Prospa rallies after beating downgraded expectations

Prospa reiterated its 2020 guidance, saying it would deliver revenue in excess of $150m for the full year.

Joint Propsa CEO's Greg Moshal (right) and Beau Bertoli. Picture: John Feder

Shares in Prospa have rallied after the online small business lender delivered a half-year result ahead of downgraded expectations and announced a management restructure to concentrate on growth.

Co-founders and joint chief executives Greg Moshal and Beau Bertoli will take on new roles, with Mr Moshal becoming the sole CEO and Mr Bertoli appointed chief revenue officer.

Both will retain their executive board positions and remain in a voluntary escrow period until the 2021 half-year result has been delivered.

Mr Bertoli said the change would enable him to concentrate on “what I do best” - growing loan originations, customers and Prospa’s distribution capability.

“We’re focused on how we can best serve more of the $20bn market in Australia and the $NZ4bn market in New Zealand, providing businesses with a number of funding options to grow,” he said.

“Our originations and book continue to achieve strong growth as our business scales and we deliver on our strategy.

“Our customer numbers are growing significantly, and we look forward to finding ways to help even more small businesses in Australia to grow and prosper.”

In the six months to December, earnings before interest, tax, depreciation and amortisation was $4.3m, or 7 per cent of November guidance, with the group’s $600,000 in net profit up from a $3m loss a year ago.

Loan originations of $306.8m, up 37 per cent on a year ago, were also ahead of guidance, with total loan originations now passing $1.4bn.

Customer numbers grew 45 per cent to 26,900.

Mr Moshal said Prospa had the benefit of being the first mover in its segment, but would not be complacent.

“We have a huge amount of data about small businesses in Australia and we are very clear about what a good small business looks like,” he said.

In early afternoon trade, Prospa shares were up 15c, or 8.6 per cent, to $1.90.

UBS analyst Josh Kannourakis said in a note the result was in-line with expectations.

However, the growth opportunity remained significant with a lot of potential upside in Prospa’s valuation.

“Execution remains the key,” Mr Kannourakis said.

Prospa said its lower simple annual interest rates of 9.9 per cent to 26.5 per cent appealed to a broader range of customer profiles.

The company continued to benefit from a lower cost of funding, with the rate decreasing by 2.5 per cent to 5.4 per cent and discussions taking place with market participants about diversifying Prospa’s funding sources.

The regulatory environment, it said, was supportive of fintech lenders to promote competition and deliver better outcomes for customers.

The move to open banking would provide more opportunities, and the cost of funding would become more competitive as the market matured.

Prospa reiterated its 2020 guidance, saying it would deliver loan originations of between $626m and $640m and revenue in excess of $150m for the full year.