Solvar shifts focus to Australian market, plans to wind down NZ lending operations

Leading automotive finance provider Solvar (ASX: SVR) has made a strategic decision to create a dedicated commercial lending business unit in Australia and gradually wrap up its New Zealand operations.

The company will continue to grow its Australian consumer lending business, however it will increase its focus on commercial lending by creating the new division.

Solvar also revealed it will cease new lending in New Zealand from August 2024.

Loan book growth

Solvar has been growing its commercial lending book, which originated through Automotive Financial Services, with commercial lending now representing $54 million or 28% of its overall loan book.

Management said the group will now focus on its skills and experience in vehicle finance by targeting key industry segments with a large addressable market and strong demand.

This dedicated focus closely align with the group’s overall strategy.

NZ loans ceasing

The group will also cease offering new loans in New Zealand, instead directing capital into the expansion of its Australian operations.

Solvar told shareholders it considers the Go Car Finance (GCF) unit in New Zealand as an earnings per share accretive business for the group, contributing more than $90 million in cumulative EBITDA since its acquisition for $21.6m in 2019.

Nevertheless, macroeconomic conditions in NZ have been challenging for an extended period and remain uncertain for the foreseeable future.

Better local options

The company believes there are now substantially better growth opportunities in the Australian market.

This, coupled with the subdued outlook for the NZ economy and the higher relative funding costs, has led the board to make the decision to cease new lending in GCF from August 2024.

While the writing of new loans will cease, Solvar said GCF will continue to collect and service outstanding loans from customers and seek to minimise disruption to customers and staff.

$9.2m of goodwill and intangibles associated with GCF will be impaired and written down as part of the windup.

Guidance ticked up

In the lead-up to the release of its full-year results on 20 August 2024, Solvar said it expects better-than-forecast results and has upwardly revised the lower end of its guidance range for normalised net profit after tax.

That range now sits at $27 to $30m.

The company also intends to declare a final dividend of 5.0 cents per share, fully franked.