The Latitude (ASX:LFS) share price falling today despite profit boost

The financial services company released its half year financial results this morning.

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The Latitude Group Holdings Ltd (ASX: LFS) share price is sinking in late morning trade, down 1.3% to $2.30 per share.

Below we take a look at the financial services company's half year financial results for the period ending 30 June 2021.

The Latitude share price drops on half year results

  • Statutory net profit after tax (NPAT) of $89.5 million, up 524% from the previous corresponding period (PCP)
  • Cash NPAT of $121 million, up 81% from the PCP
  • Volumes of $3.6 billion, up 5% on the PCP
  • Return on equity (ROE) of 19.1%, and a return on tangible equity (ROTE) of 54.4%
  • Dividend of 7.85 cents per share ($78.5 million)

What happened during the reporting period for Latitude?

During the half year, Latitude reported total volume – excluding its travel and international category, which was impacted by COVID-19 – increased by 11% compared to the PCP.

Personal and auto loans were a standout performer, increasing 37% on the PCP, with 35% growth in Australia and 46% growth in New Zealand.

The company's buy now, pay later (BNPL) offering also saw strong growth, with a 73% increase in the LatitudePay customer base on PCP, and the company reporting 458,000 open accounts.

The half year also saw Latitude settle the refinancing of its $1.04 billion Australian Personal Loans Warehouse Facility. It established a new $1.06 billion Australia and New Zealand Sales Finance and Credit Cards Warehouse to replace a prior cards warehouse facility.

What did management say?

Commenting on the half year results, Latitude's CEO Ahmed Fahour said:

This is a strong result that delivers cash NPAT just above the top end of guidance of $120 million for 1H21. The 37% volume growth in our personal and auto lending business across both Australia and New Zealand was particularly pleasing. Latitude is now the number two originator of new personal loans in Australia and one of the leaders in New Zealand…

Latitude is entering the 2H21 with a number of opportunities to grow our core instalments and lending businesses, as demonstrated by the acquisition of Symple Loans. We are accelerating our big ticket BNPL offer LatitudePay+, which allows LatitudePay customers to make purchases of up to $10,000, we have relaunched our insurance product and are well advanced in our plans for Asia.

What's next for Latitude?

Looking ahead, Latitude cautioned that new rounds of COVID lockdowns in Australia and New Zealand are slowing economic activity at the moment. But the company expects this to bounce back rapidly after restrictions ease.

It pointed to the 43% increase in its volumes (compared to the average over the previous 3 months) in Victoria in November 2020, when the state eased restrictions.

Latitude's directors indicated that the second half dividend for 2021 will remain at 7.85 cents, and they expect it to be fully franked.

The Latitude share price is down 15% since 20 April.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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