FlexiGroup Limited (ASX: FXL) announced its FY20 result today. It also revealed a capital raising as well as a name change to humm.
FlexiGroup is a business that provides credit to customers. Its humm brand is one of the ‘buy now, pay later’ competitors.
FlexiGroup FY20 result
FlexiGroup reported that its FY20 transaction volume increased by 17% to $2.5 billion with total receivables of $2.5 billion at 30 June 2020.
Active customers rose by 30% year on year to 2.3 million. Retail and commercial partners increased by 13% to 73,000.
The business reported that its cash net profit before the ‘COVID-19 macro overlay’ was $60.1 million. However, actual cash net profit was down 62% to $29.2 million.
Statutory profit, which included $3.5 million of redundancy and restructuring costs, was down 65% to $21.4 million.
Name change
The company has announced its products “will unify under our most recognised and loved brand, humm, to create a seamless checkout ecosystem to harness the natural synergies across our consumer and SME offerings”.
Management is going to do a strategic review of its commercial and leasing business.
Dividend
The FlexiGroup board decided not to pay a final dividend, that meant that the FY20 dividend was 3.85 cents per share, a 50% reduction.
The decision was influenced by the current economic conditions and the capital raising. A decision on dividends will be made in the HY21 result.
Capital raising
FlexiGroup has announced an entitlement offer worth $140 million. It’s an entitlement offer of 1 for 3.20 shares. It also has a total estimated underwritten amount of $115 million.
This money will be used to provide balance sheet flexibility and “support the sustainable and profitable growth outlook”.
Under the institutional entitlement offer, Chairman and Founder Andrew Abercrombie will subscribe for $7.5 million worth of new shares, which is equal to 23% of his entitlement. John Wylie and associated entities will purchase 100% of the entitlement.
After the capital raising FlexiGroup will have $0 of net debt, creating room for growth across the various lines.
The offer price is $1.14, a discount of 12.6% to the last closing price. That’s a nice discount for investors.
Summary
The change to humm branding seems like a good idea. A capital raising to fund more growth will hopefully be useful. There is a bit of an arms race going on between the buy now, pay later competitors.
For existing shareholders, I’d probably want to take part in the capital raising. However, for new investors it could also be worth buying because it’s already profitable and the valuation seems much more manageable.
But in terms of payment businesses, I think I’d rather buy other ASX growth shares like Pushpay Holdings Ltd (ASX: PPH).
