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FlexiGroup share price crashes to 52-week low after profit warning

FlexiGroup Limited (ASX: FXL) share price has fallen 14% in early trade, having partially recovered after initially falling 22% to a 52-week low. This comes after FlexiGroup announced this morning that a $12m after-tax impairment in its Commercial Leasing business will be recorded, putting a hole in its FY2019 results.

Management has revised down its cash net profit after tax (NPAT) guidance for the 2019 financial year to be in the range of $76 – $80 million, down from previous guidance of $95 – 100 million.

The cause of the impairment is FlexiGroup’s exposure to the voluntary liquidation of one of its equipment finance vendor program partners.

The financial services group meets a similar fate as Thorn Group Ltd (ASX: TGA) last Friday, with both companies evidently exposed to the same issue. The Thorn Group share price fell 21% after announcing that it had a $10.5m exposure to defaults on lease payments for an equipment finance product. The writing had been on the wall for FlexiGroup shareholders, with Thorn Group having warned that it was a “widespread exposure in the equipment finance industry”.

FlexiGroup Chief Executive Officer, Rebecca James, said: “Following good volume, customer and retailer growth across the business, it is disappointing to announce a significant one-off impairment in our commercial leasing business.”

Excluding the impact of the impairment, underlying 1H19 NPAT is expected to be 3% higher than the previous corresponding period.

FlexiGroup will announce its interim result on February 26.

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Motley Fool contributor Cale Kalinowski has no position in any of the stocks mentioned. The Motley Fool Australia has recommended FlexiGroup Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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