Small business lender Prospa has seen its profitability crimped by the COVID-19 economic shutdown.
Announcing an EBITDA loss of A$19.5 million for the year to 30 June 2020, the listed SME funding specialist said it had made an "additional provision of $18 million for potential credit losses to take into account the impact of COVID-19".
The provision was lower than the $20 million reported in Prospa's preliminary results on 31 July 2020, as customer repayments since 30 June 2020 have been better than expected, the company said in a statement to the ASX.
Net loss after tax was $24.9 million, 0.8 per cent lower than the prior year. The FY20 EBITDA result compares to a loss of $0.8 million EBITDA in FY19.
The final quarter marred what was shaping up as a good year: excluding the COVID-19 provision and a one-off loan receivable adjustment of $5.5 million, EBITDA for FY20 was $4.0 million.
The company also reported that the first three quarters were among its strongest to date, with loan originations hitting $429.0 million for the nine months to 31 March 2020, an increase of 31.6 per cent on the prior corresponding period.
Total revenue was $113.0 million for the nine months to March 2020, a 12.1 per cent increase on the prior corresponding nine months
"This growth was offset by a deliberately restrained risk appetite, with $21.9 million originated in Q4, a decline of 88 per cent compared to the corresponding three month period in FY19," the company said.
This resulted in total loan originations for FY20 of $450.9 million, down 10.1 per cent on the prior year (FY19: $501.7 million). For FY20 total revenue of $142.1 million was up 4.2 per cent on the prior year (FY19: $136.4 million), with solid revenue growth of 12.1 per cent recorded in the period leading into the COVID-19 pandemic.
Prior to the COVID-19 slowdown, in October 2019, Prospa launched an "enhanced" Line of Credit product, increasing the maximum line size to $100,000 and distributing the product to a broader array of customers.
In FY20, Prospa originated $56.5 million in Line of Credit facilities (FY19: $2.8 million).
Prospa remains well funded: as at 30 June 2020, the group had $442.9 million in available third-party facilities including unused facilities of $114.1 million with a lower weighted average funding rate of 5.7 per cent compared to 7.5 per cent in FY19.
Funding activity has been supported by Federal Government initiatives.
On 20 July 2020, the Federal Treasurer announced that the Federal Government’s SME Loan Guarantee Scheme would be extended to 30 June 2021 to support continued small business recovery. Prospa received an allocation of up to $223 million when the Scheme was initially introduced.
On 6 August 2020, Prospa allocated $63 million of the AOFM’s $90 million maximum investment amount to support the growth of its Line of Credit, Back to Business Small Business Loan and Back to Business Line of Credit products, with the remainder to be allocated over FY21.