Latitude Financial Services Group (LFS) H1 2024 earnings summary

Executive summary

• Statutory profit after tax from continuing operations rebounded to $9.0m in 1H24 from a $92.4m loss in 1H23, driven by strong volume growth, margin expansion, and disciplined cost management.

• Cash NPAT for 1H24 was $27.4m, up 140% year-over-year and 69% half-on-half, reflecting improved operating income and lower provision expenses.

• Group origination volumes reached $4.1bn, up 14% year-over-year and 2% half-on-half, with Money Division loan originations exceeding $1bn, up 60% year-over-year and 25% half-on-half.

• Strategic actions, including investments in marketing, customer experience, and broker relationships, as well as new partnerships with major retailers like Amazon, David Jones, and Officeworks, expanded the retail network and product relevance.

• The Group exited its LatitudePay Asia business and is closing Symple Canada operations, focusing on core Australia and New Zealand markets.

Financial highlights

• Combined Pay and Money division spending and lending volume reached $4.1bn, up 14% year-over-year; gross receivables at $6.4bn, up 3% year-over-year and 2% half-on-half, with 10 consecutive months of growth.

• Net interest margin improved to 10.1%, up 31bps year-over-year and half-on-half, with net interest income at $316m, up 2% year-over-year.

• Operating income for H1 was $342m, up 2% year-over-year and 5% half-on-half; operating expenses decreased to $165m, down 3% year-over-year and 6% half-on-half.

• Net charge-offs were 3.52% of AGR, up 21bps year-over-year, with total net charge-offs at $110m, reflecting normalization of loss levels.

• No interim dividend declared for 1H24; capital is prioritized for growth and profitability.

Outlook and guidance

• Sustained volume and receivables growth expected, driven by favorable macroeconomic trends, elevated consumer demand, and new partnerships.

• Margins anticipated to expand further as pricing and funding initiatives take effect and interest rates pivot.

• Delinquencies expected to gradually rise toward historical levels due to ongoing cost of living pressures, though employment is expected to remain resilient.

• Continued focus on cost discipline and strategic capital deployment to manage inflation and support investments.

• Further funding activities planned in 2H24 to maintain a robust and cost-effective funding program.