The humm group board has followed up the release earlier this month of an explanatory booklet detailing the proposed sale of its consumer finance business to Latitude Financial Services, issuing a statement yesterday that the consumer business has not made a profit this year.
It said preliminary financial results indicate that humm consumer finance has not been profitable in the four months to April 2022 and there is a risk of humm’s share price falling if the sale does not proceed.
humm’s majority directors are in a fight with director and 20 per cent shareholder Andrew Abercrombie, who opposes the sale.
Abercrombie’s view is that the terms of the sale undervalue the consumer finance business and that a better approach would be for humm to remain in its present form, to execute on its growth plans and to do some acquisition of its own.
The sale proposal will be put to shareholders at a meeting next month and Abercrombie has recommended that shareholders vote against the sale.
According to humm’s December half financial report, the consumer division had a 9.9 per cent fall in net operating income to $124 million, and a 57.3 per cent fall in cash profit to $12.5 million. Business volume grew 19.5 per cent $1.2 billion.
In yesterday’s statement, the directors said the results for the four months to April were “materially lower” than for the comparable period last year, after adjusting for the “reversal of the non-cash macro overlay provision”
“The buy now pay later sector, which has been the focus of humm consumer finance’s growth plans in recent years, is intensely competitive, with margins declining across the industry,” the statement said.
“The majority directors believe the negative effects of this competitive environment on profitability are likely to be amplified by increasingly challenging economic conditions.
“Operational scale is vitally important in this sector and macro environment. Humm consumer finance is a small payer relative to its competitors, with limited financial resources.”
Abercrombie issued a response yesterday, saying: “The announcement from humm today attempts to paint a negative picture of humm’s consumer business to drive support for a deal with Latitude.
“The underlying performance of the business is solid. The non-cash macro overlay provision referred to in the statement is an attempt to lower the profit numbers to serve the bard’s purpose -to get shareholders to support an opportunistic deal.”