Australia’s largest asset finance distributor, COG Financial Services Limited (ASX:COG), has reported strong volumes for the last 12 months as the appetite for asset finance continued and COG bolstered and enhanced its offerings and support for brokers to counter evolving market conditions.
In FY23, COG (which will announce its full year results on August 25) recorded robust broker volumes of $7.7 billion, which represents a 22% or $1.4 billion like-for-like growth.
“We’re very pleased with this growth rate, and attribute it to two key drivers: the increase in broker members and, more importantly, the growth of our members’ own businesses,”
says Mark Rayson, Head of COG Aggregation.
“To put that into perspective, on our estimates, in FY23 COG members settled approximately 23% of all Asset Finance in Australia, and more broadly they arranged finance for 12% of the total Equipment, Plant and Machinery CAPEX.”
During the financial year, commercial volumes grew 19%, which Rayson says is “an exceptional result, considering how mature COG is in that segment”.
“Commercial activity has been very resilient to the interest rate rises, which suggests a two-speed economy. Tax incentives for commercial equipment purchases, which ceased at the end of June, has partially driven demand last financial year,” he says. “Despite a strong level of demand, we have definitely seen our commercial customers become more focused on interest rates which has made it a challenging time for our brokers.”
At a consumer level, COG recorded a 24% growth in volume during the 12 months. “It’s certainly been an interesting and rapidly evolving time for this sector,” says Damian Mantini, Head of Strategic Partnerships. “Consumer purchases are often more discretionary and therefore more sensitive to rate increases. And if you compare this financial year with last, the use of unsecured personal loans has changed dramatically. Last year, the primary purpose was for home renovations, whilst this financial year it has gone towards debt restructuring to lower customers’ outgoings or assist with mortgage serviceability.”
Growing the consumer offering is a key focus area for the group, which is a major reason why COG recently acquired the NFC and United Financial Services (UFS) aggregation businesses. “We were comfortably the largest commercial asset finance aggregator, however, we saw an opportunity to grow our business in the retail sector. This acquisition has boosted our standing with certain funders, and whereas we might have previously ranked number two or three, we are now number one. It allows us to be best in class for our brokers across the full spectrum of asset finance products and to give them the tools to capitalise, knowing they’re getting the best proposition available,” Rayson says.
Confronting headwinds head on
Despite the sturdy results, Mantini says COG is realistic about the headwinds and challenges faced by the market. “We know we have to be agile and confront them as needed,” he says.
“We also know that as the market becomes more challenging, brokers require the broadest range of options so they can access every opportunity. And they need the certainty that they’re getting the best options available for their clients.”
Mantini points to the continuing stock supply challenges, particularly for new cars. “This prompted us to acquire the balance of our car buying business and refocus it to being a value-add for brokers. We were able to help brokers shorten and improve their conversion cycle via regular stock drops, enabling their clients to move to vehicles that were currently in stock,” he explains.
In addition to growing its consumer offerings for brokers, COG has also continually expanded its member-exclusive lender Westlawn Finance, to supplement its existing lending panel and provide brokers with one more option and point of difference over their competitors.
“Over the past year, the additional scale we have created via organic growth and acquisition gives us the means to make the additional investment that our brokers and funders require – across key areas including systems, automation and security,” adds Rayson. “Our profession is becoming more complex each year, and we have an important role in ensuring there are specialist asset finance solutions available, to complement brokers’ expertise, maximise their efficiency, and minimise their risk.”