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- Buy-now-pay-later (BNPL) company flexigroup (FXL) has withdrawn its guidance for the 2020 financial year, but still expects to post a substantial profit
- FXL posted a $100 million before-tax profit for the 2019 financial year and was expecting a similar return, but has now withdrawn that guidance
- The company says its risk management strategies will underpin its resilience in the current volatile market conditions
- flexigroup has also revised its growth targets down from for the current financial year to minimise new risks
- flexigroup closed 1.7 per cent higher on Friday, with shares trading for 60.5 cents apiece
Buy-now-pay-later (BNPL) company flexigroup (FXL) has withdrawn its guidance for the 2020 financial year, but still expects to post a substantial profit even amid market uncertainties.
The company posted a $100 million before-tax profit for the 2019 financial year and was expecting to continue the trend it had maintained since 2014 of delivering solid returns for investors. While the company still expects to return a profit for the current financial year, it can’t yet provide updated guidance.
flexigroup has a diverse funding base and remains confident of its ability to operate despite changing market conditions. The Australian government’s $15 billion stimulus package enabling small banks and non-banks to supply low-cost loans to customers and small business is almost tailor-made for flexigroup’s business model.
flexigroup says its risk management strategies will underpin its resilience in the current volatile market conditions. The group has managed to continue to grow its customer base without lowering credit standards – meaning the company has an overall low risk burden even amid the pandemic panics.
flexigroup maintains it has accurate and reliable predictive models for the relationship between approval rates and losses – which continue to be refined to accommodate the changing economic environment. Any losses incurred due to COVID-19 are expected to be within risk tolerance parameters, which is good news for the company’s bottom line.
The company has also revised its growth targets down from the previous guidance of 10-15 per cent for the current financial year. The company is fully prepared to slow its volume growth while keeping a watchful eye for potentially risky clients so as to minimise risks of loan defaults and losses.
flexigroup is also a diverse business, having interests in BNPL, credit cards and commercial lending and leasing across Australia, New Zealand and Ireland.
No individual segment of the business accounts for more than 35 per cent of its pre-tax profit – meaning even if one part of the business founders amid the crisis, the company’s position should still remain robust. When considered alongside the company’s risk mitigation strategies, the outlook appears stable, even while surrounding conditions are volatile.
flexigroup’s client base is also a source of stability. Over 75 per cent of customers are over the age of 35, with a large portion of homeowners providing added security for the loans.
flexigroup has been operating in Australia for over 30 years, has partnerships with 69,000 sellers and now serves over 1.8 million customers across Australia, New Zealand and Ireland. If the company’s risk mitigation strategies and predictive models are as fine-tuned as it says they are, and ongoing government stimulus further bolsters the industry, flexigroup may well remain as consistently profitable and resilient as it has been in recent years, even amid a worldwide disaster.
If the company’s risk mitigation strategies and predictive models are as fine-tuned as it says they are, and ongoing government stimulus further bolsters the industry, flexigroup may well remain as consistently profitable and resilient as it has been in recent years, even amid a worldwide disaster.
flexigroup closed 1.7 per cent higher on Friday, with shares trading for 60.5 cents apiece.
