hummgroup has provided a “sneak peak” of what its business will look like if the deal to sell its consumer business to Latitude goes ahead and it becomes a specialist commercial finance business – and it looks like it is keeping the better business.
humm broke down its cash earnings for its consumer and commercial divisions in its December-half financial report, showing that the commercial business, which provides asset finance to SMEs, is more profitable, has higher volume growth, lower impairments and a much better cost-to-income ratio.
The commercial division reported a 16.4 per cent increase in net operating income to A$45.4 million, compared with the previous corresponding period, and 2.7 per cent growth in cash profit to $15.3 million.
Business volume doubled to $433 million and receivables hit $1 billion for the first time. The cost-to-income ratio was 40.5 per cent.
humm chief executive Rebecca James said the commercial business has a “broker-led strategy” that relies on “speed to yes” and settlements with 24 to 48 hours.
She said the company was investing to make sure it could continue to meet brokers’ expectations and it was introducing the same strategy in New Zealand.
The consumer division reported 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. The cost-to-income ratio was 72.4 per cent.
James said that while some parts of the consumer business performed well, others were impacted by a drop-off in in-store sales and accelerated repayment of personal loans and credit card balances.
Overall, humm reported a loss of $168.3 million for the six months. This included a $181 million impairment of an intangible related to sale of the consumer business.
On a cash basis, profit fell 37 per cent to $27.8 million. Net operating income fell 4 per cent and operating expenses increased 25 per cent.
The company’s credit quality improved, with the proportion of receivables in arrears by 30 days or more falling from 2.9 per cent in June last year to 2.1 per cent in December.