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· Posted on
February 21, 2024

Prospa's 60% revenue hike is overshadowed by enormous credit loss provisions 'coz businesses are looking shaky

Prospa has announced its results for the past 12 months, and it's a bit of a mixed bag in there.

What's the key learning?

  • Prospa's revenue jumped for the financial year, but its provision for credit loss jumped big time as well.
  • It seems like investors are pretty worried that Prospa's customers, aka small businesses, are seriously feeling the pinch right now.
  • A credit loss provision is when a lender sets aside money to cover potential future losses from loans that might not be paid back.

👉 Background: Prospa launched back in Sydney in 2012 and was one of the OG fintech lenders in Australia. It tried.. and failed to IPO twice.. but then successfully listed on the ASX in 2019.

👉 What happened: Now, Prospa has announced its results for the past 12 months, and it's a bit of a mixed bag in there:

  • Their revenue jumped over 60% to $286m for the financial year. That's good...
  • Provision for credit loss jumped big time. That's a red flag.

👉 What else: All in all, they announced a $29m EBITDA loss and its share price dropped over 10%. It seems like investors are pretty worried that Prospa's customers, aka small businesses, are seriously feeling the pinch right now.

What's the key learning?

💡A credit loss provision is when a lender sets aside money to cover potential future losses from loans that might not be paid back.

💡Prospa has around 20,000 active business customers. So a big increase in its credit loss provision means that they're expecting more businesses to not pay them back.

💡The credit loss info from Prospa also serves as another indicator of the health of small and medium-sized businesses across Australia. And when businesses borrowers are in the danger zone, it means Prospa might be too.

‍

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Disclaimer: Flux Technologies Pty Ltd (ABN 86 634 507 172) is an authorised representative (Representative No. 1283166) of Mozo Pty Ltd who is the holder of AFSL No. 328141. We also provide general advice on credit products under our own Australian Credit Licence No. 530103. The product information presented does not constitute an offer and we are not recommending or suggesting any particular product. Any product advice presented is of a general nature only, and is not to be taken as any sort of advice as it has not taken into account your personal circumstances, objectives, financial situation or needs. Flux may not cover all products available to you. Check out our Credit Guide and Financial Services Guide for more information.

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