July 2017 – To grow or not to grow


The focus of our strategic review for the 2018 financial year was ‘what should be the growth rate for GPS’?

One side of the discussion is that a business must either continue to grow or perish from inflation eating away at the cost base.

In the current market conditions, growth for GPS is relatively easy. The banks are paying low interest rates on term deposits and pulling back from the GPS lending market. However, we must take care not to grow too quickly.

Bruce and I have seen it too many times in our careers. Other lenders have grown substantially only to fail when market conditions turn. The bigger they are, the harder they fall. We are very mindful of ensuring that GPS is always adequately resourced to cope with a market turn.

Other factors that limit any considerable growth at GPS are:

  1. We do not want to lose the culture at GPS with increased staff. Increasing the head count may prejudice our service levels and the way we operate this business;
  2. I am comfortable with the current number of loans managed by GPS. It provides a good spread for investors, has sufficient size to balance the funding cashflow, and I can continue to be across all of them; and
  3. There must be a balance between growth rates for both funding and loan pipeline.

Overall, the Board at GPS is comfortable with where we are and where we are headed.

The end result from all of the analysis and discussion regarding the growth rate is that we will continue with what has worked so well for GPS for so long. We are open for new investment, but will not push to grow too quickly.

In loan pipeline we will use the current surplus of loan applications to continue to improve the quality, rather than the quantity, of loans. Increased funds under management will be accommodated by slowly increasing the average loan size. Apart from increased density allowance under relevant zoning laws (the old circa 10 pack is now a circa 14 pack) loans sizes increase relative to building and other development costs.

Improving our service and skill levels will always remain a priority.

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