FlexiGroup Limited (ASX: FXL) has experienced significant uncertainty in recent times, as the wild fluctuations in its share price indicate.
After the surprise exit of CEO Tarek Robbiati and other board members a few months ago coincided with slowing profit growth, investors jumped ship and FlexiGroup fell as low as $2.22.
Shares currently change hands for $2.85, roughly halfway between their 52-week low of $2.22 and their high of $3.67.
At the Annual General Meeting yesterday, Chairman Andrew Abercrombie announced the appointment of new CEO, Symon Brewis-Weston, who will join the company early next year. Mr Brewis-Weston is currently the CEO of Sovereign Assurance Company, a New Zealand-based subsidiary of Commonwealth Bank of Australia (ASX: CBA).
While the addition of a capable CEO adds some certainty to Flexi's future, investors will be more interested in the outlook for financial performance this year – which notably did not include any specific forecasts.
The outlook for Financial Year 2016
Chief Operating Officer and acting CEO Peter Lirantzis told investors that the company would be lifting its focus on digital and IT investment, which has traditionally been 'well below industry benchmark'.
There could be an entire article covering the benefits to FlexiGroup of a higher investment in IT, but broadly speaking the company will improve customer service, increase the speed of 'originations' (new business), collect data to improve the efficiency and effectiveness of marketing outlays, and reduce costs.
FlexiGroup is now the largest leasing provider in New Zealand, and after the Fisher & Paykel Finance acquisition completes in early 2016, approximately 40% of company earnings will come from New Zealand.
The company is focussed on growing profits through 'lower risk receivables' in its 'No Interest Ever' and 'Interest Free Card' businesses, while optimisations to existing businesses will enable expansion into new product categories whilst also generating increased spend per customer.
FlexiGroup also flagged continuing investment in IT, which should deliver improvements out to 2018, and a $2 million depreciation charge
But where's my outlook for Financial Year 2016?
The AGM announcements didn't add any new information to FlexiGroup's previous guidance provided to the market, which was for the company to achieve a Net Profit After Tax of between A$92-94 million (2015: $91m). This excludes earnings from the Fisher & Paykel acquisition, which is expected to deliver mid-single digit earnings per share improvements next financial year.
Beyond 2017, FlexiGroup looks to be in a decent place with a step up in its digital capabilities as well as growth from the acquisition of Fisher & Paykel Finance. I do not expect earnings growth to shoot the lights out, but trading on a Price to Earnings ratio (P/E) of just 9 and offering a 6.2%, fully franked (sustainable!) dividend yield, FlexiGroup shares look like great value today.
