Another downgrade from the financial sector with Flexigroup shares ending down more than 10% after the company revealed a lowered forecast for business activity (and presumably profits) and abandoned issuing short terms earnings guidance for the next two years at least.
Buy rating retained as Citi analysts continue to believe the risk remains to the upside, with FY18 release cementing their confidence what we are witnessing at FlexiGroup might be a successful turnaround.
Citi analysts have been biding their time, waiting for that trigger that would allow for the gap between share price and valuation to close. It appears they now think yesterday’s interim report release might be that trigger. Upgrade to Buy from Neutral.
First half results were in line with estimates. UBS suspects confidence in the second half is building and the company’s plans should support an improved FY19, when the benefits of restructuring should emerge. Guidance is reaffirmed for FY18.
Flexigroup’s result was in line with the broker, at the lower end of the guidance range. FY18 guidance features organic growth offset by material cost increases for Certegy and further investment in Oxipay and Ireland. Growth is expected to return in FY19.