Growing pains? SME-lender pushes forward through bittersweet Q1

In a country with 2.4 million small and medium enterprises (SMEs) and $423 billion in SME loans (April 2021), Propell (ASX: PHL) considers itself the first and only all-in-one finance platform using a digital-first approach to provide SMEs with faster and simpler lending solutions.

In a country with 2.4 million small and medium enterprises (SMEs) and $423 billion in SME loans (April 2021), Propell (ASX: PHL) considers itself the first and only all-in-one finance platform using a digital-first approach to provide SMEs with faster and simpler lending solutions.

The company’s first quarter of FY23 was ‘business as usual’ as it continued its upward trajectory following a prolific FY22 for customer growth when it secured a 420+% year-on-year increase to more than 2,150 customers.

The company’s customer count now sits at more than 2,400 and the new inflow has helped Propell achieve its highest average drawdown of nearly $22,000.

Propell’s efforts to improve marketing and loan processing have proven worthwhile, leading to reduced acquisition costs for new customers who, in turn, contributed to a 10% quarter-on-quarter increase in the total number of customers on Propell’s platform.

The business’s continued focus on managing customer acquisition and marketing expenses resulted in a 46% decrease in related costs quarter-on-quarter.

Other highpoints of Propell’s Q1 FY23 included its continued improvements in lending margins owed to a reduction in wholesale borrowing costs from 13% to 11.5% and a 24% increase in its weighted average customer pricing.

Cash receipts from customers increased 48% to $291,000 in the September quarter from $197,000 in the previous quarter. The company’s total cash-on-hand was approximately $1.04 million at the end of 1Q FY23. 

Shedding weight for future gains

Focused on raising capital and optimising its cost structure in the first quarter of FY23, Propell made a 43% reduction in full-time staff creating what the company thinks is a ‘more sustainable structure’.

Consequently, staff costs increased for the quarter due to the one-off restructuring cost of approximately $183,000. However, the company believes the reduced headcount will lend itself to savings in future quarters.

Propell’s loan book growth was limited during the quarter due to constrained wholesale funding availability. However, the company received a shot in the arm in August when it successfully increased its previously maxed out $5 million lending facility to $7.5 million.

The company’s cash loss in Q1 FY23 was $894,000 which, after adjusting for one-off restructuring costs, was a 10% improvement on the previous quarter and which Propell stated was due to customer growth investments, ongoing product development and operating costs.

Propell is seeking to generate new customer leads from broker channels outside of its digital channels. The company reported encouraging initial results in October 2022 and expects this will bring significant future customer and lending growth.

Remaining focused on its goal to become the go-to finance solution for small businesses, the company is aiming to grow its customer base and lending through partnerships and ongoing expansion and to broaden its lending product offering.

Join us for a special investor briefing on Thursday, 24th November with Propell CEO Michael Davidson where you can find out more about the company, its plans for FY23 and beyond, and more. Register for the webcast.

Reach Markets have been engaged by Propell Holdings Ltd and may receive fees for its services.

Past performance is not a reliable indicator of future performance.

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