Restructured fintech expects to accelerate towards profitability

If 2022 was the year in which Propell (ASX: PHL) launched itself on the pathway to profitability, 2023 might be when it gets to significantly pick up speed, according to the company’s recently announced Q2 FY23 quarterly activities report.

If 2022 was the year in which Propell (ASX: PHL) launched itself on the pathway to profitability, 2023 might be when it gets to significantly pick up speed, according to the company’s recently announced Q2 FY23 quarterly activities report.

Compared with the previous corresponding period (PCP) of Q2 FY22, the Brisbane-based fintech saw its platform customers increase by 362%, its lending originations by 136%, its average loan size by 307% and the company’s highest average drawdown to date of more than $24,000.

The company’s receipts from customers increased significantly by 224%, advertising costs were down 18% and staff costs were down 15% (compared to the PCP).

“In a short time, Propell has grown to become Australia’s go-to finance platform for small-medium enterprises (SMEs),” Propell CEO Michael Davidson said.

“Our digital-first approach allows us to offer lending solutions that are faster to access, easier to use and simpler to manage – giving Propell an edge over traditional lenders such as banks in a market comprising $423 billion in SME loans.”

Streamlining the business to achieve profitability

Propell embarked on a cost-cutting initiative in Q1 FY23 with the intention to renew its focus on achieving profitability sooner by establishing a broker referral network and progressing discussions with providers to increase the company’s wholesale funding facility.

While the company has relied on digital marketing to acquire customers, it anticipates the shift to a broker referral network will significantly accelerate the growth in inbound leads and considers it key to achieving profitability at higher speed and lower risk to margin.

With the $7.5 million wholesale facility it secured in the last quarter, Propell has continued to improve its lending margins due to its reduced wholesale borrowing cost of 11.5% and recorded a 2% increase in its weighted average customer pricing – higher than expected.

Source: Propell

As at 31 December 2022, Propell held cash on hand of approximately $491,000 and continues to pursue cost optimisation initiatives that will deliver improvements in net operating cash flows, while maintaining its operating objectives and servicing customer needs.

With the development of Propell’s platform completed in Q1, staffing was reduced to reflect the transition from ‘development’ to ‘maintenance’ of the platform. As a result, research and development costs in Q2 were 32% lower than in the previous quarter.

Staff costs were 47% lower and administration and corporate costs were down 36%  quarter-on-quarter due to one-off redundancy costs incurred in Q1 as a result of restructuring. The cash loss in Q2 FY23 was $494,000, which was a 45% improvement on the previous quarter and a 23% improvement on Q2 FY22.

“We expect the reduced resourcing will continue to yield savings in future quarters with no loss of operating capability,” Mr Davidson said.

“The improved operating result reflects the strong growth in customer revenue and the cost savings associated with the company restructuring.”

A short-term focus to achieve long-term goals

Propell outlined its focus areas for the coming quarters: secure a new wholesale facility to meet client demand, boost lending growth through the new broker referral network, maintain the cost base while scaling the business and adding new products to increase products per customer and attract new clients.

“Propell’s goal is to become the go-to finance solution for small businesses – a single place where businesses can live their entire financial life in a simple, convenient and 100% digital way, free from the constraints of old-fashioned banks,” Mr Davidson said.

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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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