21 November 2019
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Flexigroup flexes its muscles at Afterpay

Tim Boreham
28 June 2019

Flexigroup (FXL) $1.62 is like one of those inventors who devise the next big thing in their garage, only to see someone else bask in the glory years later.

Flexigroup has extended ‘buy now, pay later’ (BNPL) financing for more than 20 years, but unlike the runaway Afterpay it never clearly promoted the offering.  Also, its business covered a confusing array of 20 products and the company has been an ordinary performer overall.

Now, the company has consolidated these products to five, including melding its two BNPL offerings Certigy EziPay and Oxipay into a funkier single product called Humm.

 “It’s definitely the hot topic at the moment,” says CEO Rebecca James of the BNPL sector.

Humm can be used for transactions between $1 and $30,000 – not that one can buy much for a buck these days – repayable over two and a half to 60 months. As with Splitit, users need an existing credit or debit card.

Flexigroup aims to entice 35 to 45 year olds making more expensive purchases. James claims an average purchase of $2,000, compared with $200 for the others.

The 62,000 signed up to date include usual suspects such as Myer and JB Hi Fi, but also the National Hearing chain and City Fertility.

Flexigroup claims a 17% of the BNPL market – as measured by transaction volumes – and 40% of receivables. The company also claims a walk-up start of one million customers here and a further 200,000 in NZ, but that is across the entire company and also covers credit card and leasing products.

James reckons that with the physical Australian retail market worth $320 billion and online sales a further $30 billion, there’s room for everyone. Flexigroup in particular is targeting the $22 billion health market and $65 billion home improvement markets.

In the first (December) half, Flexigroup’s BNPL division made a $17m profit (up 9%) – more than half of the company’s overall cash earnings of $31.9m (down 22%).

“We are not reliant on massive offshore growth to make a profit,” James says – surely not a dig at Afterpay’s US expansion plans.

Flexigroup shares surged from $1.35 to $2 after the company’s revamped management ‘reminded’ investors of its BNPL presence in early May. But the company – the only BNPL currently making money – is worth a relatively modest $680 million.

Not that everything is hunky-dory, according to broker Morgans:  “We note execution of the Humm launch has not been perfect, with poor app ratings still coming through.”


Disclaimer: Under no circumstances have there been any inducements or like made by the company mentioned to either IIR or the author. The views here are independent and have no nexus to IIR’s core research offering. The views here are not recommendations and should not be considered as general advice in terms of stock recommendations in the ordinary sense.

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