Humm keeps foot down on international expansion

Humm says customers of its “buy everywhere” service bundll are using it an average of 97 times a year, presenting an opportunity to cross-sell its “humm big things” and “humm90” products, which can be used for large purchases and deliver the company a bigger profit margin.

Chief executive Rebecca James said one-in-four users of bundll – which allows weekly purchases to be bundled up and repaid two weeks later without interest or fees – are also using humm. This product does not charge interest, but does levy an account fee of $8 a month for items over $2000 over the term of a repayment, set at the time of purchase.

Chief executive Rebecca James says the Humm brand is strong. Graham Jepson

The number of active customers using bundll and humm hit 2.7 million, up 20 per cent over the year.

For humm big things, the average price of a good is $3900 and the average repayment term is 30 months, but can be extended to 60 months. Ms James said this distinguishes humm from competitors such as Afterpay and PayPal’s new Pay in 4, which are used for smaller purchases due to the short, fixed repayment term.

“This structural shift to fixed-term instalments away from revolving credit is just accelerating, it is large and global, and it is not surprising we are seeing Apple, PayPal and Square entering the space, along with banks and loyalty programs... but we are seeing less competitive tension in the bigger item space,” Ms James said.

“The pressure on merchant fees is absolutely going to continue, so establishing direct relationships with customers and having consumer pay models is a differentiator for us, and we are seeing consumers who are now used to the pay-in-four construct wanting to use that form of finance for larger lifestyle purchases.”

Prominent investor and Humm director John Wylie said Ms James has “reinvented the Humm brand, built new products, taken costs out and given it a growth story. She has done a fantastic job in a short space of time and has also put the company in a position where is has a very strong balance sheet.”

“It has a balance between growth and profitability,” said Mr Wylie, who invested $25 million in the former Flexigroup in 2019. “She has integrated the businesses, and has a lot of cross-fertilization going on between the different product lines.”

Interest-charging cards

Humm Group reported cash net profit after tax of $68.4 million for the year to June 30, which was up 121 per cent and helped send the shares up 6 per cent to $1. Marketing expenses jumped 27 per cent as it invested in brand awareness.

One-third of profit came from revamped commercial and leasing operations, where profit of $22.3 million was up from just $4.2 million a year earlier, driven by more SME customers finding humm via brokers.

The interest-charging cards business in Australia and New Zealand, now known as humm90, contributed $44.9 million of profit even though credit card volumes dropped 30 per cent to $417 million as travel fell during the pandemic.

Transactions going through humm and bundll rose 31 per cent to surpass $1 billion over the year for the first time. The profit of the buy now, pay later division was $1.2 million, as humm invested heavily in offshore expansion. Credit losses as a proportion of buy now, pay later loans fell from 6.3 per cent in 2020 to 4.4 per cent in 2021.