Harmoney (HMY) H2 2024 earnings summary

Executive summary

• Stellare 2.0, a new cloud-native platform, became fully operational in Australia in July 2024, driving a 50% uplift in loan originations compared to July 2023 and doubling approval rates for smaller loans.

• Achieved fifth consecutive half of positive cash NPAT and loan book growth, with FY24 cash NPAT at NZD 0.7 million and statutory loss of NZD 13.2 million due to a NZD 9.5 million non-cash impairment from retiring Stellare 1.0.

• Loan book grew 2% year-over-year to NZD 758 million, with revenue up 15% to NZD 123 million, despite higher funding costs and a challenging interest rate environment.

• Automation and AI, leveraging 10 years of first-party data, underpin a highly efficient, scalable, and customer-centric lending model.

Financial highlights

• Net interest margin (NIM) for new lending in Q4 FY24 exceeded 10%; portfolio NIM was 8.8%, down 80bps due to higher funding costs, but expected to return to 9% in FY25.

• Cost-to-income ratio improved to 24%, down from 28% last year, driven by automation and efficiency gains.

• Risk-adjusted income margin contracted to 4.8% (down from 6%), but new business in Q4 FY24 already exceeded 6%.

• Acquisition costs reduced by 14% year-over-year, with customer acquisition cost efficiency supported by direct digital channels.

• Incurred credit losses increased to NZD 30.7 million (4.1% of average loans), up from NZD 24.6 million (3.6%) in FY23.

Outlook and guidance

• Stellare 2.0 rollout in New Zealand is planned for first half FY25, with full decommissioning of Stellare 1.0 expected to drive further cost savings.

• Targeting a 20% cash return on equity run rate in second half FY25, achievable with an 8% loan book growth and a 5.4% risk-adjusted margin.

• Net interest margin on the loan book expected to return to 9% in FY25, with further growth in cash NPAT and profitability.

• No equity capital raising anticipated unless extraordinary growth or strategic reasons arise.

• Scenario analysis includes a 5% inflation buffer on expenses.