PEXA Group Limited has updated its half-year guidance, flagging a $15 million non-cash impairment and a significant increase in tax expenses due to deferred tax asset derecognition.
- Non-cash impairment charge of approximately $15 million expected in 1H25
- Revised specified items guidance increased to $35 million–$40 million
- Deferred tax assets derecognised by around $19 million due to new revenue streams
- Tax expense guidance revised sharply higher to $40 million–$45 million
- Interoperability software asset under review following ARNECC program pause
PEXA Updates 1H25 Financial Guidance
PEXA Group Limited (ASX: PXA), the digital property exchange leader, has issued a notable update ahead of its half-year results due on 28 February 2025. The company now expects to record a non-cash impairment charge of approximately $15 million related to a minority investment, a significant increase from its previous specified items guidance of $15 million to $20 million for the full year.
This adjustment pushes the total specified items charge guidance to a revised range of $35 million to $40 million, indicating a more challenging financial landscape for the group in the first half of FY25.
Tax Expense Guidance Revised Sharply Higher
Alongside the impairment, PEXA has also revised its tax expense guidance substantially. The company plans to derecognise approximately $19 million of deferred tax assets (DTA), primarily due to the emergence of new non-Exchange revenue streams that fail the stricter same business test under accounting standards AASB 112 and IAS 12.
This derecognition, combined with a higher-than-anticipated effective Australian tax rate, has led to an updated tax expense guidance of $40 million to $45 million for 1H25, a marked increase from the previous $13 million to $18 million range.
Interoperability Asset Under Review
PEXA also highlighted ongoing uncertainty surrounding its interoperability program. Following ARNECC's pause of the program in June 2024, Titles Queensland has initiated a review. The group currently carries an interoperability intangible software asset valued at $14.1 million. Management has indicated it will assess potential impairment of this asset once the review report is released.
This development adds another layer of complexity to PEXA’s financial outlook, as the interoperability program was a strategic initiative aimed at expanding the company’s digital property exchange capabilities.
Looking Ahead
These updates come as PEXA continues to navigate a shifting regulatory and business environment, particularly with its expansion into new revenue streams outside its core Exchange operations. The adjustments to impairment and tax guidance underscore the challenges of balancing growth initiatives with prudent financial management.
Investors should watch closely for the finalised half-year results and auditor reviews, as well as the outcomes of the interoperability program review, which could further influence PEXA’s asset valuations and future strategy.
Bottom Line?
PEXA’s revised guidance signals a cautious near-term outlook amid strategic shifts and regulatory reviews.
Questions in the middle?
- How will the derecognition of deferred tax assets impact PEXA’s longer-term profitability?
- What are the potential outcomes of the interoperability program review and its effect on asset values?
- Could further impairments or tax adjustments emerge as PEXA expands non-Exchange revenue streams?