hummgroup’s strategic refocus delivers 145% profit surge in FY2024

A business refocus in the second half of the 2024 financial year has helped Australian fintech hummgroup (ASX: HUM) drive solid performance across its operations.

Strong growth in receivables balances contributed to a statutory net profit after tax of $7.1 million, representing an increase of 145% on the previous 12-month period, along with a normalised cash profit after tax of $60.6m (down 19%).

hummgroup’s commercial business remained a leading provider of specialist asset finance, with continued strong growth driven by broker demand and a differentiated service proposition that embodies speed to decision and speed to cash settlement.

Margin stability

The result was underpinned by net interest margin stability and significant ongoing cost savings during the second half, combined with historically low credit losses and a strong balance sheet.

Chief executive officer Stuart Grimshaw said the savings helped the company reinvest in its growth.

“This resulted in a pleasing turnaround in the second half of the year, as we saw improvements to gross yields and more stable base interest rates, while our net loss remained at historic lows as we continue to be prudent with our risk decisioning,” he said.

Commercial results

Commercial receivables of $3.0 billion were up 26% on the previous year, while consistently low loss rates across the portfolio due to robust credit decisioning and strong asset diversification, delivered a net credit loss of 0.7%.

Volumes for the group’s Australian commercial business increased by $45.6m after record volumes in the previous year, driven by changes in the government-supported instant asset write-off scheme.

However, volumes for the New Zealand commercial business decreased by $75.6m following a decision to refocus the business on a broker-led model consistent with the Australian structure.

Gross income grew 45%, with normalised operating expenses up 4% over the same period, while pricing changes and continued growth in receivables helped offset increased base rates, credit spreads and higher leverage to deliver a normalised cash profit after tax of $42.8m.

Consumer volumes

hummgroup’s consumer business delivered volumes of $2.3b for the year, while total receivables of $2.0b were impacted by the wind-down of unprofitable products and higher repayments in New Zealand.

Volume from suspended products reduced by $391m to $58.7m for the year, with the collection and run-off of receivables on these products now complete.

While normalised cash profit after tax for the first half of the year was down 46% to $17.8m, a strong second half saw a 74% improvement to $11.3m due to executed pricing initiatives, lower credit losses and efficient cost management.

Growth and expansion

Mr Grimshaw said hummgroup would continue to drive profitable growth across its operations as it expands its commercial and international interests while rebuilding the domestic consumer business.

“We will leverage our merchant and customer relationships, credit decisioning capability and funding platform to grow the existing business as we invest in technology and platforms to deliver better customer and merchant outcomes.”

“There will be a continued focus on removing unnecessary cost and complexity from our businesses to execute strategic capital initiatives which we believe will deliver shareholder value in the year ahead.”