Sydney-based fintech Flexigroup (ASX: FXL) plans to raise $115 million at a 12.6 per cent discount in a bid to bolster 'Humm', its Afterpay-like solution for large transactions.
Unlike Afterpay's maximum transaction of $1,500, Flexigroup - soon be renamed as Humm - allows for transactions of up to $50,000.
With income sources ranging from everyday consumers to revolving credit facilities to SME finance, the group's processed transaction volume rose 17 per cent to reach $2.5 billion in FY20.
Meanwhile profits dropped 40.3 per cent to $21.4 million, mostly due to a provisional buffer of $30.9 million against future COVID-19 impacts.
CFO Jason Murray describes the provision as model-driven, based on forecasts for unemployment and the macroeconomic environment.
"Clearly it's appropriate to err on the side of caution when we do that," he says.
Flexigroup experienced revenue declines during COVID-19 as it provided financial hardship assistance to heavily affected customers, although more than half of these have returned to normal repayment arrangements. The number of customers seeking financial hardship has also gone back to pre-COVID levels.
In terms of the raise, around $115 million is underwritten while reduced income recently has failed to deter major backers from making bigger bets on the company's future.
Chairman and founder Andrew Abercrombie will subscribe for $7.5 million worth of new shares in the entitlement offer, which is priced at $1.14 per share.
Investment banker John Wylie, who now has around a 5 per cent stake in Flexigroup, will take up 100 per cent of his entitlement offer.
The brand unification and capital raise comes as Flexigroup, Australia's third-largest buy-now-pay-later (BNPL) company with a 17.5 per cent market share, branches out into new channels.
CEO Rebecca James (pictured) says the group's proposition is "interest-free buying power for everything, everywhere and for everybody".
As part of that it has launched 'bundll', a BNPL product and debit card disruptor intended for Millennials and Generation Z customers; very much in the same space as Afterpay, Zip Co, Splitit and Klarna with an upper limit of $1,000 and a fortnightly repayment deadline.
"Next we have Humm90, our rebranded revolving credit business that targets young families and high earners; not rich yet, otherwise known as Henrys," says James.
"Humm90 enables 90 days of interest free shopping in every purchase, and up to 60 months of interest-free shopping at partner retailers.
"From bundll through to Humm90, we cover purchases from $1 all the way through to $50,000. This broader spending range allows us to capture a larger market than mono-line players while also offering our customers multiple touchpoints to use our products, driving stickiness and repeat usage."
The group now has 2.1 million customers and 56,700 retail partners in Australia and New Zealand, while James is also upbeat about Flexigroup's growing footprint in Ireland.
"We're also excited about the transformation of our offering in Ireland, which has gone from a leasing business to buy-now-pay-later in a very short span of time.
"We have more than doubled our customers in FY20 while also generating strong growth in retail partners and volumes."
Flexigroup is also creating a standalone division for its high-performing commercial and leasing business, which provides credit finance via operating and finance leases and chattel mortgages across Australia and New Zealand.
"The business is well established and scalable, with FY20 volumes increasing by 50 per cent," she explains.
The executive says now is the time to ramp up Flexigroup's market strategy under the Humm brand.
"With the hard work now done in simplifying and streamlining our business, the equity raise will allow us to invest and grow our strongest brand from a position of strength," says James.
"It also provides us with additional balance sheet flexibility and allows us to take advantage of opportunities that arise from the further simplification of our business.
James says the company is primed for sustainable and profitable growth, with the simplification of its business nearly complete and a common credit decision platform in place across our core consumer product suite in place.
"We are ready to put our firepower into larger ticket buy now pay later, and expand our offering with humm90 and bundll (powered by humm). We are now more nimble with a clear focus on the products that will continue to drive our growth," she says.
"The actions taken over the course of the year have put Flexigroup in the strongest possible position to capitalise on a A$450 billion retail opportunity across Australia, New Zealand and Ireland.
"Unlike our peers, we've always been profitable and we plan to continue to be as we scale."
She explains the average customer uses Flexigroup's products around nine times a year, while e-commerce volume in Australia has grown 172 per cent year-on-year.
"The single humm ecosystem will create a seamless checkout experience under one brand for our customers and retailers, with significant cross promotional opportunities, and lower customer acquisition costs through a boost in brand awareness.
"It will also simplify our story to our customers and retailers, and clarify our significant market position as a leading BNPL player and provider of long term interest free solutions."Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
Business News Australia
Get our daily business news
Sign up to our free email news updates.
Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support