This morning, consumer finance company Latitude Group Holdings [ASX:LFS] not only announced its half-year results for FY22 but also the upcoming retirement of its CEO.
There hasn’t been a major reaction to the news today, with shares remaining mostly flat since the announcement.
However, the finance stock has struggled to get on top this year, with a decline of 20% in share value this year so far despite its fast recovery after the late-July collapse.
The stock has been trading over 2% this week, and nearly up 7% in the last month:
www.TradingView.com
Latitude’s profits are down
The financial insurance provider released highlights of its half-year 2022 operations, with focus on a ‘strong balance sheet to navigate economic conditions and support growth’.
Financial highlights for 1H22:
- Statutory NPAT down 57% on 2H21 totalling $30.6 million, down 66% on 1H21
- Cash NPAT reached $93 million, down 2% on 2H21 and 11% on 1H21
- Operating expenses down 9% on 2H21 totalling $174 million, flat on 1H21
- 1H22 dividend of 7.85 cents per share fully franked
The company said that it has a strong balance sheet due to:
- Surplus TER of 9.2% (6-7% above target range)
- Loss coverage at 3.74%, with ‘$2 billion of funding headroom and no requirement to access debt markets for the next 12 months’
- High margins with a NIM of 11.3% ‘and room for product re-pricing’
Operational metrics and highlights in 1H22:
- Volumes: $3.7 billion, flat against 2H21 and up 2% on 1H21
- Gross receivables: $6.3 billion, down 1% on 2H21 and down 3% on 1H21
- Net charge-offs: 2.37%, average gross receivables remain historically low
- Risk adjusted income yield: 9.46%, down 56bps on 2H21 and down 70bps on 1H21
- Return on average gross receivables: 3%, stable on 2H21 and down 28bps on 1H21
Source: LFS
The company’s personal loans in Australia were up 16% on 2H21, and 30% on 1H21 thanks to LFS’ new Symple Loans program.
Latitude has also established agreements with JB Hi-Fi in Singapore (more than 460 merchants and 30,000 customers) and refinanced NZ and Australian credit card and Symple trusts ahead of schedule.
Source: LFS
LFS CEO on results and retiring
CEO Ahmed Fahour commented on the 1H22 results:
‘The Cash NPAT result of $93 million, which is above consensus forecast, and our strong underlying balance sheet highlight Latitude’s competitive and strategic advantage at a time of economic uncertainty. We have positioned the business to take advantage of the growth opportunities that we believe will emerge in the next 12-18 months.
‘The growth in our Money business in Australia came at strong margins. While volumes slowed after we acted early to offset the impact of interest rate rises by repricing our products, we are now well positioned as demand returns.’
Fahour has been with Latitude since 2018, and feels it is time for change, with a leaving date set for the end of August.
‘While this is a difficult decision, after four years as CEO, now is the right time to prepare for my departure next year and support the Board as it plans for my succession as chief executive.
‘It has been a privilege to serve as CEO of Latitude and I am incredibly proud of everything the business has achieved.
‘While I remain focussed on leading Latitude until I depart next year, I am looking forward to preparing for the next phase of my career and exploring the chance to increase my contribution to the community.’
Current markets and the EV future
While profits and cash were down, Latitude said it has what it needs to function in the economic environment going forward.
Many businesses are struggling to make a profit in the current market.
But what will happen in the future?
It will be heavily influence by the world’s adoption of EVs.
But EV batteries require huge quantities of lithium, graphite, copper, and nickel.
Our small-cap expert, Callum Newman, has just published a research report on three battery material stocks he thinks are flying under the radar.
Click on ‘Elon’s Chosen Ones’ to find out more.
