Why did this ASX 300 share just crash 40%?

This automotive lender is being sold off on Thursday.

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The Solvar Ltd (ASX: SVR) share price is having a day to forget on Thursday.

In morning trade, the ASX 300 share is down a very disappointing 40% to $1.04.

A man holds his head in his hands, despairing at the bad result he's reading on his computer.

Image source: Getty Images

Why is this ASX 300 share crashing?

Investors have been selling this automotive-focused loans company's shares following the release of a trading update.

For the 12 months ended 30 June, the company formerly known as Money3 expects to report:

  • Revenue up 11.4% to $209.3 million
  • Earnings before interest, tax, depreciation, and amortisation (EBITDA) up 11.9% to $110.8 million
  • Net profit after tax down 7.8% to $47.6 million
  • Fully franked final dividend of 9 cents per share

The ASX 300 share's CEO and managing director, Scott Baldwin, said:

I am pleased to report that, subject to audit, our FY23 results are in line with guidance. The Australian operations continue to perform well, with pleasing loan book growth of 31%. A total dividend for FY23 of 16.5 cents per share, fully franked, would equate to a payout ratio of 86% of the second half earnings.

So why the selling?

Investors have been selling down this ASX 300 share due to its FY 2024 guidance rather than its results.

Unfortunately, management is expecting rising interest rates and the tough macroeconomic environment to weigh on its loan book growth and profits over the next 12 months.

In respect to the latter, the company is expecting its FY 2024 net profit after tax to be in the range of $24 million to $30 million. This will be a 37% to 50% decline year on year. Management explained:

FY24 NPAT will be impacted by the full year cost of central banks rate rise cycle. Increases in funding costs are being passed through on new loans written, however it reduces the profit contribution from the back book.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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