Finexia’s $4M Stayco Write-Down Raises Questions on Asset Risks
Finexia Financial Group has restated its FY24 financials due to a material error in expense accruals and reduced the value of its Stayco investment by $4 million following an external valuation review.
- Material error found in FY24 expense accruals leading to restatement
- Under-accrual of interest and operating expenses corrected
- Trade and other payables previously understated
- Stayco investment written down by $4 million to $16 million
- Enhanced internal controls implemented with Lumina's assistance
Restatement of Prior Year Financials
Finexia Financial Group Limited has disclosed a significant correction to its financial statements for the year ended 30 June 2024. The company identified a material error involving the under-accrual of interest and operating expenses, which led to an understatement of expenses and trade payables in its prior period accounts. This restatement reflects Finexia's commitment to transparency and accurate financial reporting.
The error was uncovered during the preparation of the FY25 financial statements, following the appointment of Lumina as the Group's accounting and finance team earlier this year. Lumina's engagement not only helped identify the misstatement but also supported the implementation of strengthened processes and internal controls aimed at preventing similar issues in the future.
Revaluation and Write-Down of Stayco Investment
In addition to the restatement, Finexia has revised the carrying value of its investment in The Stay Company Income Fund (Stayco), a wholesale fund focused on accommodation businesses in Queensland. After commissioning an external valuation review, which accounted for market conditions and extraordinary events such as Cyclone Alfred, the Board decided to write down the investment by approximately $4 million, reducing its book value to just over $16 million.
Stayco has historically delivered attractive monthly distributions ranging from 8% to 12% per annum, but the recent valuation adjustment signals a more cautious outlook on the underlying asset values. The write-down underscores the challenges faced by accommodation assets in the region, particularly in the wake of natural disasters and market fluctuations.
Implications and Forward Outlook
These developments highlight the evolving risk landscape for Finexia’s investment portfolio and financial reporting practices. While the restatement corrects past inaccuracies, the Stayco write-down may influence investor sentiment and future earnings expectations. The company has pledged ongoing updates and remains focused on governance and transparency as it navigates these challenges.
Investors will be keen to review the detailed restatement disclosures in Finexia’s forthcoming FY25 Annual Report and monitor how the Group manages its investment risks and operational controls going forward.
Bottom Line?
Finexia’s financial restatement and Stayco write-down mark a pivotal moment, setting the stage for closer scrutiny of its asset valuations and controls.
Questions in the middle?
- How will the FY24 restatement impact Finexia’s FY25 profitability and cash flow?
- What are the prospects for recovery or further impairment of the Stayco investment?
- How effective will the new internal controls be in preventing future accounting errors?
