Profits blowout at Humm consumer lending business

Humm has revealed a massive drop in performance of its BNPL business as Andrew Abercrombie continues his fight to stop its sale to Latitude.

Humm Group former chair Andrew Abercrombie is continuing to push to block the sale of its BNPL business to Latitude. Picture: AAP Image/Tracey Nearmy

Humm Group has warned its buy now, pay later business is under “significant pressure” – with the division’s cash net profit after tax down 61 per cent for the year-to-date at the end of May.

Humm shareholders are currently considering a takeover bid from Latitude Financial, with the company’s board strongly urging shareholders accept the offer. The deal – for 150 million Latitude shares and $35m in cash – is now worth $245m after a slide in the market over the last week.

Humm, in an ASX update, said its consumer finance division also had its net receivables down by around 3.6 per cent between the end of December and May 31.

But cash net profit before tax at its commercial business has risen 47 per cent in that time, the company told shareholders.

“The trading environment is very tough for (Humm consumer finance), with intense competition, rising interest rates, and weakening consumer sentiment,” said the company’s chairman, Christine Christian. “HCF has experienced a reduction in net receivables, net yield compression and higher expenses.

“The board and management remain excited about commercial’s prospects as a standalonebusiness,” she added.

Cash net profit after tax for the consumer division, for the fiscal year-to-date was expected to be $17.3m, compared to $44.3m for the same period last year.

Big Things AU volumes have declined, in part due to increased competition in solar, while volumes in Cards NZ are flat. There continues to be volume growth in HCF’s other product segments,” the company said in an update.

Despite this, volumes continued to increase – rising from $1.94bn to $2.22bn in that period.

“Profits are materially lower as compared to this time last year,” said Ms Christian. “Without enhanced scale, which the Latitude transaction will deliver, the outlook for HCF will be even more challenging.”

Humm shares fell 14.8 per cent on Thursday to close 10c lower at 58c. They have fallen more than 37 per cent since December 31.

It is not the first time in recent weeks that Humm has warned about the health of its consumer finance and BNPL business.

In an extraordinary move to try and seal the sale to Latitude, Humm told the ASX in May that the division had “not been profitable” for the four months to April 30. “This is a materially lower result than for the comparable period last year,” the company said in a statement at the time.

The sale is opposed by former Humm chairman Andrew Abercrombie, who remains the company’s largest shareholder.

“As the largest shareholder in Humm, I am calling on the chair of Humm’s board to write to all shareholders as a matter of urgency to clarify the value of the proposed sale of the consumer finance business to Latitude,” Mr Abercrombie said in a statement on Wednesday.

“When I speak to shareholders, some of them continue to believe that the consideration payable by Latitude is worth $335m,” he said.

“In fact, the deal is now worth closer to $261m – or about $74m less than when the deal was announced … This was a dud deal from the very beginning, undervaluing what I believe is a great business which the very same board confirmed was profitable just 7 months ago.

“Now that the Latitude share price has taken a deep dive, I believe this deal is nothing but a garage sale,” Mr Abercrombie said.

Ms Christian has previously clashed with Mr Abercrombie over the sale of the division.

Earlier this month The Australian reported that Ms Christian had accused Mr Abercrombie of “stringing shareholders along” for his own gain.

“So far, he has provided no plan on how Humm should respond to the substantial deterioration in non-bank consumer finance sector economics,” Ms Christian said at the time.

“He is also telling shareholders that Humm would be a consolidator in the sector – but he has not provided any plan for how Humm would realistically seek to fund these consolidation plans and create shareholder value.”

The combined Humm consumer finance and Latitude businesses would be the largest of their kind in Australia and would have gross receivables of $8.4bn, some five million customers and around 82,000 merchants. Latitude closed down 10c at $1.40.