Humm have released their full year results as follows:

SOUND FINANCIAL PERFORMANCE BASED ON SECOND HALF RECOVERY

Strong balance sheet fundamentals

• hummgroup total receivables of $5.0b, up 18%

o  Commercial receivables of $3.0b, up 26%

o  Consumer Finance receivables of $2.0b, up 11%.

• Strong balance sheet with $125.1m in unrestricted cash and $0.7b of warehouse headroom.

• Fully franked final diviend of 1.25 cents per share bringing dividends for the year to 2.0 cents per share ona fully franked basis, representing a return to shareholders of 6.02%.

Improving returns from core businesses

• Statutory net profit (after tax) of $7.1m was up 145%. The second half Statutory net profit (after tax) of $13.1m represented a turnaround of $19.1m from the first half loss of ($6.0m).

• Normalised cash profit (after tax)1 of $60.6m was down 19% with positive second half performance from core businesses.

• Normalised cash profit (after tax)1 of $32.5m in 2H24 was up 16% on 1H24 mainly driven by a 4% increase in Net operating income and a 14% decrease in costs from the first half.

• Net Interest Margin (“NIM”) stabilised across FY24 at 5.5% with an exit NIM of 5.5% improving by 40bps from June 2023.

• Group Net Credit Loss/Average Net Receivables (“ANR”) was maintained at 1.8%.

• Management executed $13.2m in cost savings during FY24.

Executing on the customer

• Volume from continuing products of $3.8b, up 6%.

• Gross yield2 of 11.6%, up 50bps.

• Launch of humm Hybrid Loan Product in 1H25.

The Commercial business continues to demonstrate impressive operating leverage, with receivables growing by 26% with only a 4% increase in normalised operating costs.

Driven by growth in humm AU and our global businesses, the Consumer business delivered volumes of $2.3b in FY24 up 12%.

hummgroup has a differentiated and diversified funding platform supported by local and global banks andinvestment managers. This platform has allowed hummgroup to maintain growth while driving efficiency in itscapital structure.

At 30 June 2024 hummgroup has:

• $125.1m of unrestricted cash as at 30 June 2024.

• $0.7b of undrawn warehouse headroom at 30 June 2024, following the funding transactions

executed during the period.

• Issued over $2.0b of ABS during FY24, in both public and private placements.

In regards to a valuation

Based on the above figures I expect a normalised CNAT of $90 million CPAT in 2023/24 which is $75 million x 20% due to the anticipated decrease in costs,

Current valuation as follows: FY NCPAT $60.6 Million / 492m shares = $0.1232 per share

I will increase my PE to 6 now that the business is starting to turn around

So 6 x $0.1232 per share gives us a valuation of $0.7392 per share

But they also have about $125.1 million in unrestricted cash which is $0.254 per share

So $0.7392 + $0.254 = $0.9932 per share

The work Humm has been doing on diversifying credit sources is now yielding results. When finding interest rates finally drop the NPAT impact should be strongly positive for Humm.

The business is probably worth more than the above but after the last few years of poor management the jury is still out if the business will come good or get taken over, I do hold this stock in my portfolio and have done for quite a while which is why I have included some in my Strawman portfolio as I believe that the worst days are behind it and the next few years should be better than the last few.

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.

Humm's share price has moved from the middle 40's to today's high of $0.69 which is mainly due to the buy back which has been going for a few months now and has cleaned out some of the shorters/traders that have kept the price low. With some good results in the half yearly results in late February this stock could go over $1.00 quite easily as there is still significant value here.

AA the Managing Director of Humm continues to buy shares on the market and currently has approx 125 million shares which I believe shows confidence with the company and with current price around $0.42 they are quite inexpensive.and are due for a re-rate

Humm announces new CEO

humm group limited (ASX: HUM) advises that Rebecca James has notified the Board of her intention to stand down as Chief Executive Officer of hummgroup. After almost five years leading humm, Ms James is leaving to take up a new job opportunity in New Zealand, in order to be closer to family.

As a result, hummgroup is pleased to announce that it has appointed Stuart Grimshaw, a current non-Executive Director of the Board, to the role of Managing Director and Chief Executive Officer, effective 1 June 2023.  

Mr Grimshaw has been a member of the hummgroup Board since July 2022, bringing over 35 years of experience in the financial services sector. With an impressive track record including as former Chief Executive Officer of the Bank of Queensland from 2012 to 2014 and as Executive Chairman (and then Managing Director and Chief Executive Officer) of EZCorp he is ideally positioned to lead hummgroup in its next phase of growth and development.  

Ms James will work with the Board to transition her executive responsibilities in an orderly manner. She will remain in her role until 31 May 2023 and will be available to support the Board, Mr Grimshaw and the team as needed until 30 June 2023. 

Humm group have released their latest trading update as follows:

• Hummgroup 1Q23 volume of $988.2m, up 29% on pcp

• Consumer Finance volume of $601.7m, up 8% on pcp

• BNPL big ticket volume up 8% with BNPL small ticket down 11%, a result of planned product closures

• Cards (Australia and New Zealand) 1Q23 volume of $296.5m, up 19% on pcp

• flexicommercial volume of $386.5m in 1Q23, up 88% on pcp

• Net loss (gross write offs net of recoveries) of $19.3m in 1Q23, down 20% despite a 24% growth in receivables

• Net loss / average net receivables in 1Q23 of 2.3%, down 110bps on pcp

• Cost reduction initiatives well progressed with1Q23 operating expenses below pcp

With huge volume increases and lower write off’s so far Humm should be able to continue to grow sustainably and profitably well into FY’23.

So currently Humm is looking good and all things considered this is better than anyone could have though so soon after the Latitude debacle.

Humm have released a 3Q business update, as follow:

• Hummgroup 3Q22 volume of $871.1m, up 31.5% on pcp

• Commercial and Leasing volume of $275.3m in 3Q22, up 93.6% on pcp

• Humm Consumer Finance (“HCF”)1 volume of $595.8m, up 14.5% on pcp o BNPL segment volume of $296.9m in 3Q22, up 16.1% on pcp o Cards (Australia and New Zealand) 3Q22 volume of $299.0m, up 12.9% on pcp

 • Group net loss2 / average net receivables (“ANR”) of 2.8%, a 30bps improvement on pcp (3Q 21: 3.1%)

All sectors are growing including BNPL but with Commercial and Leasing up 93.6%, so the business is performing very well.

The share price today upon the release of these figures has dropped 3 cents to $0.785 which is a drop of 3.68%, There is currently something not quite right with the price action of this stock which is due to the current proposed buyout of non-commercial operations and the shorting of this stock which is about 5 – 6%. It could be assumed that there are certain interests that are supressing the SP to ensure the proposed buyout of non-commercial operations is successful.

I still believe that this is a buy as if the buyout is successful there will be considerable upside to Lattitude as well as the remaining commercial operations. Or if the buyout is not successful then this increased TO should result in the improved performance of the company.

I still believe that a fair share price for HUM is between $1.40 to $1.50 per share.