humm®group announces half year 2024 results
· hummgroup total receivables of $4.65b, up 23% on pcp
· Commercial receivables of $2.70b, up 39% on pcp
· Consumer Finance receivables of $1.95b, up 6% on pcp
• 1H24 Normalised Cash Profit (after tax)1 “Normalised Cash Profit”of $28.1m, was only down 27% on pcp, despite material increase in interest rates, and the rebuilding our PosPP offering. This profit was underpinned by another strong performance from Commercial
• Normalised Cash Profit was impacted by an interest expense increase of $61.7m from increases in receivables, base rates (offset by hedge benefits), credit spreads and improved efficiency in our funding structures
• 1H24 Statutory Net Loss (after tax) of $6.0m (1H23 Statutory Net Profit (after tax) of $7.5m)
• Group Net Credit Loss/Average Net Receivables (“ANR”) was 1.68%, a 27bps improvement on pcp
• Management executed $7.5m in further cost savings during 1H24 bringing the total savings to $26.1m since commencement of the program in 1H23, which offset some of the necessary reinvestment into customer facing roles and the overall inflationary environment
• Strong balance sheet with $4.65b in receivables, $159.4m in unrestricted cash, and $1.14b of warehouse headroom
• Fully franked interim dividend proposed of 0.75 cent per share
• A total of 20.9m shares (approximately 4.0% of shares on issue) purchased through buy back and share plan as at the date of this report
The drop in the SP has been a huge over-reaction as the results are a mixture of quite good and not so good.
Commercial is going very well and it just keeps growing with it being up 39% on PCP.
Consumer finance was OK with an increase of 6% on PCP.
Despite tough economic conditions the credit loss results were good and better than last year which is a credit to the company.
The problem is the increase in funding costs with the performance for the period being materially impacted by a $61.7m increase in interest expense, an 88% increase over the prior corresponding period, the result of increases to base interest rates, widening of credit spreads, increased leverage from additional mezzanine funding and higher receivables balances. While interest rates have increased over the last few years the increase in the last 6 months has been minimal so it is a bit much, as you would assume that the management of the funding is an important part of running a finance company.
Jump in unrestricted cash to $159m is excellent and with a current company value of around $282Million this values the company at around $123million and so this could be in play for a takeover.
Overall the results were a pass but management needs to get consumer credit and funding costs in order to improve the share price.