Prospa Group - Q4 FY24 Trading Update and Scheme of Arrangement - 8 July 2024
PGL (PGL) Share Update July 2024 Monday 8th
Prospa Group Reports Q4 FY24 Trading Update and Scheme of Arrangement Details
Prospa Group Limited (ASX: PGL) has released an unaudited trading update for the quarter ending 30 June 2024, alongside details of a proposed Scheme of Arrangement with Salkbridge Pty Ltd.
Instant Summary:
- Q4 FY24 originations at $149 million, a 4% decrease from Q4 FY23.
- FY24 originations totaled $616 million, down 18% from FY23.
- Net bad debts increased to 13% of average gross loans for FY24.
- Prospa had $956 million of secured funding as of 30 June 2024.
- Proposed Scheme of Arrangement with Salkbridge Pty Ltd to acquire all issued shares in Prospa.
Quarterly Trading Update
Prospa Group Limited has reported its unaudited trading update for the quarter ending 30 June 2024. The company recorded $149 million in quarterly originations, reflecting a 4% decrease compared to the same period last year (Q4 FY23: $155 million). This decline is attributed to the company's conservative risk settings in response to challenging macroeconomic conditions.
For the full fiscal year 2024, Prospa's originations totaled $616 million, marking an 18% decrease from FY23's $753 million. The closing gross loans for the quarter and year stood at $796 million, down 8% from FY23's $862 million. The number of active credit customers also saw a slight decline, dropping to 19,990, a 2% decrease over the year.
Financial Metrics
Net bad debts for FY24 were 13% of the average gross loans of $821 million, representing a 27% increase over the year. However, the trend showed improvement in the second half of FY24, with net bad debts decreasing to 12%.
As of 30 June 2024, Prospa had access to $956 million in secured funding, a 4% increase from the previous year (Q4 FY23: $921 million). Of this, $208 million was undrawn, compared to $140 million in the previous year. The company's total cash reserves ended the year at $127 million, with $19 million being unrestricted, excluding a $12 million corporate debt facility with iPartners.
Scheme of Arrangement
Prospa has also provided an update on the proposed Scheme of Arrangement with Salkbridge Pty Ltd, an entity controlled by a consortium led by the Salter Brothers Tech Fund. The Scheme proposes that all Prospa shares not already owned by the consortium will be acquired. The consortium currently holds approximately 4.95% of Prospa shares.
The Scheme allows consortium members to retain their shares in Prospa or exchange them for shares in HoldCo. Tubbin Investments Pty Ltd, a consortium member, has indicated it may retain its 0.69% holding in Prospa post-Scheme. This decision will require Tubbin and any other consortium members retaining shares to undertake to dispose of their shares alongside other HoldCo shareholders in any future transactions, ensuring no special benefits are conferred.
The Independent Expert, Kroll, has confirmed that these changes do not affect its conclusion that the Scheme is in the best interest of Prospa shareholders. The Independent Board Committee continues to recommend that shareholders vote in favor of the Scheme, in the absence of a superior proposal.
The decrease in originations and increase in net bad debts reflect the challenging economic environment. These factors may negatively impact Prospa's stock price as investors react to the financial performance. However, the proposed Scheme of Arrangement could provide a strategic opportunity for Prospa, potentially stabilizing its market position.
Investor Reaction:
Analysts have noted concerns about the decline in originations and the rise in net bad debts. However, the proposed Scheme of Arrangement has been viewed positively as a potential stabilizing factor for the company.
Conclusion:
Investors should closely monitor Prospa's financial performance and the progress of the Scheme of Arrangement. The outcome of the shareholder vote and the company's strategic responses will be crucial in determining its future market position.