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Expansion in the novated leasing segment has delivered profit growth to the asset finance giant, while aggregation NPAT drops slightly.
ASX-listed financial services organisation COG Financial Services Limited has released its 2024 financial year first quarter results (1Q24), which revealed a 19 per cent increase in net profit after tax and amortisation (NPATA) compared to the prior comparative period (1Q23).
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In the release yesterday (16 October), COG revealed that the organisation achieved $6.2 million NPATA attributable to shareholders in 1Q24 (1 July 2023 to 30 September 2023), up from 1Q23, when it achieved $5.2 million.
The segment with the greatest increase year on year to impact that growth was the group’s novated leasing portfolio, which grew from $900,000 in 1Q23 to $2.4 million in 1Q24.
COG said this was partly due to the organisation’s acquisition of the novated leasing business Paywise.
However, it also indicated that the segment had also been able to grow organically through tax incentives provided such as those for electric cars financed through a novated lease arrangement.
Speaking to The Adviser, chief executive of COG, Andrew Bennett, stated: “There’s a lot of activity in novated leasing [and] a lot of it is driven by the electric vehicle discount…
“But the number of new cars this year was up 8 or 10 per cent on the same time last year, so it’s strong in electric cars, but it’s strong right across the board.
“The segment is growing strongly and our business within that segment we’re gaining market share.”
COG’s “biggest” business segment is the finance broking and aggregation arm, which reached $2.4 million NPATA to shareholders in 1Q24, down slightly from $2.5 million in 1Q23.
Mr Bennett said that while the segment was still “really robust” the volume was “a little bit soft in the first quarter this year” off the back of “a massive May, June last year”.
He stated it was due to “a little bit of pull forward in volume because of the instant asset write-off running out in June”.
COG’s update also revealed the greatest deficit from 1Q24 to 1Q23 was in its funds management and lending segment.
The organisation stated the fall from $3 million in NPATA to shareholders in 1Q23 to $2.2 million in 1Q24 was due to being “adversely impacted by a temporary squeeze on historical originations”.
Mr Bennett told The Adviser that COG has “some fixed rate, unhedged equipment leases to SMEs” that they wrote approximately two years ago when the cost of funds was low and was still on their balance sheet despite the cost of funds increasing “suddenly in the last 12 months”.
He confirmed it was a “temporary negative” and said they “are confident of future growth in both volume and margin”.
Looking ahead Mr Bennett said COG is still “acquisitive” in their “core markets of finance broking and aggregation”, pointing to their acquisition of NFC and United Financial Services in August.
He added that the organisation is also continuing to “heavily invest into technology” and systems for brokers because they believe it is what’s “going to differentiate people in the future”.
Mr Bennett concluded: “COG’s a relatively new business, we’ve been going for about six or seven years and we’re happy with the way the model is maturing and delivering enhanced growth and offering for our broker members.”
[Related: 2 asset finance aggregators acquired by COG]
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