FlexiGroup Revises its Full Year Cash NPAT Guidance

Australian leading financial services company, FlexiGroup Limited (ASX: FXL) made an announcement on 5 February 2019 stating that it is now expecting its FY 2019 cash net profit after tax (NPAT) to be in the range of $76 – $80 million. Following this news, the share price of the company decreased by 5.556 percent as on 5 February 2019.

After the review of the company’s unaudited financial performance for the six months ended 31 December 2018 (1HFY2019), the company has revised its Full Year Cash NPAT Guidance. The company is expecting the Cash NPAT for the first half of 2019 to be around $32 Mn which is around 3 percent higher than the prior comparable period on an underlying basis, with 272k new customers added and 2,800 sellers onboarded in the last 6 months.

The company’s AU Commercial Leasing business and various other finance providers has become aware that one of its equipment finance vendor program partners has entered into voluntary liquidation, with liquidators appointed. According to the company, its contractual arrangements with the underlying small business borrowers are sound and enforceable. The company has been trying to identify if there is a course of action which could be taken to assist in meeting the offer made to those customers by the intermediary.

This has proven difficult, and FlexiGroup has therefore taken the decision to provision for $12 million after tax in relation to the Group’s exposure generated through this equipment finance vendor program partner.

The company also informed that its AU cards business total receivables increased by 18 percent year on year (Y-O-Y) against a negative trend across the category, with a 3.1 percent drop in the total amount lent to households through credit cards as reported by the Reserve Bank of Australia. This 18 percent growth is, however, below budget expectations for the period.

According to the company’s Chief Executive Office Rebecca James, the company’s Australian and New Zealand cards businesses have shown strong resilience against structural headwinds in the market. And now the company is expecting its 1H 2019 NPAT to be slightly ahead of the comparable period last year, on an underlying basis.

As reported in the FY2018 results, while there is an improvement in arrears in AU cards business, the improvement is occurring at a slower than forecast rate, also impacting Group NPAT. Investment in the Group’s buy now pay later product Certegy EziPay, which appeals to consumers with average transaction values above $1,000, continues to drive growth with volumes up 7% year on year.

The company will be releasing its results for the six months ended 31 December 2018, and it will be sharing its key elements of the new Group strategy on 26 February 2019.

In the last six months, the share price of the company decreased by 44.32 as on 1 February 2019. FXL’s shares traded at $1.190 with a market capitalization of circa $471.59 million as on 5 February 2019 (AEST 4:00 PM).


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