Thank you for standing by, and welcome to the Humm Group First Half twenty twenty one Results Conference Call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. I would now like to hand the conference over to Ms. Rebecca James, CEO.
Please go ahead.
Good morning. Thank you for joining us for our half year 'twenty one results presentation. My name is Rebecca James, Chief Executive Officer of Home Group, and I'm joined today by our Chief Financial Officer, Jason Murray. I'd like to start today by talking you through our group highlights for the half before discussing our plans to accelerate local and international growth. I'll then hand over to Jason, who will walk you through our financials.
We will, as always, allow for your questions at the end of the presentation. We believe our offering is the most flexible buy now, pay later offering in the world. We're the only provider to facilitate transactions up to 30,000 with payment terms ranging from 5 fortnights to 5 years. Today, 2,600,000 customers entrust us to help them buy and pay over time. And we're just getting started.
It's our mission now to take our offering global, expanding into the United Kingdom from Ireland and also into Canada. We're taking the fight to our competitors both locally and globally. We intend to significantly ramp up our investment in marketing and our product experience in all key markets. Turning to Slide 5, you'll see the group highlights for the first half. During the period, we've added 750,000 new customers, up 40% on PCP, taking total group customers to over 2,600,000.
We now have a superior credit decision engine delivering net loss to ANR of 3.2 percent in the first half twenty twenty one, a direct result of continued investment in our proprietary decision engine to improve our credit performance. We are a digital first business with over 1 point 3,000,000 app downloads to date, a significant increase in digital penetration. And our buy now, pay later business is ramping up. Buy now, pay later segment volumes of $473,000,000 is up 14% on PCP, reflecting the strong performance in Island, Little Things in Australia and the increasing contribution from bundle. Our new buy now, pay later product offerings, including Little Things, Australia, New Zealand, Ireland and Bundle have been snapped up by consumers, with volume in these products increasing 90% on PCP.
More importantly, our customers are using our products more regularly, with total BNPL transactions up 293 percent on PCP to 1,500,000 as we penetrate into everyday spend and increase our stickiness with customers. The strong results from the half now gives us the confidence to invest in our strategy, designed to support and accelerate our long term growth. On Slide 7, you will see that has 4 areas of focus that will support its short- and long term growth. Everything we've done up to now has been to get us to a position to put our firepower behind these growth initiatives and expand our customer numbers, merchant numbers and addressable market, both locally and abroad. We will go to market with new products, Bundle and Home Pro, with target new markets and new audiences to expand our domestic reach in Australia and New Zealand, drive customer engagement and transaction frequency, building our products that are loved and used every day expand our installment payment core by attracting new merchants and platforms in Australia and New Zealand through our differentiated product offering and expand into new markets internationally through a considered and differentiated strategy that will appeal to a broader range of merchants and customers than traditional buy now pay later players.
On Slide 8, you will see that following beta testing in December 2020, the company is now proudly promoting Humpro, a buy now, pay later product designed to meet the needs of small to medium business owners. As part of new products for new audiences, Home Pro is being designed to give business owners more options and greater flexibility when financing their business and follows demand from SMEs who are looking to invest and grow as trading conditions return to pre pandemic levels. There are just under 3,000,000 SMEs in Australia and New Zealand and a $30,000,000,000 credit market, representing a significant opportunity for Humpro. Hump Group will leverage its considerable experience in responsible credit decisioning and building customer centric experiences as it rolls this new product out to its business customers. On Slide 9, you'll see that HomePro can be used anywhere Mastercard is accepted online, in store and to pay supplier invoices.
Other buy now, pay later for business solutions require suppliers to be integrated into their network, which limits how and where they can be used. Humb Pro acts like a universal trade account. It is accepted universally at every supplier that accepts Mastercard payments. Purchases are grouped into monthly balances with another month to repay. It also allows users to manage multiple monthly balances on individual repayment terms, providing the freedom to continue making purchases without impacting existing commitments.
And of course, our fees are competitive and transparent. On Slide 10, you'll see that Hum Group's other new product designed to drive growth is Bundle, our nascent buy now, pay anywhere product, which has already gathered over 50,000 customers. Using the Mastercard network, Bundle customers can shop anywhere, anytime, online and in store, interest free with no minimum spend. Bundle has experienced positive momentum over period with monthly transactions now reaching over 321,000. Monthly volumes have also grown rapidly over the half, now totaling $11,400,000 a month.
Bundle, as the world's 1st buy now pay anywhere platform, has significant technology and data expertise and the company has been exploring ways to collaborate and partner with the world's best technology and payments companies to realize that potential. In November, we announced the first step in that mission through a partnership with Mastercard to expand the application and distribution of bundle. The agreement is for 5 years and is expected to deliver an additional growth path for Hum Group, at the same time as expanding the services that schemes can provide to customers. Hum Group has become synonymous with easy digital interest free finance and the key to this is a focus on driving customer engagement through our digital channels. There have been over 1,300,000 app downloads across the Home Group ecosystem, including 120,000 buy now, pay later app downloads in December 2020 alone.
We have designed seamless and delightful app experiences, which include instant provisioning that allows our customers to sign up and shop in less than 2 minutes marketplaces that offer a frictionless 2 click shopping experience apps rich with additional features like BPAY that allows customers to pay for household bills at over 20,000 providers and easy and simple to navigate repayment features that allow customers to pay their way. Our app scores have been consistently high and our focus on continuing to deliver a strong customer experience has driven customer usage now to 14 times a year on average and delivered an NPS of 58. That's a Net Promoter Score showing engaged customer advocacy for is the original buy now, pay later product that allows young families to live interest free forever. Our ability to finance both big and little purchases continues to drive retailer adoption and customer growth and will be our USP when we expand into new markets. Focuses on driving customer engagement by signing new merchants and platforms in our existing markets.
During that period, we continue to add new merchants, which shows the strength of the product and our differentiated customer proposition. In the last 12 months, the company has added over 9,300 new retailers. The growth in home and health over that period shows that being able to finance both small and big ticket items is resonating with a broad range of retailers. It's what we own and where we'll win. And this has translated into rapid growth for our BNPL products, as you can see on Slide 13.
A key driver of expanding our installment payment core as the brand continues to gain traction and consumers use our products more regularly. App downloads increased 130% on the prior December month, surpassing 119,000 downloads, the biggest ever month for Home Group. Monthly transactions have skyrocketed 316% over December 2019 as we penetrate into everyday spend and increase our stickiness with our customers. Total BNPL volumes have increased 23% since December 2019, driven by an 85% growth in Little Things volume over the same period. Big Things volume in Australia was slightly restrained during the beginning of the half as consumer spending on large items, typically purchased in store and Healthcare felt the challenges of Melbourne's extended lockdown.
These have since returned. Turning to Slide 14, and I'd just like to talk about the continued success of our Irish operations, which have gone from a leasing business to a rapidly growing buy now, pay later business in a short space of time. As the only buy now, pay later player in Ireland, we've nearly doubled our customers in the first half twenty twenty one, while also generating strong growth in retail partners and volumes. The rapid progress in growing buy now, pay later customers, volumes and retailers in Ireland clearly demonstrates Humm Group's ability to pivot and scale internationally. With many of our retail partners in Ireland also operating in the U.
K, this provides us a stronger base from which to expand. On Slide 15, you'll see that today, Hung Group is announcing the launch of our buy now, pay later product, into the United Kingdom and Canada in the second half of the financial year twenty twenty one. Buy now, pay later adoption in these markets is still in its infancy with a significant opportunity to displace outdated traditional point of sale finance. We are well placed to capture the shift from revolving credit to paying over time in fixed installments, with a focus on high value purchases in health, automotive, home improvement and luxury. With a market opportunity of $778,000,000,000 and as the only player servicing both the United Kingdom and Ireland, there is a clearly differentiated offering for merchants and customers that will challenge traditional point of sale finance in the United Kingdom.
Our Little Things product will be available for smaller ticket items and Big Things for more significant purchases with longer terms. The U. K. Expansion is spearheaded by Patrick Joseph Byrne, CEO of Hum UK and Ireland and Ross Gould, our Head of Credit and Risk. PJ has led the Hum Ireland business for a number of years, delivering continued growth in volumes and customers.
From the outset, when exploring our expansion into the U. K, we built our offering around a customer centric product design. That means that it has already been configured to meet increasing regulation, including serviceability checks. Canada provides with an additional $613,000,000,000 market opportunity. And given our strong existing relationships and the region's complementary regulatory framework, it makes for an attractive market for to enter.
We've made great progress already in preparing for our launch and announcements around Board and senior executive appointments for that region are due imminently. We're also in active discussions with a number of participants in the market with further strategic alliances to be announced on launch. On Slide 19, you will see that PJ and the team have already made strong progress in the U. K. With over 200 retailers signed up including Pamela Scott, Instasmile, McGurk's Golf, River Medical and Therapy Clinic.
With substantial capital at our disposal, the ability to service large items, a key differentiator and a significant international market opportunity, we have a strong platform for future growth. It's an understatement to say we're incredibly excited about the potential of these markets and we look forward to updating you on our progress. I'd now like to hand over to Jason to walk us through the first half 'twenty one group financials.
Thanks, Rebecca. And turning to Page 18 of the pack. Gross income, which is interest income plus fee income, was up was $225,200,000 down 6.4 percent on the prior comparative period, or PCP. The biggest driver of the decline was lower interest bearing balances in AU cards. There was also an impact from the consumer leasing business, which is in runoff and ceased writing new business in 2019.
Gross profit, which is gross income less interest expense and less direct cost of sales, was $174,300,000 down 4.1%. The decline was proportionately less than gross income due to lower borrowings in some segments and lower cost of funds, which led to a $7,000,000 saving. Marketing and operating expenses will be covered in more detail in the next slide, but at headline level, we're really pleased with the progress we've made to date, reducing combined operating expenses by 11.1% on PCP. Turning to credit performance. Impairment losses were down 35.2 percent to $25,000,000 Impairment losses are made up of actual losses, less any recovery benefits from those losses and the movement in provisions against the portfolio.
The combination of lower actual losses and strong recoveries led to a net loss of $40,000,000 down 12 percent or $5,500,000 on PCP. $6,100,000 of the provision movement or $4,300,000 after tax is a partial release of the COVID-nineteen macro overlay. You'll recall at the FY 2020 full year we took a $30,900,000 post tax provision in relation to the impact of COVID-nineteen and the majority of that provision remains in place until we get a clearer view of the full impact of the pandemic. The balance of around $2,000,000 is an increased write back of the baseline provision. This robust credit performance reflects the benefit of continued investment in our superior credit decisioning engine and fraud platform and the adoption of a customer centric approach to hardship management and collections.
Our tax expense of $18,700,000 although up substantially on PCP, is now at more normalized levels of around 30%. Last year, our tax expense was lower as there was a one off benefit recognized through the tax expense line. Taking into account all of these movements, our cash NPAT of $43,400,000 for the half is up 25.8%. This strong underlying profit increased earnings per share to $0.096 and improved return on equity to 13.1% despite our having raised capital during the period. Reconciling cash NPAT to stat NPAT, are non cash items of $4,800,000 and these are contained in the appendix on Page 31.
Looking to the second half of 'twenty one, Humm Group is focused on growth in Australia, New Zealand and Ireland, and we're also entering 2 new international markets, as Rebecca mentioned. This will involve investments in marketing, product and people, and the company, therefore, expects second half 'twenty one cash NPAT to be lower than the first half. To support the company's investment for growth, the Board has decided not to pay an interim dividend for the first half 'twenty one and will continue to review the dividend policy each half year period. Turning to operating expenses. We wanted to provide greater clarity on the underlying movements which have resulted in HomeGroup becoming a simpler, leaner operation.
Operating expenses are down $10,900,000 compared to PCP. Payroll costs are down $13,000,000 as we further streamlined the business by removing duplicate roles and functions, saving $6,900,000 and achieving a 30% reduction in our headcount since December 2018. Other operating expense savings of $3,600,000 were driven by simplifying the business and disciplined management of costs. We've consolidated 3 telephone systems into 1. We've developed a single knowledge management system.
And by introducing lower cost self serve models like web chat, we've standardized our approach to serving customers. Importantly, these efficiency gains have also improved consumer product reviews. Marketing expenses were up $1,800,000 and reflect a conscious investment in new products with launching in New Zealand in September and a renewed focus on bundle after that product pretty much went into hibernation during the early months of the COVID-nineteen pandemic. Depreciation was up $3,900,000 reflecting increased investment in systems and a steady stream of product development as well as continued innovation and feature rollout in our existing products to further drive customer engagement. Our cost to income ratio of 49.8% in the first half 'twenty one is down 4 20 basis points on PCP.
And as you can see in the bottom right chart, we've made significant progress in reducing the core operating costs of the business. CTI, excluding marketing and depreciation, has fallen 7.90 basis points since the first half 'twenty to 34%. Investment in international expansion will drive a moderate short term increase in the cost to income ratio, but we will maintain a continued focus on reducing core operating expenses, excluding marketing and depreciation. We'll now take a look at the segment views, turning first to Buy Now Pay Later or BNPL. This segment consists of our traditional BNPL product and now also includes Bundle, our Buy Now Pay Anywhere product, which we've re categorized from Australia cards and the newly launched Humpro, our business now, pay later product.
Cash NPAT for the half was $3,100,000 although remaining profitable and we're the only profitable BNPL player that we're aware of, we have reinvested $6,700,000 into new products and new markets, and we've shown this on a comparative basis for the prior period. The impact in both periods was caused by development costs in Bundle and Hump Pro. The current period also includes investment in the relaunch of Bundle and to a lesser extent, Hump New Zealand, which launched in September. It was really pleasing to see volume of $473,000,000 up 13.8%. This reflects strong performance in Hum Island, Hum Little Things and an increasing contribution from Bundle.
We're genuinely excited about Bundle and the momentum that builds has built in the last few months since the effective relaunch. Across BNPL, momentum in online volume continues as customer spending shifts to e commerce. We're also seeing consumers purchase larger ticket items online. Gross profit of $45,500,000 was down 7.3% despite receivables growth of 8.9%. The decline was due to higher direct cost of sales as we invested in the business and margin compression in some product segments.
The continued focus on cost efficiency mentioned earlier led to a $2,400,000 decrease in operating expenses for the segment. The operational savings were actually greater than this. However, we reinvested in marketing and new product launch and development. Finally, the portfolio continues to perform really well with 30 plus day arrears at 1.85 percent for Australia at the end of the period. Turning to Cards.
Profits increased on both sides of the Tasman despite a challenging operating environment. Australia Cards cash NPAT of $12,200,000 was up 87.7 percent despite volume declining 43.2 percent to $201,000,000 due to the impact of COVID-nineteen across travel related industries. If you exclude key travel partner volumes and associated refunds, the segment volume period on period only declined 2.4%, outperforming system in Australia which shrunk just over 9%. Gross profit for AU Cards was down 9.9 percent to $37,500,000 due to a decline in interest bearing receivables. There was an industry wide pay down of card balances over the period.
And importantly for Humb Group, this was more prevalent in Once and Lombard, our legacy products in Runoff with Humb 90 interest bearing balances remaining broadly stable. The faster than expected pay down of the books in Runoff has also had a positive impact on impairments. In fact, the company wrote back $200,000 for the period from lower arrears as well as a partial release of the COVID-nineteen macro overlay of $4,300,000 after tax as a result of the significant drop in the number of hardship cases from the prior period. Turning to New Zealand Cards. Cash NPAT of $14,300,000 was up 5.9% for the period.
Volume was down 17.3%, again largely due to the impact of COVID-nineteen on spending, noting that travel and hospitality make up a lower proportion of the volume you write in New Zealand compared to Australia. Gross profit for New Zealand cards was up 2.8%, driven by higher net interest margin and lower direct cost of sales. In addition, operating expenses reduced 8.5%, reflecting the benefit of the cost reduction initiatives in this segment. Next, the Commercial and Leasing business. Cash NPAT of $13,800,000 for the half was up 46.8 percent reflecting a business that has been completely rebuilt and refocused.
Volume was up 46.9 percent driven by strong growth in Australia in small business lending through our dedicated broker distribution channel and an internal focus on fast and efficient approvals. The reputation that the team have built over the last 12 months as a prudent lender providing consistent and quick credit decisioning has allowed us to gain share in a market that grew modestly overall. This prudent growth has not been at the expense of credit quality, which is level with prior periods and in some sectors even better. Gross profit of $36,700,000 was down 3.4%, mainly due to portfolio mix, moving from vendor finance programs to chattel mortgages. In addition, the runoff of the consumer leasing portfolio continues to diminish half on half, but is still recorded in this segment.
The simplified structure and runoff of legacy products has also led to a corresponding reduction in OpEx of 29.3 percent to $15,700,000 Finally, just before Christmas, the team also enrolled in the SME loan guarantee scheme, enabling access of up to $100,000,000 of 50% loss guarantee support. Turning to Slide 23, you can see the changing profile of Australia Commercial and Leasing as we've refocused this business. With operating income up and capital deployed down, the ROE of the business continues to improve. The strategic review of the business is still in progress and this focus on driving capital efficiency remains the top priority. To this end, we'll be launching a $300,000,000 asset backed transaction in March and we're exploring mezzanine debt opportunities to drive lower equity contribution in the warehouse facilities.
Turning to credit risk management. We're extremely pleased with the credit performance of the Group over the period. The focus of the Credit team has been to ensure that our processes are robust with continued investment in our credit decisioning engine and the Group Fraud platform. In BNPL, the net loss to ANR is down 80 basis points to 4.1% as a result of reduced arrears and the investment in our platform driving better customer management. Australia Cards net loss to ANR reduced 40 basis points to 3.8%.
As mentioned previously, the repayment of card balances across the system was evidenced in our portfolios that was matched by a greater reduction in associated losses. New Zealand Cards was the only business segment across the group where net loss to ANR actually increased due to the maturing of the Mastercard scheme portfolio and a reduction in the recovery rate from debt sales. Both served to move the loss to ANR for the portfolio from a low base to more in line with New Zealand industry benchmarks. The commercial and leasing book continues to perform incredibly well despite strong volume growth. With 95% of loans that were previously in hardship in the Australia portfolio from COVID-nineteen now performing and arrears substantially down, we're seeing good lead indicators of the quality of loans being written and the performance of the book.
These segment results aggregate to a group net loss to ANR of 3.2%, down 10 basis points on PCP and a great result in a year of major disruption. Moving on to our wholesale funding facilities and our treasury team have done a fabulous job ensuring that we remain well funded for growth with $737,000,000 in undrawn wholesale funding facilities available to us as at 31 December 'twenty. In October, we successfully completed a $250,000,000 AU term securitization, the 11th securitization of Home Group's BNPL receivables to date. In 2016, we were the 1st Australian ABS issuer of green bonds. And with the latest transaction, we've now issued over $470,000,000 of green ABS notes as certified by the Climate Bond Standard Board.
Just after the period end, we also settled mezzanine funding of $70,000,000 for the Australia Cards portfolio, which will drive additional capital efficiency in that portfolio and across the group. We are super focused on driving further rolling improvements in the Australia Commercial and Leasing business. And as I mentioned earlier, the $300,000,000 term securitization will launch in March. Turning now to our corporate debt facilities. And as you can see, we've significantly deleveraged the balance sheet, providing liquidity and positioning Humb Group for growth.
The recent equity raise has given us significant balance sheet flexibility as we expand into new markets and grow customers and receivables across our product suite. With NIL net gearing as at 31 December 'twenty, we will continue to look at the best options for capital efficiency while maintaining adequate liquidity. Needless to say, with government stimulus coming to an end and impairment losses at all time lows, we remain well positioned for all eventualities. And with that, I'll now hand back to Rebecca.
Thank you, Jason. We believe that we have the most flexible buy now, pay later offering globally, enabling seamless approvals for purchases big, small or business related, and we empower consumers to choose how they wish to pay, with terms from 5 fortnights through to 5 years. We already have significant scale with 2,600,000 customers, and we're just getting started. We now have a significant market opportunity, both locally and internationally and with a total addressable market of $1,900,000,000,000 Hum Group has emerged from the pandemic in the strongest possible position with substantial capital at our disposal. We're now ready to put that firepower behind 4 clear, recognizable products to accelerate our growth.
Thank you for your support. I'd now like to take questions.
Thank you. Our first question comes from Apoorv Siegel with UBS. Please go ahead.
Good morning, Rebecca and Jason. Just my first question, with the Hundley entry into the UK, I saw that you've signed over 200 merchants already. Can you just talk to what the feedback has been from those U. K. Retailers in terms of why they've chosen to go with Hum?
And also, are any of these merchants like Hum exclusive or is it a case where merchants are generally just happy to offer additional buy now, pay later options to what they already have?
Yes. Thanks, AP. The feedback that we've had on our market entry into the United Kingdom has been incredibly strong. As the only operator in Ireland, we actually have a really strong point of differentiation for retailers. As you can imagine, many retailers service customers in both markets.
And so we are the only ones that can concurrently service that particular need. So the demand has been strong. Some of those relationships are exclusive because they've made the decision to only have one offering in cart that can service both of those markets. But others, we will be one of a number in cart.
Got it. Okay. And then just further in terms of the strategy for U. K. And Canada.
Little Things has clearly been the growth driver in Australia, up 47% in volume terms. Big Things volumes are up 6%. Which of those two products will be the key focus in the UK and Canada? Just based on which of them you think has the best chance of success?
Look, it's very much the sum of the parts, AP, in a differentiated offering. I mean, what is winning retailers is the fact that we can span the small and bigger ticket and again, removes the need for a retailer to have multiple players in part. And while the growth rate in our smaller transactions has absolutely been impressive, we need to recall that we've we launched that side of our business in April 2019, so it's quite new. The significant proportion of our volume overall is in those in that larger ticket.
Yes, sure. Okay. Just one final question for me, please. Just on the cards business, obviously being heavily COVID impacted. Can you talk to the timing of what a recovery looks like?
And can this business get back to pre COVID volume levels?
We absolutely believe that it can. We rebranded that product late last year into 90. So it now squarely fits into that ecosystem. We are successfully acquiring customers directly. And one of the great inbuilt features of that particular product is again its installment payment feature.
So any customer that comes on board that makes a transaction of over $200 they can decide to use what's called our 90 wrap feature and they can choose to pay that off over 3 months, 6 months, 9 months or 12 months in fixed term installments. And so it is very much tapping into this change in consumer preference for fixed term installment products. And we're really pleased with how that's trending.
I think also, Pete, just pointing out again the fact that ex refunds and travel related volume was only back 2.4% against system just over 9%. We were actually pretty pleased with that result because maintaining prudent credit quality is also important. So as we come out of the pandemic and as marketing of that product increases, as Beck mentioned, we're positive and the P and L obviously speaks for itself.
Awesome. Thanks guys. Appreciate your time.