It has been a difficult few weeks for FlexiGroup with the financial services group seeing its share price down by nearly 70% since February 20, as the S&P/ASX 200 Index (ASX: XJO) has moved very much into bear market territory.
This comes as the share market tries to factor in the impact that the coronavirus outbreak will have on the wider Australian economy and Australian businesses in the weeks and months ahead.
What did FlexiGroup announce today?
This morning, FlexiGroup emphasised it remains confident that its corporate and warehouse facilities with banks should be sufficient to fund its business in the months ahead if the economic situation worsens, and reaches the point where security markets are unable to fund non-bank lenders such as itself.
The Group added that it could also potentially benefit from the Australian Government’s decision yesterday to support non-bank lenders through its Australian Office of Financial Management which provides funding to small to medium businesses and consumers.
However, in light of the highly unusual market conditions, FlexiGroup has withdrawn its growth objective for transaction volumes of between 10% and 15% for FY20.
There is no doubt that all sectors of the economy are under enormous pressure right now, which is only going to grow in the weeks and months ahead. Small to medium-sized businesses are particularly vulnerable, with many seeing their revenue inflows slow right down. Already some small businesses are considering laying off staff.
FlexiGroup commented that it will manage business volumes over the coming weeks closely, and slow down volume growth if required, to maintain some flexibility with regards to its existing debt facilities.
Recap of previous funding update announcement
FlexiGroup’s announcement today follows a previous one made four days when the company provided a more detailed assessment of its funding situation.
The Group noted that it had $674 million undrawn wholesale funding facilities available, provided by a range of major banks, both domestic and international. It also can access over $100 million in undrawn corporate debt facilities if required.
In addition, FlexiGroup announced that it has secured an additional $75 million of committed wholesale funding with a major domestic bank extending for a further two years.
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Motley Fool contributor Phil Harpur 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.