PEXA Group (ASX: PXA) delivered an underwhelming FY 2025 result, with the business struggling to capitalise on earlier momentum in the UK market.
Ahead of the results, PEXA achieved several milestones, including signing its first Tier 1 lender in the UK and completing the region’s first digital property settlement.
However the FY 2025 result disappointed investors, with management unable to provide meaningful details around further conveyancer or lender adoption in the UK.
The PEXA share price closed 9.34% lower at $15.34 on the day of the announcement, but has regained ground in the time since, with the PEXA share price closing at $16.53 yesterday.
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PEXA International FY 2025 Progress
Leading into the result, all eyes were on the International division. The UK market represents PEXA’s most promising growth opportunity, with adoption hinging primarily on securing Tier 1 lenders.
However, disclosures in the FY 2025 results put a halt to the momentum. Management significantly reduced visibility of Tier 1 lender adoption, citing “commercial in confidence.”
Interestingly, Tier 2 and Tier 3 lenders were disclosed, but not Tier 1. When asked, management reiterated their focus on NatWest:
“So look, they are commercial in confidence. We’re very focused on an on-time and excellent implementation of NatWest. We still engage with a number of lenders. Some have reached out following the NatWest announcement, curious about timing and how they may work with PEXA. So we’re not in a position to give sort of definitive like who’s more excited and who’s not. We’ll share that when — with the market when we’re ready. We’re really focused on NatWest right now.” – Russell Cohen, PEXA CEO, August 29 Result Call
To me, that suggests PEXA is struggling to attract other Tier 1 lenders. Instead, PEXA has its eggs in the NatWest basket, hoping proof of concept will convince others to jump on board.
Management said the ramp-up with Natwest would be gradual, starting with remortgage transactions before transitioning to sales and purchases. Meaningful revenue contributions are not expected until FY 2027 and FY 2028.
That implies material UK revenue remains 18–24 months away, so we can’t say for sure at this moment whether or not PEXA will manage to drive the kind of lender adoption it needs to flourish.
PEXA FY 2025 Financial Results
PEXA’s key financial results for FY 2025 include:
- Group revenue of $393.6 million, up 16% year-on-year
- Core earnings before interest, tax, depreciation and amortisation (EBITDA) of $134.4 million, up 21% year-on-year
- Core net profit after tax of $2.1 million, compared to a $4.7 million profit in FY 2024
- Statutory net loss of $76.1 million, compared to an $18.0 million loss in FY 2024
Frankly, the headline numbers tell us little about the group’s financial performance. The modest $2.1 million core net profit masks the strength of the Australian business while flattering the weaker Digital and International segments.
What is PEXA’s True Profitability?
To gain a better understanding of PEXA’s profitability, investors should follow the cash flow.
The core Australian settlements platform is the jewel in the crown. It produced an operating cash flow of $138.7 million in FY 2025, up from $121.4 million in FY 2024.
Including leases, share purchases and borrowing costs, a standalone Australian division would earn $134.1 million in operating cash flow.
PEXA has decided to “invest” (Editor’s note: lol) that cashflow into the two other segments:
- The Digital Segment, by acquiring small proptech firms to build a local digital business
- The International Segment – Taking a version of the PEXA platform to the UK, and acquiring Smoove and Optima Legal to encourage adoption among lenders and conveyancers.
So far, those acquisitions have failed to deliver positive returns on the invested capital. Before the company began its acquisition spree, the EBITDA margin was 47.5%. That has since dropped to 34.1%.
After accounting for operating losses incurred by the Digital and International segments, as well as “one-off” redundancy and acquisition costs, the business earned a free cash flow of $48.7 million in FY 2025.
As of 30 June 2025, PEXA had $70.7 million of cash and $315.2 million of debt, giving it a net debt of $244.5 million.
PEXA’s New CEO Moves Quickly to Reset Business
PEXA welcomed new CEO Russell Cohen in April, who has moved quickly to refocus the business.
As part of an effort to simplify PEXA, Cohen has placed the Digital division under strategic review. A divestiture appears likely, with an update expected at the October AGM.
Alongside $78.2 million of asset write-downs and other items affecting FY 2025 statutory net profit, this indicates he is moving quickly to reset both the financials and strategy toward the core settlement business.
Cohen has also acted swiftly to restructure the management team. Both the CFO and head of the Australian division have departed. It remains uncertain whether Acting CFO Liz Warrell will continue in the role or if a new CFO will be appointed.
The Australian Financial Review has raised concerns over Warrell’s employment history before PEXA.
“Last year, the Federal Court found iSignthis had failed to disclose that a significant portion of its revenue came from just three customers, made misleading or deceptive statements and that Karantzis breached his director duties.”
“Sins around iSignthis can’t be pinned on Warrell. That would be Karantzis, who spun the fantastic financing narrative. But what does it say about the finance executive’s plain judgment that she kept working for him, even when he launched dubious legal actions against the regulatory agencies coming after him?”
PEXA’s Australian Competitor Concedes Defeat
PEXA’s home market of Australia continues to strengthen its competitive moat.
Sole rival Sympli announced it would collaborate with PEXA rather than compete directly.
This comes after the Australian Registrars National Electronic Conveyancing Council announced it had paused its interoperability program, effectively meaning PEXA no longer needed to open its software to competition.
While a positive policy move for PEXA, soon after the NSW Independent Pricing and Regulatory Tribunal (IPART) announced it would be reviewing e-conveyancing service fees.
IPART last reviewed fees in 2019. The review found that despite PEXA’s 100% market share, prices were reasonable and CPI-linked increases were appropriate.
I expect the current review to reach the same conclusion, with the Australian division maintaining its monopoly on settlements. That said, the dominant Australian business is running out of growth, with market coverage currently at 90%.
Is PEXA a High-Quality Stock?
I’ve been following PEXA stock for a few years now because of the enviable strength of the Australia business, which has historically been masked by poor capital allocation decisions designed to build the International and Digital businesses.
The decision to write down non-performing assets, review the relevance of the Digital segment, and improve transparency around the profitability of each segment seemed to me positive developments for the long term.
However, the FY 2025 results left me feeling a little more pessimistic about UK growth prospects, than I was before. That’s a real negative because I don’t think PEXA should be considered a high-quality business until it either divests its international and digital segments, or divests its digital segment and makes its international segment profitable.
While the market is already becoming more optimistic about PEXA, I think it still needs to cover a lot of hard yards to transform itself. Therefore, at the risk of missing this potential turnaround, I’ll be waiting for either a more favourable price, or some favourable developments, before I buy shares.
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Disclosure: The author of this article does not own shares in PXA and will not trade PXA shares for at least 2 days following the publication of this article. The editor of this article, Claude Walker, does not own shares in PXA and will not trade PXA shares for at least 48 hours following the publication of this article. This article is not intended to form the basis of an investment decision and is not a recommendation. Any statements that are advice under the law are general advice only. The author has not considered your investment objectives or personal situation. Any advice is authorised by Claude Walker (AR 1297632), Authorised Representative of Ethical Investment Advisers Pty Ltd (ABN 26108175819) (AFSL 276544).
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