Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Solvar Ltd (ASX:SVR) reported a 27% increase in normalized NPAT to $18.5 million, indicating a strong financial turnaround.
• The company achieved ISO 27,0001 certification for cybersecurity, reflecting significant investment in protecting customer and corporate data.
• Solvar Ltd has consolidated its technology platforms, which is expected to enhance productivity and customer experience.
• The company has introduced a new funding partner, providing funding diversity and supporting future growth.
• A 20% increase in dividends per share was announced, demonstrating confidence in maintaining shareholder returns.

Negative Points

• The company is facing ongoing legal challenges with ASIC, which have incurred significant legal fees and could impact future operations.
• There is uncertainty due to the upcoming federal election, which may disrupt business volumes.
• The New Zealand operations are being wound down, which could affect overall growth and financial performance.
• Employee expenses have increased due to compliance and regulatory requirements, impacting the cost structure.
• The company has not initiated a share buyback due to blackout periods, which may affect shareholder value perception.

Q & A Highlights

• Warning! GuruFocus has detected 7 Warning Signs with ASX:SVR.

Q: Can you comment on the consensus estimates for FY26, which show only a 1-3% increase in revenues? Is this conservative? A: The estimates were made last year before seeing the first half's turnaround. Analysts are expected to revise their guidance for FY26 and FY27, especially as regulatory uncertainties clear. The recent rate reduction also adds confidence for robust growth in FY26. (Respondent: Unidentified_2)

Q: Can you clarify the capital management and lending comments, particularly regarding leverage and the mezzanine funding? A: The mezzanine funding was introduced in September 2024 to diversify funding partners and scale the Moree book. This reduces the equity needed for growth. The better-priced funding allowed us to pay off higher-cost debt in New Zealand. (Respondent: Unidentified_3)

Q: Will the legal issue in Australia be concluded this year, or might there be challenges to the decision? A: We believe our lending practices have been fair and transparent, and our legal counsel does not anticipate an appeal. However, we must wait for the judge's findings before making any conclusions. (Respondent: Unidentified_2)

Q: Why has the bad debt charge increased despite improved credit quality? A: The increase in bad debt is driven by the existing backbook. As the backbook runs off, we expect material improvement in bad debt ratios. (Respondent: Unidentified_3)

Q: What will the commercial lending business unit focus on? A: The focus will be on used assets, particularly wheeled assets like utes and vans, targeting small businesses. We aim to fund heavier assets for small businesses without competing with banks. (Respondent: Unidentified_2)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.