The Money3 Corporation Limited (ASX: MNY) share price is falling this morning after the lender withdrew full-year guidance. Shares in Money3 are already down 75% from their February all-time high of $3.04 and are currently trading at 74 cents.
Money3 advised this morning that it expects its earnings for the 9 months ending 31 March to be 2020 to be approximately $23 million, which is consistent with previous guidance of net profit after tax (NPAT) of $30 million for FY20.
Nonetheless, due to the uncertainty surrounding the coronavirus situation, the company believes it is prudent to withdraw its FY20 guidance.
Money3 provides personal and car loans in Australia and New Zealand. Until recently, the company was originating over $1 million in loans every business day. Around 1 in 500 registered vehicles in Australia have a loan with Money3.
The economic slowdown that it seems coronavirus will inevitably trigger is likely to reduce the number of loans Money3 makes. People tend to pay extra attention to spending and budgeting during a recession, and are particularly wary of taking on new financial commitments such as a car or personal loan.
If Money3 customers lose their jobs as a result of the coronavirus downturn, they may struggle to make payments on existing Money3 loans, causing defaults to rise. Increased delinquencies could eat into the company’s earnings as anticipated payments are not received and extra funds are spent chasing bad debts.
The company advised that it is well prepared to deal with any disruptions that are likely to be caused by coronavirus. It says it has implemented robust business continuity measures to maintain the resilience of its business operations and protect the health and wellbeing of staff.
The offices in Melbourne and Auckland continue to be fully operational, having introduced team splitting to reduce the number of staff in the office at any one time. Money3’s use of cloud-based technology allows the company to have staff working remotely as the need arises.
On 16 March, Money3 advised the market that it had drawn an additional $40 million on its existing debt facilities in Australia. The Australian debt facility can be unilaterally extended by the company to a maturity date of December 2022. The New Zealand debt facilities run until April 2022.
Money3 says it has a strong balance sheet. It emphasised its ample liquidity with a cash balance of $46 million. It also has fairly low leverage with net debt being 30% of the loan book. The company anticipates loan volumes will decrease through the period of economic disruption but any reduction in loan volumes will lead to an increase in the cash position, further improving liquidity.
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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.