Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Humm Group Ltd (ASX:HUM, Financial) achieved a record level of $5 billion in receivables, marking an 18% increase.
- The company realized significant cost savings of $13.6 million in the second half of the financial year.
- Net interest margin stabilized at 5.5% in the second half, despite previous periods of rapid interest rate increases.
- Credit losses were maintained at historic lows of 1.8% of average net receivables.
- The company reported a $7.1 million statutory profit, up from $2.9 million in the previous year.
Negative Points
- Normalized cash profit after tax decreased by 19% compared to the prior year.
- Operating expenses remain a concern, despite significant cost-saving measures.
- Losses from suspended products were still notable, amounting to $15.9 million in FY24.
- The commercial business saw an increase in net losses due to higher volume growth in previous years.
- The consumer business experienced margin compression and reductions in origination costs.
Q & A Highlights
Q: Can you provide an overview of the financial highlights for the year?
A: Stuart Grimshaw, CEO: We delivered an 18% increase in receivables to $5 billion, achieved $13.6 million in cost savings in the second half, stabilized net interest margin at 5.5%, and maintained credit losses at historic lows of 1.8%. We also reported a $7.1 million statutory profit and a $60.6 million normalized cash profit after tax.
Q: What were the key drivers behind the improved performance in the second half of the year?
A: Adrian Fisk, CFO: The second half saw a 16% increase in normalized cash profit, driven by a 5% increase in net interest income, cost reductions, and improved credit quality. We also saw a reduction in losses from suspended products and a focus on cost efficiency.
Q: How did the commercial portfolio perform, and what were the main contributors to its growth?
A: Stuart Grimshaw, CEO: The commercial portfolio grew significantly, with receivables reaching a record $3 billion. This growth was driven by strong relationships with brokers, speed in decision-making, and expansion into new regions and sectors such as agribusiness.
Q: Can you elaborate on the cost-saving initiatives and their impact on the financials?
A: Adrian Fisk, CFO: We achieved $13.2 million in savings this year and $31.8 million since the program's inception. These savings offset inflation impacts and allowed us to invest in frontline capabilities. We also reduced costs associated with suspended products and improved our cost-to-income ratio.
Q: What are the future plans for the consumer business, and how did it perform in the second half?
A: Stuart Grimshaw, CEO: The consumer business saw improved performance in the second half, with normalized profit increasing to $11.8 million. We are focusing on rebuilding the business around the customer, optimizing unit economics, and introducing new products such as a regulated hybrid loan structure.
Q: How is the company addressing the challenges posed by interest rate changes?
A: Adrian Fisk, CFO: We have stabilized our net interest margin at 5.5% and improved capital efficiency. We continue to hedge our fixed portfolios and adjust our strategies to navigate the interest rate environment effectively.
Q: What are the key elements of the new Forward Flow Program, and how will it benefit the company?
A: Adrian Fisk, CFO: The Forward Flow Program allows us to originate and service receivables without requiring capital, thus increasing our capacity for capital-light growth. It also provides upfront reimbursement of origination costs and servicing fees, enhancing our return on equity.
Q: How did the international operations perform, and what are the growth prospects?
A: Stuart Grimshaw, CEO: Internationally, we saw positive growth in Ireland and Canada. We are investing in technology platforms to enhance customer and merchant value propositions and see good growth potential in these markets.
Q: What measures are being taken to ensure the continued performance of the credit portfolio?
A: Adrian Fisk, CFO: We maintain a disciplined approach to credit management, with net losses at 1.8% of average net receivables. We closely monitor the economy and adjust our credit settings as needed to ensure portfolio strength.
Q: Can you discuss the company's capital strategy and its impact on shareholder value?
A: Adrian Fisk, CFO: Our capital strategy focuses on balancing growth with maximizing shareholder returns. We have improved capital efficiency, paid dividends, and completed a share buyback program. These actions, along with our focus on ROE accretive initiatives, aim to deliver long-term shareholder value.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
