Edited Transcript of HUM.AX earnings conference call or presentation 25-Aug-22 12:30am GMT

Thu, August 25, 2022 at 10:30 AM·31 min read

Full Year 2022 Humm Group Ltd Earnings Call St Leonards NSW Aug 25, 2022 (Thomson StreetEvents) -- Edited Transcript of Humm Group Ltd earnings conference call or presentation Thursday, August 25, 2022 at 12:30:00am GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Adrian Fisk Humm Group Limited - CFO * Rebecca James Humm Group Limited - Group CEO ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Thank you all for standing by, and welcome to hummgroup's financial results. I'd now like to hand the conference over to CEO, Rebecca James. Thank you. Please go ahead. -------------------------------------------------------------------------------- Rebecca James, Humm Group Limited - Group CEO [2] -------------------------------------------------------------------------------- Good morning, and thank you for joining us today to discuss hummgroup's financial results for the full year ended 30 June 2022. With me, I have Adrian Fisk, our Chief Financial Officer; and Craig Horlin, our Head of Investor Relations. Since Adrian and I last addressed you, 2 significant things have happened, and I want to acknowledge those upfront. Firstly, we separated our Consumer Finance and Commercial divisions in anticipation of the transaction that didn't proceed. However in doing so, we've been able to step back and assess each business independently and determine the best path forward. We will present these 2 businesses and our priorities for each in their own right to you today. And secondly, the buy now pay later sector has come under significant pressure as macroeconomic conditions have resulted in tighter margins in high-volume, low-value transactions. As a long-term player in the larger end of the interest-free installment market with more than 30 years experience, we think we bring a unique perspective on this, and we're keen to discuss that with you today. At our core, we have 2 resilient businesses with a strong future. As you'll see throughout the presentation, both our Consumer Finance and Commercial businesses remain profitable and competitive despite sector headwinds. What hummgroup is known for and what we have a history of is helping consumers and small to medium business owners buy bigger ticket items. It is this position in the market that has delivered a pleasing financial and operational performance for the company. Today's numbers are a direct result of initiatives taken over the course of the past 12 months to align with our core offering in bigger ticket items and ensure that we are in the strongest position to continue to grow our business in a profitable and competitive manner. During the period, we have grown our receivables booked by over 20% to $3.3 billion in the year with the overwhelming majority of it in what we would call financing bigger ticket items. It demonstrates our strength in this area and our differentiation from our peers. Less than 2% of our receivables constitute small items in the [pay in 5] buy now pay later sector. We provide an average loan of $4,000 in our Consumer Finance business and an average loan value of $100,000 in our Commercial business. This has been the heart of the business, and we've successfully navigated through various rate and economic cycles. We're also in a position to profitably fund our growth. We ended the year with $51.1 million in cash NPAT, inclusive of substantial investment in growth and international expansion. And we proposed a fully franked final dividend of $0.014, bringing the FY '22 full year dividend to $0.031 per share. We've continued to invest and enhance our superior credit decision engine, which has delivered net loss to ANR of 2.8% in full year '22, a 70 basis points improvement on pcp. In the current environment, we are acutely aware of the need to manage our costs. We've already removed more than $9 million between the first and second half, including a reduction in marketing and a 10% reduction in the number of people engaged in the business. Finally, our liquidity position is strong with $113 million of unrestricted cash, $860 million in warehouse headroom, $110 million in undrawn debt and a well-diversified and sophisticated funding platform. I'll also point out in the last 12 months, we have added $170 million of additional mezzanine capacity and our post-year-end warehouse headroom increased to $1.2 billion. Our core businesses are in a strong position. I'd also like to acknowledge that in the past 6 months, there have been significant changes in our operating environment, increased funding costs and the dampening of consumer sentiment due to cost of living pressures, along with share market volatility that has impacted small ticket pay in 5 monoline business models and, consequently, valuations in the sector. Turning to Slide 3. And in light of this changing environment, we have sought to strengthen our business further and consolidate our business in the second half and focus on where we differentiate and where we believe that we can deliver superior returns on a shorter investment horizon. This slide outlines the items that have been actioned and delivered. We've consolidated our product offering to align with our bigger ticket core. We have accelerated growth in our Commercial business in Australia and have now replicated the broker-led equipment finance strategy in New Zealand, which has seen that offering in that market return to growth. In our Consumer Finance business, we have decommissioned a number of products, including hummpro in both Australia and New Zealand, and bundll New Zealand. We're focusing our offer on the core, bringing with it significant cost benefits. It is also worth noting that as a result of these actions, we have terminated our joint venture with Red Bird in New Zealand. The business also completed a review of our buy now pay later product, humm, in New Zealand. And as a result of regulatory challenges which make it difficult to derive revenue from both the merchant and the consumer, we reached a conclusion to close that product in the first quarter of FY '23. The focus of our Consumer business in New Zealand is now purely on our profitable and successful long-term interest-free and white label cards business. We have continued to simplify our systems, including the technology we use in streamlining our operations to continue to provide a quality service to our customers. This includes launching a new scalable cloud-based technology for our installment business globally. In a world of rising interest rates and lower consumer sentiment, we're focused on tighter margin management. More than 75% of our portfolio is hedged, and we've implemented repricing initiatives to mitigate rising cost of funds, passing between 125 and 150 basis points on to merchants and brokers who serve our Commercial customers. We've switched off merchants, which don't meet our return thresholds and tightened our credit settings to reflect the current environment. Finally, we've increased our financial flexibility, adding $709 million of additional capacity for our market-leading and fast-growing Commercial business. Turning to Slide 4, you'll see our agenda for today. Our vision is to be the favored way to pay for bigger purchases. It's a vision that speaks to both our future and our heritage, spans our suite of products and capitalizes on our strengths in funding and securitization. We're often asked how our 2 businesses fit together. And on Slide 5, you can see the characteristics for each of these businesses. While the end customer, distribution and purchase value differ, the core expertise of the business is leveraged to serve both. In our DNA is expertise in credit decisioning and management along with funding and securitization. It is that capability, which enables us to deliver an exceptional customer experience in the areas of speed to yes, a priority for both our merchants and broker partners, and speed to sale and settlement. On the next slide, you'll see a walk-through of hummgroup's cash net profit after tax. As you can see, our core bigger ticket businesses of Commercial, Australian Cards, New Zealand Cards and humm Australia Big things, delivered combined cash NPAT of around $90 million. Our Commercial business has had an exceptional year, delivering cash NPAT of $28.7 million, up 28.7% on last year. We then have our mature Consumer Finance businesses. As you can see, Australian Cards, New Zealand Cards and humm Australia Big things, all larger ticket interest-free products sold at the point of sale were all positive contributors to profit, delivering a cash NPAT of $61 million combined. Profitability was impacted by losses in Little things, that's products under $2,000 of transaction value; newer growth products, bundll, hummpro, humm New Zealand; and offshore expansion. I'd like to take a moment to talk about bundll, hummpro and humm New Zealand. These products are enjoyed and loved by customers, however, require heavy investment in marketing to drive scale as the business model is a direct-to-customer rather than by the merchant. Given the changing environment, we have decided to take the following actions and focus on our products that will get a stronger return on investment in a shorter-term horizon. In New Zealand, we have made the decision to close both buy now pay later product, bundll and humm, given the competitive pressure on merchant services fees and an unsupportive regulatory environment, which stops us generating any form of revenue from the consumer, making the long-term future of these products unviable in that market. We have closed hummpro in both Australia and New Zealand and paused origination on bundll in Australia to consolidate those features and those customers with humm in Australia. These steps will help to reduce costs and immediately improve profitability. It's important to note that humm Little things in Australia remains a key companion product to our Big things product, a product construct valued by our merchants. By aligning Little things as a companion product to Big things rather than a stand-alone offering, our marketing spend will reduce considerably going forward given the majority investment within building that brand and directly acquiring customers with the intent of making a small e-commerce purchase in the first instance. We obtained our U.K. credit license from the financial credit authority in the third quarter FY '22, enabling us to provide regulated interest-free and interest-bearing bigger ticket installment finance. While we were the first of our ASX-listed peers to secure this license, it was obtained later in the year than anticipated. And as a result, volume forecast for FY '22 were not achieved. Management and the Board are currently reviewing international investment levels and return horizons in light of changing macroeconomic conditions. We'll provide an update at our AGM in November. We'll talk in more detail shortly about the performance of the Consumer Finance business in FY '22, but this slide provides you with an overview of the actions that we've already taken to improve its profitability. On Slide 8, you can see the makeup of our Consumer Finance business. New Zealand Cards, humm90, which is our Australian cards product, and humm Big things are all point-of-sale installment products, enabling purchases of goodwill services within an average ticket size of $4,000. Each of these products are profitable with room for growth. Our core customers are young families with an average age of 42, with the majority being homeowners. As you'll see on this slide, Little things is responsible for a very small portion of our receivables, circa $48 million, with humm Big things and AU and NZ Cards are responsible for the lion's share of our Consumer Finance receivables around $1.8 billion. I'd now like to go into more detail on New Zealand Cards as it's one of our strongest and most resilient products in terms of performance, particularly throughout the pandemic. Our New Zealand Cards business dominates the New Zealand market where 1 in 3 new credit cards issued is a humm product. The card's New Zealand volume has remained resilient through COVID, even during periods when everyday spend was curtailed through lockdowns. We see opportunity to increase engagement of the product by introducing new features, expanding our partnerships and migrating Q Card customers to Q Mastercard to allow customers to spend anywhere. As the cash NPAT chart shows, this product continues to be highly profitable for the group and delivered a cash NPAT of $30.8 million in FY '22, up 10% on the prior period. Our Australian Cards product, humm90, has been designed with the traveler in mind. With no foreign exchange fees and long interest-free periods, its distribution is heavily skewed to key travel partners. We've started to see growth return to this portfolio, with volume growth up 15% on pcp, following a prolonged period of subdued activity. In addition, we've implemented new machine learning capability into our scorecards, which has driven an improvement in approval rates while delivering a 190 basis point improvement in credit loss. While cash NPAT of $8.9 million in FY '22 was down 47% on pcp due to reductions in receivables and interest income, receivable balances have now returned to growth. As you can see, we believe we are well placed to grow volume in our AU Cards business as international travel returns to pre-pandemic levels. It's also worth pointing out that given the interest-free period of the cards that there is a lag between long-term interest rate volumes and interest-bearing balances. Big things remains a profitable contributor to Consumer Finance performance with cash NPAT of $21.3 million, offset by investments in growth and offshore. Segment volumes were up 21% on the prior year, predominantly driven by our e-commerce small ticket offering in Australia. Growth in our Big things offering in Australia was down 7% on last year, impacted by the Omicron and Delta variants of COVID, which restricted in-store shopping where big ticket items are typically purchased. This reduction was offset by Big things volume in other markets. While we see our small ticket offering is a key to the product proposition for merchants and customers, it is our larger ticket offering that drives the profitability of this segment. With that in mind, we've taken steps to focus on our core and align to humm's unique market position in Big things. This also means product rationalizations to products that are driven by merchant versus marketing originations, which I've previously mentioned. We have a number of key priorities for our Consumer Finance business in FY '23. In response to the changing macro environment, we've decided to focus on our core products, platforms and systems that deliver our greatest customer experience and opportunities for profitable growth within each of the geographies we operate in. hummgroup has consolidated our Consumer Finance business and reprioritized its focus on its core strength, partnerships across both its cards and installment plans businesses with a focus on big ticket installment products. We're taking the opportunity to assess the group's investment levels in Big things expansion in offshore. The review will consider the macroeconomic environment, investment horizon and alternative investments to deliver long-term value to shareholders. I look forward to providing you with an update at our AGM in November. We know there is more to do. And in 2023, we will look to transition into domestic installment business onto a global platform and simplify our New Zealand Cards system. We will continue to focus on service transformation, consolidating our 3 customer service centers and investing in product development with self-service applications. We'll also look to improve our margins by optimizing profitability through a disciplined management of merchant return profiles. In order to rightsize the business and drive operational leverage in the Consumer business, hummgroup is targeting a further $15 million to $20 million of cost savings from the FY '22 cost base in FY '23 with $20 million to $25 million annualized and a reduction in CapEx investment to $18 million from our recent levels of $30 million. Turning now to our Commercial business. We're exceptionally proud of the pace of growth in this business without sacrificing our credit quality. In FY '22, we onboarded more than 212 new brokers and increased receivables from circa $900 million to $1.5 billion. We have invested in this business, ensuring that it continues to deliver a differentiated service proposition, speed to yes and settlement within 24 to 48 hours. Given the success of this reoriented business, we're now replicating the success of the broker-led strategy in New Zealand, and we're managing our risk based on the economic outlook in that market. flexicommercial is focused on delivering commercial asset finance for the $41 billion equipment finance market. Our top 3 assets being transport, construction and light commercial vehicles. Our market-leading service is how we have stood out in the broker channel and has been underpinned by an investment in technology, which allows us to drive efficient decisions and differentiates us from traditional lenders. 45% of deals are decisioned on the same day and 35% of approved deals are automated, making us quicker, nimbler and easier to work with than those traditional lenders. We have served over 10,000 customers in FY '22 with an average deal size of $100,000. This makes us Australia and New Zealand's leading provider of specialist asset finance with over $1.5 billion in receivables. In terms of dynamics, our Commercial business has benefited from the pullback of the big 4 from the SME market. Where we do come across them, speed to yes and speed to settlement continue to be our key differentiators. We take a differentiated approach to lending by only providing finance through the broker channel. Why? Well, we know that 73% of Australian asset loans are sold through brokers who were used by SMEs for their convenience, advocacy and best fit. We see a large opportunity to grow our presence in the asset finance industry with over 500,000 SMEs we believe we can target. Bear in mind that we know that 1 in 2 SMEs applied for funding last year and that the lending market has grown 5% annually over the last 10 years. So you can see the further growth potential in this business. Looking ahead, we know there are specific subregions and geographies where the market is underrepresented, which we will target through increasing business development team size and location. This includes expanding our broker channel in New Zealand. We will also consider targeted accretive acquisitions, although we're not dependent on this to drive our growth. We plan to continue being the best service provider to brokers. We will invest in technology to see greater automation of our processes, enhancing our systems through the implementation of scalable tech that will ultimately make us more efficient to deal with. Finally, we have a focus on sharpening our margin management and believe there is room for improving -- improvement through repaid pricing our front book to reflect rising interest rates and implement risk-based pricing. I'd now like to hand over to Adrian, who will walk you through the financials. -------------------------------------------------------------------------------- Adrian Fisk, Humm Group Limited - CFO [3] -------------------------------------------------------------------------------- Thanks, Bec, and good morning. I'm here today to discuss the financial performance of hummgroup for the full year to 30 June '22, which has delivered a cash NPAT of $51.1 million, down from $68.4 million in the comparative period. The results that we are delivering today are unaudited as the audit of the financial statements of Ernst & Young is still in progress. The audit was planned, anticipating that the humm Consumer business would be sold by 30 June '22. EY have advised our Board that the audit is well progressed, that the key areas of judgment are substantially complete and that there are no disagreements delaying the completion of their audit. Our cash NPAT result of $51.1 million is pleasing given the challenges that emerged in the operating environment over the last 12 months. Gross income was relatively flat, with volume growth driving increased receivables and was offset by yield compression. We have provided more information on product yields later in the presentation. We are very pleased with our impairment expense that whilst up 8%, reflecting growth in the portfolio, was offset by sustained improvement in our credit processes that have delivered a net loss to ANR of 2.8%, down from 3.5%. Marketing expenses were lower this year as we reduced spend in the second half given the low growth environment and decommissioning of products. Operating expenses were higher, reflecting the absence of JobKeeper and our investment in the expansion of the U.K. and Canada. I'll cover operating expenses in more detail as we have commenced plans to reduce our cost base in the Consumer business to reflect the lower income environment and to achieve operational leverage. The statutory loss of $170.3 million predominantly reflects the noncash impairment of intangibles including goodwill and software of $202.1 million, of which $181.2 million was taken back in December. Further impairments were taken in the second half related to products that are noncore. In addition, we have booked off one-off items relating to the legal provision for Forum Finance, which included a $3.5 million before tax in the period and transaction costs related to the proposed sale of $10.8 million before tax and $7.6 million after tax. Finally, on dividends. Consistent with our decision to return to dividends last year at the Strategy Day, humm has proposed paying a fully franked dividend of $0.014 per share, which equates to $6.9 million. This takes our full year dividend for FY '22 to $0.031 per share. On the next slide, hummgroup's costs remain high as we transition from our legacy products in technology and consumer to a modern, scalable platform. On this slide, we set out a bridge of our FY '22 operating costs compared to FY '21. And the table below includes detail of the key line items. It shows that operating expenses increasing $11.4 million in FY '22 with the main drivers being investment in the expansion of the U.K. and Canada, which were $12.3 million before tax and up $10.8 million on FY '21; JobKeeper, government incentives of $6.1 million, which we received in FY '21; and increased technology costs outside the U.K. and Canada of $2.4 million. In the second half of FY '22, we were constrained in our ability to execute cost transaction -- cost transformation due to the activity of the transaction, but our people count was reduced by 10%. Marketing expenses were down $6.1 million due to humm actively constraining spend in the second half given the lower growth environment and recognizing that branding -- rebranding took place in FY '21. We also reduced CapEx activity from the planned $30 million to $23.9 million. And our depreciation reduced by $1.5 million for the year and $9 million in the second half as a result of impairments taken earlier in the year. The next slide sets out our cost-to-income ratios for the group, Commercial and Consumer, and the key initiatives that we're putting in place for the next 12 months to target $15 million to $20 million of cost savings in FY '23, with annualized benefits of $20 million to $25 million. The separation process we undertook for the Commercial business has given us clear line of sight on the costs required to run this business. And these costs are being rightsized to ensure that we have a cost-to-income ratio below 40%. You can see by the graph that as we have grown Commercial revenue, it has demonstrated operational leverage and translated into a lower CTI ratio. Management is now directing its attention of the Consumer business, where we have plans to reduce the CTI ratio to 50%. As previously mentioned, the cost base is impacted by legacy products and technology. Our cost reduction objectives will be predominantly achieved through replatforming the Australian installments business to our global Salesforce/Q2 platform. By simplifying our New Zealand Cards platform by removing lending and migrating to select, cost reduction through transitioning our infrastructure to the cloud and systems consolidation and right-shoring our operation centers and consolidating our call centers into one. Further, we'll be reducing our CapEx spend to $18 million this year from $24 million in FY '22 and $30 million in FY '21. Turning to credit. We are very pleased with the sustainable improvements that our credit teams have delivered in origination, fraud and credit processes to deliver a group net loss to ANR ratio of 2.8%, down from 3.5%. These investments in systems and processes have delivered over recent years and include a group fraud platform, including digital identity, fingerprints and biometrics and also automated verification and authentication tools. We have introduced comprehensive reporting. We have leveraged bank statements online for income verification. We've enhanced our decision tools and credit scoring. We've implemented machine learning models in AU Cards, and we have improved our collections capability. These have directly contributed to lower losses and further have been successful with our collection strategy and debt sale programs over the last 12 months, which have seen material improvements in recoveries. AU Cards and AU BNPL debt sale pricing improvements will continue to be in place for the next 18 months. As you can see, these programs have delivered sustained improvements in our larger, bigger ticket BNPL, card value and cards NZ loss-to-NR ratios. The uptick in losses in small ticket items resulted from increases in loss in bundll earlier in the year, which have been resolved through changes to our origination controls and increased losses in Little things in the second half of '22, largely a result of new product features which have been stopped. The Commercial net loss of 0.7% shows the impact of improved counterparty and asset quality and our investment in credit underwriting and collections capability. This ratio is also benefiting from higher growth and a larger denominator, and we anticipate will normalize over time. On the following slide, we have provided our investors with more information this year on the movement in net loss, macro provision releases and provision movements per product. We consider that we are conservatively provisioned. And adjusting for specific products that have been closed in the period, we have maintained our provisioning levels since the half year December '21. We had a lower macro provision release this year of $4.7 million compared to $21.6 million in FY '21. At the half year, we booked a macro provision release of $5.7 million, and the full year, we booked an additional provision of $1.0 million. We note that the reduction in coverage between June '21 and December '21 in the first half were largely normalization post-COVID leading us to a steady-state baseline. Our baseline provision releases have increased due to a number of factors. We've had lower receivables during the year in said products. We've had reduced arrears attached to initiatives covered in the prior slide. And we've had also lower recoveries -- improved recoveries as discussed. The Commercial provision has benefited from releases attached to the washup of the POS leasing book and commander exposures. This offset higher provision costs as we continue to grow the Commercial portfolio. We consider that we are conservatively provided and note that we are seeing very low arrears and hardship levels across all products. Balance sheet strength and the quality of our funding program is a competitive differentiator for the hummgroup. At 30 June '22, we have $113 million in unrestricted cash and $896 million headroom in our warehouse funding arrangements, as well as $110 million of undrawn corporate debt. Since year-end, we have continued to expand our funding capacity with 2 new Commercial warehouse facilities executed with major financial institutions, along with mezzanine debt providers, which has increased our warehouse undrawn capacity to $1.2 billion and gives us capacity to continue to fund the growth of the Commercial business. In recent years, we have been very focused on improving the capital efficiency of our balance sheet. We have introduced mezzanine in our facilities, which has the effect of reducing the capital employed in our warehouses, for example, from 20% to 7%. This freed up capital has allowed us to continue to fund the growth in our book. The reputation and the experience of our treasury team has been an asset during this disruptive time in financial markets. And with our new Board, we will evaluate our capital stack, including the perpetual note and cash balances to ensure that we balance capacity for growth with efficiency and return from our shareholders. And we expect to complete this work by our AGM in November. I would like to turn now to the financial performance of the Consumer and Commercial businesses and build on the information that I committed to provide you since our Investor Day last year. As Bec mentioned, the cash NPAT for the Consumer business was $22.4 million, down from $46.1 million in the prior period. We've shared with you that we have 3 profitable businesses in Cards AU, Card NZ and Big things BNPL that generated $61 million in cash NPAT. Part of these profits have been invested in new products and offshore expansion. We have taken a very clear strategy for FY '22 and FY '23 to refocus the business on Big things and carefully evaluate our product, geography and vertical strategy to ensure that we are meeting our investment hurdles. This is likely to limit growth but improve profitability. The cards portfolios have experienced lower receivables due to the economic environment, but continue to deliver profit, and we are starting to receive the growth return, particularly in the Australian travel sector. Big things delivered a profit of $21.3 million for the year, which is down on last year due to the competitive yield compression, particularly in verticals like solar. Little things delivered a loss of $12.5 million, which will improve in the next 12 months by MSF increases and selective focus on key merchants. bundll, humm New Zealand and hummpro delivered an aggregate loss of $17 million. It is to be determined that the income yield from these products was not enough to offset the losses in the cost of running. We have exited bundll in New Zealand and closed hummpro. bundll AU has been closed to new customers, and we are working on refining the product construct, and we're transitioning this product to the global tech stack, which will improve functionality and lower cost. humm New Zealand will be closed in FY '23. A key priority for the business is managing our exposure to rising interest rates. During the year, we saw significant increases in swap costs. We have an active hedge program in place in which 77% of our total book is hedged and 90% of our Australian book is hedged. This strategy has provided protection on our back book for rate increases. And the focus is to ensure that we manage rate increases on our new originations. We will continue to actively manage this exposure and have already increased rates to merchants by 150 basis points in the consumable. We note, however, that during the -- due to the timing of swap rate increases relative to merchant increases, we will see a squeeze in net interest margin in the first half of FY '23 that we expect to normalize in the second half. Now turning to the BNPL segment. We have split out our yield information between Big things and Little things for the first time in these slides. You'll remember that it has been challenging in the past due to constraints in the underlying source systems. Big things cash NPAT of $21.2 million was down from $29.3 million in FY '21. Volumes were down this year impacted by COVID and in-store sales with reduced trading days and supply chain issues. Yield has come down over the past 3 years, reflecting competitive pressure in the market. We are now repricing this book to reflect rising interest rates, and we expect competition to reduce as funding conditions for some of our competitors become more challenging. Net loss to ANR is relatively stable and down from FY '20. Little things cash NPAT loss of $12.5 million versus $8 million for FY '21 has strong volume growth. And this has come at a cost with marketing of $7 million in humm AU spent largely on Little things customer acquisition. Loss rates have increased as we expanded the reach of this product and launched new features like gift cards and Tapp. The unit economics of this product are a challenge given our scale. And so we're repositioning this product as a companion product to Big things across key verticals and partnerships. We're also taking steps to optimize earnings by increasing MSF and fees, and along with closing key merchants that are not strategic or profitable. NZ Cards continues to deliver strong returns. Cash NPAT was $31 million despite lower volume and receivables. Yield is stable and the net loss is reduced. Cards in AU is delivering a profit of $9 million. Yield has come down as the mix of interest-bearing balances reduced, largely a product of new interest-free volume flows. We are looking forward to the return to travel in this book from Flight Centre, which has a 6-month delay before volume converts into revenue. Net losses are down in both geographies due to the improvements that we have discussed on previous slides. We are very proud of the performance of our Commercial team, and the business has gone from strength to strength with record months in February, March, May and June this year. Receivables growth resulted from strong volume performance this year, driving gross income to $119 million, an increase of 22.9%. Cash NPAT was higher due to operating leverage in this portfolio. We continue to see volume growth through our competitive positioning in the market and strong relationships with our broker distribution network. Capital efficiency has also improved this year with a strong funding program executed in the year and the introduction of mezzanine financing in Commercial Australia. In Commercial AU, yield has reduced, largely a result of product, of risk-based pricing and improved credit as we attract high-quality customers from the banks. Loss rates were lower with a loss-to-ANR ratio of 0.8%, reflecting improvements in both counterparty and assets. Commercial New Zealand continues to build out our broker-led SME asset finance offering and has seen strong growth in the later part of FY '22. We're expecting strong growth in rates from this business in FY '23, but yield will continue to come down as mix shifts away from leasing to asset finance. I'd like to thank you for joining us and would like to pass back to Bec to close the presentation. -------------------------------------------------------------------------------- Rebecca James, Humm Group Limited - Group CEO [4] -------------------------------------------------------------------------------- Thanks, Adrian. As you will have seen, hummgroup is well positioned to navigate the new economic environment with a strong balance sheet, profitable products and leading credit capabilities. We'll continue to take a prudent approach to credit management, and we're continually monitoring the appropriateness of credit [buffer] settings within our decisioning models. And we're satisfied that remain appropriate for the current conditions. We will continue to take steps to focus on our core and align to humm's unique market position in big ticket. And finally, we will continue to focus on reducing our cost base and managing net interest margin through passing on and strong portfolio management as interest rate increases. With that, I'd like to conclude today's presentation, thanking our team for their resilience, commitment and performance for the previous year and hand back to our moderator for today's Q&A session. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) There appears to be no questions. So Rebecca, I'll hand to you if you have any closing comments. -------------------------------------------------------------------------------- Rebecca James, Humm Group Limited - Group CEO [2] -------------------------------------------------------------------------------- Thank you. Thanks for joining us. And Adrian and I will look forward to answering questions one-on-one, understanding that we're catching up with a number of our investors and analysts over the coming days. Thank you for your time. -------------------------------------------------------------------------------- Operator [3] -------------------------------------------------------------------------------- Thank you so much. This does conclude today's conference call. Thank you all for joining. You may now disconnect.