Consumer lender Latitude Financial Services was admitted to the official list of the ASX yesterday, completing a more modest listing than the company’s aborted attempt in 2019.
The company was listed with 1 billion fully paid ordinary shares valued at $2.60 each, for a market capitalisation of A$2.6 billion. The shares closed at $2.70, for a gain of 3.8 per cent.
In September 2019, when it last issued a prospectus, it was expecting to list with a market cap of between $3.55 billion and $4 billion.
On that occasion, its owners KKR, Varde Partners and Deutsche Bank planned to sell down to a 55 per cent combined holding. This time they will retain 66.4 per cent.
Last month, Shinsei Bank agreed to purchase a 10 per cent stake from the owners. Minority investors hold 14.3 per cent, around 7.7 per cent has been taken up in a share offer and the balance is being taken up by staff via a Latitude Equity Plan.
The public offer was for just 76.9 million shares (7.7 per cent of the company), compared with an offer of 622 million shares in 2019.
Chief executive Ahmed Fahour’s holding is 2.7 million shares. Under the 2019 prospectus, he was to receive 12.6 million shares.
According to the pro forma financial statement included in the prospectus, Latitude took a COVID-19 hit last year.
Net interest income was $880.1 million for the 12 months to December – down from $947 million in 2019. Other income (largely insurance premiums) fell from $87.7 million to $54.1 million.
Loan volume fell from $8.8 billion in 2019 to $7 billion last year and average gross receivables fell from $7.6 billion to $6.9 billion.
At December 31, the company had 562,000 open loan accounts and 2.2 million open instalment accounts.
Cash earnings fell 18.4 per cent from $274.2 million in 2019 to $223.9 million last year.
The cost to income ratio was 43.1 per cent and the return on equity was 18.2 per cent.
Latitude’s strategy is to grow in the buy now pay later market. It said its BNPL and interest-free products in Australia and New Zealand are positioned to gain share.
It claims to be a leader in the “B2B2C” market – distributing product through retailers and other partners.
Later this year it will launch a “big ticket” extension to its BNPL range, Latitude Pay, allowing consumers to spend up to $10,000 and repay over 36 months.
It will also launch a “shop anywhere” product, allowing consumers to use BNPL for everyday purchases.
It said it also has the opportunity to grow share in lending, where it is targeting white label opportunities. It has a white label relationship with Kiwibank in New Zealand.