The Prospa Group Ltd (ASX: PGL) share price sunk 15% at the open this morning after the online lender released its unaudited results. Prospa is forecasting lower growth over FY20 as well as making additional provision for credit losses due to the impacts of COVID-19.
Prospa shares have since regained some of their losses to be trading 7.65% down at the time of writing.
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What does Prospa do?
Prospa is an Australian online business lender. Customers can borrow up to $300,000 with a 10-minute application, with funding available in as little as 24 hours.
Prospa first listed on the ASX last year at an offer price of $3.78. The Prospa share price fell to 75 cents this morning but has since recovered slightly and is now sitting at 84 cents.
What did Prospa report?
Prospa's unaudited results show a material impact from the coronavirus-induced economic downturn. The lender reports its loan originations have decreased, while provisioning for credit losses has increased. Total loan originations were materially impacted in April and May, but did pick up meaningfully in June.
Prospa provided 5,501 customers with COVID-19-related relief packages between 1 March and 31 May 2020. These were typically full deferrals of 6 weeks duration or partial deferrals for 12 weeks. Interest during the deferral periods was capitalised.
The environment remains challenging for Prospa's small business customers. As a result, the company has set aside a $20 million provision to take into account the impact of the COVID-19 pandemic. An additional $5.5 million is being written off following a review of loan book receivables.
The above provisions have contributed to an expected earnings loss before interest, tax, depreciation, and amortisation (EBITDA) of $18 million to $22 million. Prior to these adjustments EBITDA was expected to be $4 million to $8 million for FY20. Revenue grew at an annualised rate of 10% over the 9 months to March. This slowed abruptly with the onset of the pandemic, meaning Prospa now expects its FY20 growth to be around 4%.
What is the outlook for Prospa?
Prospa says it is seeking to support its small business customers to rebuild and invest for the future. The company is an approved lender under the SME Guarantee Scheme. This scheme has been extended to 30 June 2021 by the Federal Treasurer to support small business recovery. Prospa continues to provide customer relief packages but reports the volume of customer support requests has returned to pre-COVID levels.
Prospa says it adapted quickly to the challenge of supporting customers as they navigate this period of economic uncertainty. The company says it sees customers across all sectors planning for their recovery.
Prospa's full-year results will be announced on 27 August. The Prospa share price is trading at 84 cents per share at the time of writing, which is down more than 80% on this time last year.
