The Flexigroup Limited (ASX: FXL) share price is on the sidelines today after the company announced a trading halt for equity raising. The news comes alongside Flexigroup's release of its FY20 results, as the company looks to pivot its strategy in the coming 12 months.
The Flexigroup share price was $1.30 at close of trade yesterday, after clawing back from a 52-week low of 38 cents when it bottomed out in March.
So what were the FY20 highlights for the buy now, pay later (BNPL) group? And what are the details of its strategy update?
Flexigroup FY20 result
There were some positive takeaways from the Flexigroup result overall. Its FY20 net profits remained in the black at $21.4 million, active customers were up 30% to 2.3 million compared to FY19, and transaction volumes lifted 17% on last year's levels to $2.5 billion.
Its BNPL operations delivered as much as 18% volume growth, reflecting strong performances from Australia, New Zealand and Ireland. Notably, Flexigroup's Australian online volume increased by 172% overall in FY20 and 262% in the second half of this financial year. This is reflected in booming online retail sales via BNPL more broadly.
On the other hand, revenues for the company slumped 5% to $450 million and the net profit result was 6.5% lower. This weaker overall financial performance has prompted Flexigroup to scrap its dividend payout for the time being.
As a result, Flexigroup has initiated a 1 for 3.20 entitlement offer, expecting to raise $140 million in additional equity. $115 million of this figure will be underwritten. The company said these added funds would provide "balance sheet flexibility and support the sustainable and profitable growth outlook".
Strategic update
The company's new strategy will focus around the humm platform. To maximise the platform's profitability potential, Flexigroup and its flagship products will be rebranded under the one name. This would simplify the business around "a unifying value proposition of interest-free instalment payments for consumers and SMEs".
Flexigroup CEO Rebecca James said:
FY20 has seen Flexigroup make significant progress against its strategy, with the company now primed for sustainable and profitable growth. With the simplification of the business nearly complete, and a common credit decision platform in place across our core consumer product suite, we are ready to put our firepower into larger ticket buy now pay later, and expand our offering with humm90 and bundll.
Flexigroup's rebranding to humm remains subject to a shareholder vote at the company's FY20 AGM. A reservation of the ASX ticker "HUM" has already taken place.
James said the rebrand would "simplify our story to our customers and retailers, and clarify our significant market position as a leading BNPL player and provider of long-term interest-free solutions".
Foolish takeaway
I think a parallel can be drawn between the boom of the buy now, pay later sector and the Australian gold rush that began in 1851.
Companies like Flexigroup are flocking to capitalise on this 'golden' opportunity, but to be honest I believe the bigger BNPL players like Zip Co Ltd (ASX: Z1P), Afterpay Ltd (ASX: APT) and Sezzle Inc (ASX: SZL) are a better buy at this point.
