Humm Group’s Profit Surge Highlights Cost Cuts but Credit Risks Loom

Strong Financial Turnaround

Humm Group Limited has delivered a robust set of interim results for the six months ending December 31, 2024, marked by a significant turnaround in profitability and operational efficiency. The company’s cash profit after tax soared to $29.8 million, representing a 119% increase compared to the prior corresponding period. This surge reflects both top-line growth and disciplined cost management.

Return on capital employed (ROCE) climbed impressively to 10.9%, up 122% from the previous period, signaling enhanced capital efficiency and stronger returns for shareholders. The company’s net interest margin (NIM) remained stable at 5.5%, underpinning consistent revenue generation despite competitive pressures.

Operational Efficiency and Cost Management

Operating expenses fell by 13% to $83.8 million, contributing to a marked improvement in the cost-to-income ratio, which dropped by 18 percentage points to 52.4%. This reflects the success of humm’s ongoing cost savings program, which has delivered $36.6 million in cumulative savings since inception, including $4.8 million in the first half of FY25 alone.

The company’s focus on technology and transformation initiatives, including cloud infrastructure modernization and AI-driven credit and call centre enhancements, is expected to sustain these efficiency gains while supporting future growth.

Growth in Assets and Credit Quality

Assets under management expanded by 14% to $5.32 billion, driven by growth in both commercial and consumer finance segments. The commercial business saw an 18% increase in assets under management, with cash profit up 35%, while consumer finance improved cash profit by 154%, supported by stable net interest income and reduced credit losses.

Credit quality remains a strong point for humm, with net losses to average net receivables (ANR) maintained at historic lows of 1.8%. The commercial segment’s net loss to ANR rose slightly to 0.8% due to portfolio seasoning but remains well controlled, while consumer credit losses improved by 80 basis points to 2.5% following tighter credit settings.

Capital Management and Shareholder Returns

Humm Group continues to demonstrate prudent capital management, with a partial repayment of $25 million plus accrued interest on its perpetual notes during the period. The company ended the half with an unrestricted cash balance of $113.6 million, providing ample liquidity to support growth initiatives.

Reflecting its strong financial position, humm declared a fully franked interim dividend of 1.25 cents per share, delivering a 6% annualised return to shareholders. The company also executed a $10 million share buyback, further enhancing shareholder value.

Outlook and Strategic Focus

Looking ahead, humm Group is well positioned for profitable growth, underpinned by a strong and stable balance sheet, ongoing credit quality improvements, and continued cost discipline. The company’s investment in technology platforms aims to enhance customer experience and operational resilience, setting the foundation for sustainable expansion in both commercial and consumer finance markets.