Why the Latitude (ASX:LFS) share price is rising today

Shares in Latitude are in the green today after the company released an update showing improved business performance. Here’s the rundown.

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The Latitude Group Holdings Ltd (ASX: LFS) share price is climbing in early trade today. At the time of writing, the company’s shares are changing hands for $2.50, a rise of 2.04%.

This comes after the instalments and lending business released a trading update for the first half of 2021.

How is Latitude performing?

The Latitude share price is climbing today following a positive update showing improved business performance.

According to this morning’s release, Latitude’s loan volumes for the six months ending 30 June 2021 (H1 21) are expected to come in at $3.7 billion.

This is an increase of 7%, with personal loan volumes up 25% in Australia, and 50% in New Zealand compared to H1 20.

Latitude noted the growth in volume comes despite its international and travel segment being impacted by COVID-19.

Those categories are forecast to be down 46% and 74% respectively on the prior corresponding period (pcp) due to border closures.

Gross loan receivables are projected to remain consistent with H2 20 levels at $6.5 billion. According to the company, this is because customers have been able to make early repayments on loans due to lower spending and government cash stimulus packages.

Costs are anticipated to fall by around 10% over the pcp due to management’s focus on its simplification program.

Pleasingly, the company’s book credit value has improved with net charge-offs predicted to decline by around 40% from H1 20.

As a result, Latitude expects a net profit after tax (NPAT) of between $115 million and $120 million for the six months ending 30 June 2021.

Management said the current 7-day lockdown in Victoria will not affect its H1 21 guidance.

Management commentary

Latitude managing director and CEO Ahmed Fahour said:

Volumes have recovered strongly in all areas other than travel and current indications are that this trend will continue for the remainder of 2021. Instalments volumes have been pleasing, particularly in the home segment, and we see this performance continuing. Personal loans and auto loans volumes are growing strongly and Latitude is now the number two originator of new personal loans in Australia and one of the leaders in New Zealand. We remain optimistic that travel volumes will recover quickly when borders reopen, although the reopening has been further delayed.

The LatitudePay+ (big-ticket buy now, pay later) pilot is currently in market and will move to full launch in 2H21. Latitude will also apply for the necessary licences to build its instalments business in Singapore and Malaysia in the coming months, in conjunction with our key merchant partners.

About the Latitude share price

Since listing on the ASX late last month, Latitude shares have dropped by around 7%. This is despite the company raising $150 million in its initial public offering (IPO) at $2.60 per share.

Based on valuation grounds, Latitude has a market capitalisation of $2.5 billion, with exactly 1 billion shares on its registry.

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