Wednesday 19 July 2017 by William Arnold Company updates

Axsess FY18 guidance and potential offshore expansion

Key points:

  • Axsess confirmed its previously guided FY17 NPAT of $3.6m (compared to our conservative base forecast of $2.6m)
  • FY18 NPAT guidance was given of $6m (compared to our current forecast of $7m – NPAT is not a particularly relevant credit indicator but we may revisit our forecasts once full results are released)
  • The loan book continued to grow from $129m, since we reviewed the company in March as part of the last raising, to $167m
  • Arrears greater than 30 days have reduced from 1.5% as at April to 1.1% at June 2017(a spike in March/April is consistent with historic seasonality)
  • Total credit losses in FY17 remained stable at 1.13% of net receivables (~1% FY16). General provisioning for impairments increased from $1m (Dec 16) to $2m (June 17) as part of the groups 2.5% general provision for losses
  • Axsess has also made some comments regarding the possibility of overseas expansion, going on to specifically mention Canada. While Canada is similar to Australia in many legal and commercial aspects, there are the usual risks associated with international expansion into an unfamiliar market. In terms of funding, the Series II 7.5% notes restrict eligible receivables to debtors and contracts derived in Australia. The BBSW+6.50% floating rate note do not have this restriction in terms of eligible assets. I believe it is unclear whether Axsess may legally be able to use Notes I funding to expand offshore however even if so practicalities may exclude this (such as assets will no longer be account as eligible under Notes II or the senior debtor’s facilities, plus such utilisation may damage the relationship with Axsess’ financiers)
The media release is available here.

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