This morning consumer credit business FlexiGroup Limited (ASX: FXL) reported an adjusted net profit of $44 million for the six month period ending December 31 2017. The adjusted profit is 1% higher than the prior corresponding half, although the cash net profit dropped 4% to $41.5 million after including "one off" restructuring costs.
The statutory net profit suffered from an $89.1 million impairment to the value of of its Consumer Leasing division to come in at a $50 million loss.
Total portfolio income came in at $229.3 million compared to $235.5 million in the prior half year, which represents a 3% fall.
Over the period the company also reduced its substantial net debt load by $62 million to leave gearing reduced to 44% from 82% in the prior corresponding period. The group also reports that it will "continue to deleverage" over financial year 2018.
FlexiGroup will pay a dividend of 3.85 cents per share on total cash earnings per share (EPS) of 11.1 cents. This is within the group's stated payout ratio of 30%-40% of cash net profit. The interim dividend was flat on the prior corresponding period (cpp), while cash EPS were down 17% on the pcp.
The group's chief executive reaffirmed guidance for a full year cash net profit in the range of $85 million to $90 million, alongside an ambition to "drive NPAT growth in FY19".
FlexiGroup operates a consumer and commercial leasing division that leases equipment mainly to small businesses at healthy rates of return, while its consumer lending business offers small amounts of consumer credit via its cards business.
Both of these businesses can grow organically by acquiring new customers, with its Australian consumer cards business seeing customer growth up 30%. The group also an online fraud protection business in Certegy that it has ambitious growth plans for.
In terms of consumer credit lending the group now faces stiff competition from the likes of "buy now, pay later" startups like Afterpay Touch Group Ltd (ASX: APT) or Zip Money. While its substantial debt load remain a key risk.
Overall this looked a reasonable result for a business that generates healthy cash flows that enable it to pay out a reasonable dividend yield. In response to the results the shares are up 1% to $1.67 today, although they're still down 59% over the past five years.
