Rising Loan Impairments and ASX Delisting Shadow Propell’s Growth Ambitions

Strong Revenue Growth Amidst Rising Losses

Propell Holdings Limited (ASX: PHL) has released its half-year results for the period ending 31 December 2024, revealing a complex financial picture marked by robust revenue growth alongside escalating losses. The company’s revenue from ordinary activities climbed 75% to $1.27 million, primarily driven by a 180% expansion in its loan book to $6.18 million. This growth translated into a more than 200% increase in interest income, underscoring Propell’s success in scaling its lending operations.

However, this growth came at a cost. The net loss after tax surged 121% to $2.03 million, reflecting significant loan impairment expenses that more than offset the revenue gains. The impairment increase was attributed to a small number of larger loans aging beyond 180 days in arrears, mostly issued before the company implemented enhanced credit assessment criteria. Propell expects these impairment costs to normalise as its tightened credit policies take effect.

Operational Efficiency and Strategic Investments

Despite the widening loss, Propell demonstrated operational discipline by reducing underlying operating expenses (excluding loan impairment and finance costs) by 29% to $804,672. This cost containment aligns with the company’s strategic focus on achieving profitability while maintaining a sustainable cost structure. Investments continued in product and technology development, with Propell completing its digital, cloud-based, open API platform ahead of schedule, positioning it as a leading digital finance solution for small businesses.

The company also expanded its broker referral network, a key channel for customer acquisition, which has accelerated inbound leads and is viewed as critical to driving future loan book growth and profitability. Additionally, Propell secured an increase in its wholesale funding facility from $7.5 million to $11 million at a stable interest rate of 11.5%, providing the financial capacity to support its lending ambitions.

Navigating Regulatory and Market Uncertainties

In a significant development, Propell has engaged with the Australian Securities Exchange (ASX) to discuss its potential removal from the official list. This move introduces uncertainty regarding the company’s market status and may impact investor confidence. The company is concurrently negotiating extensions on its convertible note maturity and exploring refinancing options to ensure liquidity and operational continuity.

The board remains confident in Propell’s ability to continue as a going concern, citing strong cash balances, positive operating cash flow of $433,042 for the half-year, and a clear pathway to profitability supported by high net interest margins and a low cost base. However, the company acknowledges material uncertainties related to its financial position and the outcome of the ASX discussions.

Outlook and Strategic Focus

Looking ahead, Propell aims to leverage its enhanced lending capacity and broker network to accelerate loan book growth while maintaining tight cost control. The company plans to broaden its lending product suite to deepen customer penetration and diversify revenue streams. Achieving these objectives is expected to underpin a return to profitability as the loan book scales with strong margins.

Propell’s vision remains to become the premier digital finance platform for small businesses in Australia, offering a comprehensive, convenient, and fully digital financial ecosystem free from traditional banking constraints. The coming months will be critical as the company balances growth ambitions with financial discipline amid regulatory scrutiny.