Humm share price dips after profits tumble 25%

Here's how Humm's FY22 financials stack up.

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Key points

  • The Humm share price is trading 2.7% lower to 54 cents today 
  • Earnings slumped to a $170 million loss on a statutory basis after writing down parts of the business 
  • Commercial performed relatively strongly with earnings increasing 28.7% 

The Humm Group Ltd (ASX: HUM) share price has fallen straight into the red on Thursday. It appears the market is not taking a liking to Humm's full-year FY22 results today.

At the time of writing, shares in the financial services company are down 2.7% to 54 cents. For context, the S&P/ASX 200 Index (ASX: XJO) has some spring in its step this morning, moving 0.6% higher.

Humm share price slips on underwhelming result

  • Consumer finance volume up 13% on prior corresponding period to $2.4 billion
  • Commercial and leasing volume up 103% to $1.1 billion
  • Gross income down 1% to $440.4 million
  • Cash net profit after tax (NPAT) down 25% to $51.1 million
  • Statutory NPAT swinging to $170.3 million loss from $60.1 million profit
  • Final fully franked dividend of 1.4 cents per share

The considerable statutory loss stemmed from a $181.2 million impairment expense. Specifically, management determined the fair value of its goodwill and software should be reduced.

What else happened in FY22?

While Humm garnered a greater amount of receivables in FY22, the company's profitability suffered at the hands of its buy now, pay later (BNPL) segment. All of Humm's various BNPL operations — aside from 'Big Things AU' — delivered a loss in the reporting period.

Unfortunately for shareholders, Humm was unable to unload the business to Latitude Group Holdings Ltd (ASX: LFS) earlier this year. Originally, the company was eyeing a consideration of $335 million for the consumer-focused division. However, on 17 June, both parties announced the termination of the sale agreement, weighing on the Humm share price.

On a brighter note, the commercial side of Humm is humming along. Unlike the consumer business, cash profits for commercial actually increased in FY22. The segment was responsible for a tidy $28.7 million in cash earnings, up 28.7% year on year.

What did management say?

Humm CEO Rebecca James discussed the company's core focus during FY22, stating:

At the group level we are focused on our core business as a bigger ticket instalment financier across both our businesses. We have taken a disciplined approach and prioritised our strategic initiatives resulting in the closure of certain products and a focus on margin to ensure that we are in the strongest position to continue to grow our business in a profitable and competitive manner.

Furthermore, James listed some of the actions Humm has taken in light of the challenging operating environment, noting:

Humm Group is focused on margin management, already repricing portfolios to offset rising funding
costs. Enhancing operational leverage, during the second half Humm Group reduced marketing spend
and lowered the number of people employed in the business by 10%.

What's next?

Looking ahead, management refrained from giving any revenue or earnings guidance. However, shareholders were informed that a further $15 million to $20 million of cost savings are being targeted in FY23.

Additionally, capital expenditure is expected to be tapered from $30 million to $18 million. Overall, management plans on taking a prudent approach to remain cash profitable moving forward.

Humm share price snapshot

As with most companies in the BNPL sector, the Humm share price has been dealt a blow over the past 12 months. Anyone holding Humm shares is now down 44% compared to where they would have been a year ago.

Based on the current Humm share price, the company holds a market capitalisation of $270 million.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. 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 recommended Humm Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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