Solvar Limited reported solid FY25 results with profit growth, a significant dividend hike, and a positive outlook for FY26 driven by loan originations and commercial lending expansion.
- FY25 normalised NPAT up 17.4% to $34.1 million
- Fully franked dividends increased 40% to 14 cents per share
- Loan book grew 5.3% despite 8.6% decline in interest income
- Share buyback returned $37.4 million, improving EPS by 1.7 cents
- FY26 forecast NPAT of $36 million including NZ arrears loan book sale
Solid Financial Performance in FY25
Solvar Limited has delivered a steady financial performance for the fiscal year ending 2025, highlighted by a 17.4% increase in normalised net profit after tax (NPAT) to $34.1 million. Despite an 8.6% decline in interest income to $389.1 million, the company’s loan book expanded by 5.3% to $832.7 million, reflecting ongoing demand in its core Australian lending operations.
The company maintained a stable bad debt rate of 4.4%, consistent with the prior year, underscoring disciplined credit management amid persistent cost-of-living pressures. Cash collections remained robust at $528.8 million, only slightly down by 1.5% compared to the previous year.
Capital Management and Shareholder Returns
Solvar’s capital management strategy continues to focus on delivering shareholder value through consistent dividends and share buybacks. Over the past three years, the company returned $37.4 million to shareholders via buybacks, repurchasing 11.5% of shares outstanding. This has contributed to a 1.7 cent improvement in earnings per share (EPS), which rose 21.2% to 16.8 cents in FY25.
The board declared a fully franked final dividend of 8 cents per share, bringing the total dividend for the year to 14 cents; a 40% increase on the prior period. The payout ratio remains disciplined at around 71%, supported by franking credits of $75.5 million as of June 30, 2025.
Q1 FY26 and Outlook
Early indicators from the first quarter of FY26 show a slight 3.9% decrease in interest income to $44.6 million, while the loan book held steady with a 3.1% increase to $828.3 million. Normalised NPAT for the quarter was $8.1 million, down 8.1% year-on-year, with bad debts rising marginally to 1.2% from 1.0%.
Looking ahead, Solvar projects new loan originations to exceed $400 million in FY26, supported by the launch of a new commercial lending product and completion of a technology upgrade aimed at improving origination efficiency. The company also expects a normalised NPAT of $36 million, boosted by a one-off $2 million profit uplift from the sale of its New Zealand arrears loan book, which will reduce exit risk and streamline operations.
Strategic Positioning and Risks
Solvar’s moderate leverage and over $300 million in funding headroom provide flexibility to support loan book growth without immediate equity raises. The company’s focus on disciplined underwriting and credit quality is critical as regulatory scrutiny of non-bank lenders intensifies. While used vehicle price declines may stimulate demand, they also pose valuation risks to collateral.
Overall, Solvar’s FY25 results and FY26 guidance suggest a company balancing growth ambitions with prudent risk management, leveraging technology and product innovation to navigate a competitive and evolving lending landscape.
Bottom Line?
Solvar’s blend of steady growth, enhanced dividends, and strategic initiatives sets the stage for a pivotal FY26 amid evolving market dynamics.
Questions in the middle?
- How will the sale of the New Zealand arrears loan book impact long-term profitability?
- What are the risks and opportunities from the new commercial lending product launch?
- How might increasing regulatory scrutiny affect Solvar’s underwriting and growth plans?