Humm Earnings: Disadvantages Evident and Prospective Recovery to Take Time

The 27% decline in no-moat Humm’s first-half fiscal 2024 normalized profit to AUD 28 million and the fall in the share price since reporting indicates market optimism regarding an earnings recovery was premature. The contraction in gross profit margins and 4% growth in operating expenses, despite cost-cutting, relative to the first half of fiscal 2023 suggests it will take time before earnings recover to around AUD 65 million, the fiscal 2021-23 average. While challenging given higher interest expenses, operating cost inflation, and competitive pressures limiting fee increases, we think it is achievable should interest rates retreat.