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Why the OFX share price could slump this morning

The OFX Group Ltd (ASX: OFX) share price is one to watch this morning, after the company reporting that net profit after tax has slumped 8% in its latest half-year results.

What could move the OFX share price this morning?

The currency platform reported its half-year results this morning, which could put its share price under pressure. Revenue growth was flat with $65,888 million in 1H 2020, while net profit before non-controlling interest fell 8% to $8,342 million.

Underlying net profit slid 5% lower to $8,627 million for the period while net operating income edged lower to $59,544 million.

Earnings before interest, tax, depreciation and amortisation (EBITDA) growth was also flat at $16,149 million while OFX’s EBITDA margin edged 10 basis points higher to 27.1%.

The company’s earnings per share (EPS) fell to $3.44, down from $3.75 in 1H 2019.

OFX cited a “challenging market” with Brexit uncertainty and the US–China trade war the key culprits. Cross-border spot volumes are down for the currency platform which caused the net operating income fall.

Positively, client growth continued in the company’s North America and Corporate segment in line with OFX’s strategic priorities. However, the company’s overall active clients fell 3.0% throughout the year.

The OFX share price could be boosted by the 9.7% growth in Corporate revenue including a 24.5% increase in its Global Currency Account. 

How is the OFX balance sheet?

Positively, OFX’s total assets climbed 36.36% higher in the 6 months to 30 September 2019. However, much of this increase was in its “Cash held for subsequent settlement of client liabilities” account.

This was due to the company’s client liabilities also climbing higher throughout the half-year.

The OFX share price could be under pressure this morning after reporting a 59.78% drop in net operating cash flow to $7,185 million.

How have the company’s shares performed in 2019?

It’s been a difficult year for shareholders as the OFX share price has slumped 20.69% to $1.38 per share.

This reflects the ongoing Brexit and US–China trade war situations hurting volumes for the currency group.

OFX shares are yielding a tidy 4.31% per annum, but closed trade yesterday just shy of their $1.26 per share 52-week low valuation.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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