FlexiGroup (FXL) announced it had entered into an agreement to acquire Interest Free and Visa card business Lombard Finance Pty Ltd. Under the agreement FlexiGroup will acquire Lombard for a net $10 million funded from existing cash reserves ($5m) and equity consideration ($5m). Lombard provides interest free financing through established relationships with a number of leading retailers and currently has approximately 23,000 active customers, including 11,000 Visa cards on issue. The acquisition is expected to be earnings accretive for FlexiGroup in FY13. Additional investment in Lombard to reposition the business for growth will occur in 1H13, with expected profit contribution to grow significantly beyond FY13. FlexiGroup also reaffirms its FY12 Cash NPAT guidance of 12% to 15% growth on FY11.
John DeLano, CEO and Managing Director of FlexiGroup said: “Lombard represents a compelling opportunity to expand our footprint in the highly attractive Interest Free retail market, 95% of which is dominated by “Interest Free” cards. The Lombard products complement our existing ”no interest ever” products extremely well, opening up new industry segments, and enabling us to offer a Visa card to FlexiGroup’s 700,000 existing customers and 250,000 customers originated annually.” “We see this as a very similar opportunity to our highly successful Certegy transaction which three years ago we acquired for $31m and that business today is forecast to contribute $19m to $21m to the Group’s Cash NPAT.
FlexiGroup is a diversified financial services group providing “no interest ever”, leasing, vendor programs, mobile broadband, lay-by and other payment solutions to consumers and businesses. Through its network of 11,000 merchant, vendor and retail partners the Group has extensive access to three key markets, Business to Consumer, Business to Business and Retail to Consumers (and small business customers). Performance has been characterised by solid profitable growth as the company has expanded and diversified its business through organic growth, acquisition and product innovation. This diversification strategy has been extended to the large, high growth online market with the 2012 acquisition of Paymate (an online payment processing business).