Ann: Appendix 4E and Annual Report, page-3

The annual report contains some very impressive figures in relation to the car lending business which is referred to as personal lending. So impressive in fact, I contacted the company for clarification. I have it on good authority that FSA is partially funding the car lending business from a Westpac facility that incurs an interest rate of 3.82% per annum. When you consider that FSA charges borrowers 16% per annum plus fees, there is a healthy lenders margin to be made!

Keep in mind that the loan pool is $35.3M, growing at approximately $1M per month and the Westpac facility is drawn down to $27M.

Struggling to believe these figures? Check out page 37 of the annual report which sets out interest income of $4,382,230 and fee income of $1,360,178, giving a combined income of $5,742,408 for the year. While we don’t know the actual running costs of the car lending business, we are told that they were charged $745,100 in interest for the financial year.

The following two quotes from the annual report sets out what we can expect going forward.

As we grow our loan pools our business will benefit from higher incremental margins due to fixed cost leverage. This will result in profits growing at a faster rate than revenues. We will continue to see this positive impact to profit growth during the 2018 financial year.

For personal loans, our focus until December 2017 is to maintain new monthly originations at the current level, allow the pool to age and closely monitor arrears and losses, at which point we accelerate new origination growth.

I note that Westpac are due to review the $40M lending facility in December 2017. Based on the commentary provided, it would appear that the board is confident that they will be in a position to increase the lending activity and accelerate profits. Time will tell!