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FlexiGroup's NZ cards business outpaces credit growth; bad debt ticks up

Tuesday 21st August 2018

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FlexiGroup's New Zealand credit card unit boosted annual profit as lending growth outpaced the nation's consumer credit expansion.

Cash profit rose 9 percent to $31.9 million in the 12 months ended June 30, outperforming the wider Australian financial services group. The Kiwi cards unit, which includes the Q Card, Flight Centre MasterCard, Farmers Card and Oxipay, added 73,000 customers in the year, with 481,000 as at June 30.

Customer spending rose 14 percent to $710 million, and closing receivables ended the year up 9 percent at $707 million. Reserve Bank figures show total credit billings in New Zealand rose 5.7 percent to $3.42 billion in June from a year earlier, while total advances outstanding climbed 5.8 percent to $7.19 billion as at June 30. RBNZ figures released today show the pace of growth in spending and outstanding balances slowed in July.

"This sustained growth is being driven by consumers becoming smarter with how they choose to finance and pay for the things they need," FlexiGroup NZ chief executive Chris Lamers said in a statement. "It is also a reflection of the sound retail and economic environment which we’ve been operating in over the past 12 months." 

That growth led to a 13 percent increase in impairment losses on consumer loans to A$14.3 million, or 2.2 percent of receivables in Australian dollar terms. A year earlier, bad debt charges amounted to 2 percent of the loan book. 

FlexiGroup's NZ leasing division posted a 14 percent fall in annual earnings to $9.8 million, as lending shrank 3 percent to $91 million and its loan receivables declined 10 percent to $170 million. The company said sales volume picked up in the second half of the year "reflecting positive momentum" from a new management structure. 

The Australian group built the New Zealand business through acquisitions. In 2015 it bought Fisher & Paykel Finance from parent F&P Appliances for $315 million and later bought Spark New Zealand's Telecom Rentals business for $106 million.

FlexiGroup posted a net loss of A$10.3 million, writing down the value of assets and receivables in its Australian consumer and cards businesses. Cash earnings shrank 5 percent to A$88.2 million, near the top of their forecast range. FlexiGroup said it expects cash earnings to grow between 8 percent and 13 percent in the 2019 year.

The ASX-listed shares jumped 21 percent to A$2.20. 


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