Investors hammered shares in listed foreign exchange punter/provider OFX Group (OFX) yesterday after it confessed to having been caught up in the backwash of the surge in market volatility since the June 23 Brexit vote.
While the company at one stage had boasted about record transactions volumes after the shock vote by Britain to leave the European Union, it was the continuing uncertainty caused by that vote and then the unknown of the early stages of the US Presidential campaign that depressed forex transaction values.
And that in turn wrecked its half-year profit, and in turn investors wrecked the share price, sending it down 17% on the day to $1.345 and a three year low.
Shareholders are paying for the weak result with the interim dividend slashed to 2.8 cents a share from 3.6 cents a year ago, a cut of 22% and a move to conserve cash outflow.
And as a further sign of the company pulling its head in it yesterday announced a dividend reinvestment plan for the interim dividends, and said it would decide on a similar offer for the final dividend next May.
Statutory net profit for the six months ended September 30 fell 13.3% to $9.7 million, but the underlying result was worse, a fall of 21%, because of one-off items in the prior year, OFX said today.
It forecast its fiscal 2017 underlying net profit after tax would be “slightly up” on the prior year, which was saw investors dump the stock.
The shares are sharply lower than the 12-month high of $3.55 hit last November, after global rival Western Union said it was considering paying up to $3.70 a share to take over the company. Those talks were abandoned in February this year and the OFX shares have since struggled to regain their ground.
Turnover in the half, which is a measure of total transaction value, fell 4% to $9.6 billion, but was in line with the final half of 2015-16.
The result was hit by a fall in average transaction values of 11% to $22,800, mostly due to the fall in the value of the pound and stronger Australian dollar.
Company CEO Richard Kimber said the company has seen a return to modest revenue growth despite unfavourable market conditions post Brexit. Transaction volumes have increased from both existing and new clients.
“As part of our three year accelerate strategy the first half saw a step change in investment in our proprietary technology platform, key personnel hires, and in our rebranding and marketing program,” he says.
“While along with a stronger AUD and lower value GBP transaction flows this investment has resulted in reduced earnings, it provides a strong platform for growth and will accelerate margin growth as we scale the business.”
