within a few cents of the record low of 9 cents posted in June.
Investors who backed the company’s initial public offering 13 months ago are sitting on large paper losses.
Supporters of the IPO paid 50 cents a share.
Melbourne-based payments technology company, Novatti, completed a horror reporting season for the listed payments sector.
The company posted a net loss attributable to shareholders of $16.6 million for the 12 months to the end of June.
This was about 40 per cent or $4.8 million worse than the 2021 loss.
Despite its revenue doubling to more than $32 million, Novatti’s bottom line was undermined by a surge in employee benefits expenses that ballooned by more than 68 per cent to $27 million.
Managing director Peter Cooke said the company was looking to achieve positive cash flow