'Directionless' FlexiGroup gets a caning

Morningstar has given the FlexiGroup board and management a serve over what it describes as the company's "instability" and "lack of direction".

FlexiGroup chief executive Tarek Robbiati resigned in June, after two years in the job, and last week the company announced that he had brought forward his departure.

And on Monday,  chairman Chris Beare and non-executive director Anne Ward announced that they were both stepping down, effective that day.

"Instability remains an issue and a lack of direction may weaken the current business performance and the firm's position for the future," Morningstar said in a note.

Morningstar was also unimpressed with what it described as a "disappointing" earnings update.

The company said its unaudited cash profit for the year to June was A$90.1 million - up from $85 million in 2013/14. It guidance for 2015/16 is for a cash profit of $92 million to $94 million.

"Fiscal 2016 guidance does nothing to allay concerns that the direction of the business is uncertain, whether dealing with competition and growing volumes, or cost control," Morningstar said.

"While fiscal 2015 cash net profit of $90.1 million is within guidance, fiscal 2016 guidance is soft. This is eight per cent to ten per cent below our forecasts and, given the acquisition of Telecom Rentals in March, means no organic growth."

Morningstar also said weaker volumes in the SME leasing and enterprise leasing divisions demonstrated "a weaker competitive position than we had thought."

"It has historically used flexibility, service and speed as key tools to win new clients, and while the company acknowledges it dropped the ball on this front, we think increased competition is playing into the result."