FlexiGroup share price lower following half year results release

The FlexiGroup Limited (ASX:FXL) share price is trading lower on Tuesday after the release of its half year results this morning…

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The FlexiGroup Limited (ASX: FXL) share price is trading lower with the market on Tuesday following the release of its half year results.

The financial services company's shares are down 2% to $1.80 at the time of writing.

a woman

How did FlexiGroup perform in the first half?

During the first half of FY 2020, FlexiGroup recorded $1.3 billion of transaction volume.

This was an increase of 28% on the prior corresponding period (excluding discontinued operations) and was driven by a 15% lift in retail partners to 69,000 and a 12% jump in active customers to 1.87 million. Receivables grew 7% on the same period last year to $2.7 billion.

On the bottom line, the company reported a statutory NPAT of $33.3 million and a cash NPAT of $34.5 million. This was a 6% and 8% increase, respectively, over the prior corresponding period.

The FlexiGroup board declared a fully franked interim dividend of 3.85 cents per share, which is in line with last year's payout.

Transformation strategy is delivering.

FlexiGroup's Chief Executive Officer, Rebecca James, explained that its growth was being driven by the delivery of its transformation strategy.

She said: "The transformation strategy put in place 12 months ago is delivering, demonstrated by the key indicators over the last six months. Profit growth, strong double digit volume growth across all current product propositions, and a significant reduction in losses in proportion to volume."

"This has been achieved in conjunction with transitional investments in technology, credit and collections capability, new product development and marketing. More importantly, our strategy has delivered three clear market propositions as well as unique, recognisable and visible brands that are loved by our customers," she added.

These brands include its refreshed buy now pay later product humm. Management notes that its ability to service any transaction up to $30,000 interest free is standing out as a key differentiator in a crowded market being dominated by Afterpay Ltd (ASX: APT).

In addition to this, the company revealed that it is launching an online marketplace today for its world first bundll product. This marketplace will allow users to shop online everywhere and purchase and checkout in two clicks.

Outlook.

FlexiGroup expects its transaction volume to grow between 10% and 15% for FY 2020. This is being driven by new product launches, new customer segments, and new partnerships, which are being partially offset by the softer retail trading environment.

The company also reiterated that it is "in the first year of a three-year comprehensive business transformation plan, the objectives of which are to accelerate growth; reduce costs; deliver a best in class digital platform; and invest in loved brands."

In light of this, it does not intend to issue short term earnings guidance. This is because "it believes a focus on short term profit objectives can contradict the broader goal of ensuring flexigroup achieves its medium term goals and emerges as a strong, long term industry leader."

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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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