Would now like to hand the conference over to Mr. Angelo DeMasi, CEO. Please go ahead.
Thank you very much, and good afternoon all. Thank you for joining us today as we release Humm Group's Full-Year Results for the FY 2025 financial year. I'm Angelo DeMasi, and I'm the Group Chief Executive Officer. Joining me today is Adrian Fisk, Humm Group' s Chief Financial Officer. On slide three, you'll see the agenda for the presentation this afternoon. Adrian and I will walk you through the slides included in the investor presentation. Turning to page five, where we've highlighted the key performance metrics for the group for FY 2025, we delivered a statutory profit after tax of $36.9 million for the period. Cash profit after tax of $52.9 million represents a refined measure of our performance. I'd point out that on the same basis as our previously reported and defined measure, our cash profit after tax was $55.1 million for the year.
Cash earnings per share was $0.102, and return on cash equity for the year was 10%. This was supported by the increase in our refined cash profit after tax result and capital management through the paydown of the perpetual notes through the period. Our continued commitment to cost reduction saw operating expenses down by 6%, driving our cost-to-income ratio to 51.7% for the period. Group-wide, our net credit loss to assets and receivables was stable against prior periods at 1.7%, with improved credit performance in consumer offset by increased losses in the commercial business, which I'll discuss in more detail later in the presentation. Finally, we've declared a final and fully franked dividend of $0.0075 per share, recognizing that H2 was weaker than H1 as a result of both increased commercial losses and elevated legal costs associated with an asset inquiry in respect of our Cards AU board.
This takes total dividends to $0.02 per share for FY 2025, which is consistent with FY 2024 and represents a 4.8% return to shareholders. We've also included a new measure of underlying cash flow for investors, which was $41.9 million for the period, consistent with FY 2025, which I'll talk to in more detail in a moment. Moving on to slide number six, you'll see in the top left graph, we show the growth in cash profit after tax over the last three years, representing the clear focus of the management team on profitable growth, credit discipline, and cost management across our core businesses over this period. The top right graph focuses on our cash generation capability, which along with our investment in transformation will be a strong focus of my leadership.
The underlying cash flow of the business is derived from the cash flow statement and represents cash from operations, net of CapEx. You will note that the cash flow generated was used to invest in higher CapEx this year of $21.3 million. This CapEx investment has been targeted across three major areas: our new regulated Humm loan product, the continued investment in our commercial business to maintain our leading position in the market, and the replatforming of our data and infrastructure. Across the bottom two graphs, you can see our stable credit performance and the output of our continued focus on our cost-to-income ratio as we move closer to our goal of sub-50% CTI. We'll now turn to slide seven, which shows the strength of our balance sheet and the extensive capital management activities we've executed throughout the year.
On the top left, you'll see the growth in assets under management over the period to a record $5.5 billion, up 9.6% on prior period. We saw consistent growth in our commercial and consumer portfolios, and as discussed on the previous slide, we've executed on this growth whilst maintaining a stable credit performance despite headwinds across the markets. We're increasingly focused on equity returns and capital allocation. On the top right graph, you will see the improving returns to shareholders over the past three years, measured both on a return on cash equity basis and on an earnings per share basis. We've also introduced an underlying cash flow per share metric, which is in line with my focused leadership on managing to cash. I want to emphasize that we remain committed to balancing the return to shareholders and the investment in our end-to-end technology and product platforms.
On the bottom left graph, you will see the continued strength in our unrestricted cash, which represents the cash available to the group for liquidity, working capital, and investment purposes. Importantly, unrestricted cash was able to be maintained at circa $125 million, alongside a full and final repayment of the $53.6 million above subordinated perpetual notes. Turning your attention to the bottom right graph, this further reinforces our commitment to effective capital management that delivers long-term shareholder returns. The repayment of the perpetual notes resets the balance sheet to lower cost facilities and releases approximately $7.7 million of savings in future periods. The board determined to pay a final dividend of $0.0075 per share, taking the final dividend for FY 2025 to $0.02 per share, which will be paid on October 7, 2025. I direct you now to slide eight, which shows our half-on-half performance through FY 2024 and FY 2025.
Whilst cash profit after tax was lower in the second half, we have had solid performance across our key metrics. Volumes, as presented in the top left graph, were largely stable over the two halves. However, we do expect softer volume across the group in the first half of FY 2026. We expect this softness to be primarily driven by lower volumes in our Humm AU business as we continue to refine the credit processes and the end-to-end technology platform underpinning the new Humm loan offering released in response to the new Buy-N ow-P ay-L ater regulations. While this has had a limited impact on the FY 2025 cash profit result, as of June 2025, the board has determined to impair $8.5 million of software capitalized in the earlier years of the Humm AU loan project in light of the reduced volumes we expect in FY 2026.
On the top right-hand side, net interest margin reduced slightly in the second half as the commercial business targeted growth in premium assets and as we saw growth in the lower yielding, better performing health and solar POS PP verticals. Finally, on the bottom right graph, our net loss to assets and receivables ratio has remained lower over the period, with an improvement in credit performance in our consumer book, offsetting heightened losses in the commercial portfolio. As we've highlighted with the market previously, losses in the commercial book have increased as anticipated and as the receivables book seasons. The time to recover secured asset lengthens and as a result of heightened arrears in the Victorian transport sector for assets originated in FY 2023. We expect these losses to remain elevated in the first half of FY 2026 before trending down through the balance of the financial year. Now to slide nine.
Our investment focus for FY 2025 has been on transforming our product platforms and modernizing our IT environment to enable growth in revenue, enhance user experience, increase platform resiliency, and efficiency. Through the increased CapEx investment in FY 2025, we've made good progress in executing against our transformation strategy. In Humm AU, we've implemented and continue to refine our product platform that underpins the new Humm loan offering, with a legacy Humm POS PP product now placed into runoff. We have turned our attention to the implementation of the new cards product platform and are mobilizing efforts to commence this project later this year. The implementation of our new modern data platform is underway, which will allow us to leverage our significant data resources and create value through our AI initiatives across the business.
We're well progressed in the modernization of our IT environment, having simplified our infrastructure by removing more than 1,000 servers, decommissioning physical data centers as we migrate to the cloud, lowering our costs over the medium term, and improving our security posture in the process. Moving to slide 10, our global expansion investment strategy delivered a positive return in FY 2025, supporting a balanced growth trajectory across key international markets as we look forward to FY 2026. Our Irish business delivered a profit of $11.2 million, with strong net interest margin and a positive return on cash equity of 29.7%. Pleasingly, our UK business broke even in the month of June following a careful strategy to follow our Ireland merchants into the UK in verticals we understand deeply.
We see a sizable growth opportunity across these markets, which offer access to a retail finance market in excess of $80 billion as we harness our digital platform, exceptional service offering, and existing merchant relationships as a competitive advantage. As communicated to the market in May, the operating model reset for our Canadian business was executed, with $4.4 million of costs removed from the business ahead of FY 2026. Management will continue to monitor our performance in this market. I'd now like to hand over to Adrian Fisk, the Humm Group Chief Financial Officer, to speak to our financial section. Over to you, Adrian.
Thanks, Angelo, and good afternoon. I'll be discussing the financial performance of Humm Group for the year end of 30 June 2025, and we're pleased with the cash profit result and the underlying performance drivers of the business in the FY 2025 year. Firstly, we've made a minor modification to the way the non-IFRS measure of cash profit is calculated. Our investors will remember that we removed normalized profit as the core metric back in FY 2024 and adopted a cash profit after tax. As a result, we do not normalize one-off items, but we do note that it includes both cash and non-cash items. Following our reporting at the half year, the board has refined the cash profit measure to reflect cash depreciation attached to rent. This refinement recognizes that WB16 includes rent in depreciation, and therefore, by deducting depreciation in full, we're excluding the rent from cash profit.
This change has had the effect of reducing cash profit by $2.2 million at the year end and $2.1 million in FY 2024. Cash profit for the full year on this refined measure was $52.9 million, up from $33.8 million in FY 2024. Under the prior measure, our cash profit for FY 2025 was $55.1 million. The cash profit result reflects the effort from the management team to transform the underlying performance of the business and to remove the cost of suspended products over the last three years. For the full year, our statutory profit is $39.6 million, and this includes $8.5 million of impairment of software in the Humm AU business. Traction on the Humm loan product, which was released in market in June, has been softer than expected as the product adapts to the new market regulations. We refined credit approval processes, and we implemented a new end-to-end technology platform.
This has had limited impact on the cash profit result for FY 2025, and management is evaluating the impact into FY 2026. Our growth metrics remain stable despite broad pressures on credit growth across the economies in which we operate, with assets under management of $5.5 billion at year end. This represents a 16.4% increase in CAGR over the last five years, driven by both consumer and commercial, while maintaining losses at a low level. Net operating income was up 6.2% to $330.5 million, reflecting top-line growth momentum. Portfolio NIM was 5.4% in FY 2025, down by just 10 basis points on FY 2024, reflecting disciplined pricing and funding strategy that is taking advantage of improved credit spreads across the market. It is important to note that the changes in fee and other income and cost of origination largely reflect the effects of the forward flow as we replaced NIM with fee income.
Net credit losses as a percentage of assets and receivables originated by the group remain at historical lows of 1.7%, reflecting our credit underwriting standards. Improvement in the underlying credit performance of consumer business in Australia follows deliberate and focused initiatives to tighten credit settings over 12 months ago. The improvement in credit performance in consumer was partly offset by anticipated increases in losses in commercial, which Angelo spoke to and I'll cover a little bit more in detail later. We're pleased to report that the operating expenses are down 5.7%, contributing to an improvement in our cost-to-income ratio, which reduced from 58.2% to 51.7%. This is very close to our interim target of 50% CTI and demonstrates the ongoing commitment to operational efficiency and cost control. Pleasingly, return on cash equity was 10.4%, highlighting the enhanced capital productivity and reflecting profitability on consumer and commercial segments.
Importantly, return on cash equity was supported by the full repayment. The group introduced a new reporting segment, corporate this year, which is a common practice across the industry, and it's designed to more accurately reflect the performance of our underlying businesses and the central corporate costs. Items include group payroll costs, professional fees, insurance, occupancy, and technology costs. As a result, the FY 2024 results have been reinstated to ensure comparability. Finally, I note that CapEx representing IT development and software expenditure was $21.3 million as we implemented our regulated hybrid product this year, which is slightly higher than our target of $20 million for the year. Turning now to a new slide, slide 13, supplementary information. While cash profit metric no longer normalizes one-off items, the board, given the NBIO, is determined to include additional detail for investors in these results to highlight specific items in FY 2025 and FY 2024.
This added transparency will ensure that investors are fully informed of the underlying performance of the business. Of note, through FY 2025 on the left-hand side, the group incurred additional $1.8 million in project costs associated with the acceleration of the Humm loan product in the lead-up to the 10 June deadline. We also incurred additional legal costs in response to the asset inquiry on our AU Cards portfolio, and this was partially offset by the reversal of the Forum Finance provision as new information became available. As advised at our Q3 2025 update, we've executed on the removal of costs from our Canada business as we reset the operating model with $4.4 million of cost reduction expected in FY 2026. Alongside this supplementary information, we've provided a view on underlying cash flow for FY 2025 and FY 2024.
This information is based upon the cash flow statement, which shows stable cash flows for the year. Growth in cash from operations has been used to invest in additional CapEx investment through FY 2025. On slide 14, our commercial business led by Brennan White, Brennan's Flexi Commercial and one of the leading equipment finance businesses in Australia, produced a cash profit result of $45.3 million for the year. Despite softer market conditions, the team is growing market share and diversifying into new geographies like regional Australia, Perth, and new products such as Flexi Premium and Agriculture. Our Flexi Premium product represents larger loan size, higher quality assets with expected lower credit losses. This is a result in a slight reduction in front book NIM, which is expected to improve credit losses over the life of the loans.
The growth metrics for commercial continue to be positive, with assets under management growing 12% and net operating income up 11%. The cost-to-income ratio of 24.4% delivers us operating leverage and allows the business to respond to the current economic environment and drive returns to shareholders. As previously communicated, the commercial business recorded higher losses in FY 2025 when compared to prior years. This was particularly the case in the second half. Despite the dollar increase, the net credit loss to assets and receivables ratios remain within our targeted range of 1%- 1.1%, which remains industry-leading losses for an equipment finance portfolio. The reasons for the year-on-year losses include growth in the receivable books of around $1.6 billion between FY 2022 and FY 2025 and the fact that losses take 12months- 18 months to flow through the book.
We've also seen an increase in time taken to recover secured assets post the market distortion in COVID. We're lending into areas such as the transport sector in Victoria, predominantly originated in the second half of 2022 and the first half of 2023, noting the controls were tightened in late 2023 to reduce loss exposure to these sectors. Our credit team expects these heightened losses to increase in the first half of next year and normalize for the remainder of the year. These credit losses have affected the overall performance of the second half, noting that 10 basis points of net credit loss to assets and receivables represents about $3 million in loss before tax. On slide 15, we look at consumer finance.
The consumer finance team of Jackie Emmer and PJ Bryan continue to transform the business, delivering a cash profit of $24.8 million from a profit of $8.6 million in the prior period. As you can see from the graph on the bottom right-hand side, we have a number of profitable businesses, including Cards New Zealand, Cards AU, Humm Ireland, and Humm AU, which in combination generated $35.2 million of cash profit. In addition, we have executed on targeted investments in the U. K. and Canada, which cost $10.4 million. Importantly, these targeted investments have improved from their run rate of the first half. The Cards New Zealand team delivered $15.7 million cash profit from our leading Q Card business, from an increase in volume and receivables and yield. We have growing volume above market trends from our strong brand, and our focus is on product mix and revolve rates.
The team did well to be flat on the prior period, given the rolloff of favorable hedging in the prior period, increasing the cost of funds by 20 basis points. The Australian consumer business has benefited from deliberate action taken 18 months ago to improve credit performance of the portfolio across both Humm AU and Cards AU. While traction on the Humm loan product offering was softer than expected, management will be focused on restoring Humm volume in FY 2026. The Humm Ireland business is delivering good growth and the financial performance as a leading point of sale business in the Irish market. The returns on this business are close to 30%. While Humm UK posted a small loss of $0.9 million for the year, it turned profitable in the month of June. We remain focused on the opportunity, unit economics, and competitive environment in the Canadian business.
As Angelo Demasi said, we've now consolidated the business under the leadership of the U.K. and the Irish team, which has delivered our $4.4 million run rate savings while concurrently improving merchant and credit profile. On slide 16, we've introduced our corporate segment, and we've included this page to add transparency around our central costs, such as audit fees, insurance, etc. I'll move then to slide 17, which is credit risk management. We're pleased to report that the annualized net credit loss to assets and receivables was 1.7%, which is a historical low for the group and an outcome of the deep experience and disciplined execution of our credit team led by Tim Moulton and the business. This ratio takes into account assets originated by the group and sold into the forward flow program.
In consumer, net credit loss to assets and receivables improved by 60 basis points to 2.7%, driven by a tightening of credit settings and continued improvement in collection processes. Cards N. Z. has increased loss rates by only 10 basis points, which is pleasing given the economic headwinds facing their economy. We've already covered the commercial net credit loss to assets and receivables ratio that has increased to 1%, and note that this is within the range of our expected loss rates for this group and reflects the secured nature and the diversification of this portfolio. You can see on the bottom right graph the improvement in credit quality in this portfolio since December 2022 using our internal grading system. As we've said, we expect losses in this book to peak over the first half of 2026 before normalizing through the balance of the year.
You can see that our balance sheet provision remains good at 2.6%, exceeding actual losses by 90 basis points. We note that we have provided 2% against our commercial business, well above the current loss rates. Finally, on slide 18, we have a mature funding platform that has enabled us to continue to grow. During the period, we've executed $4.7 billion in funding transactions, including term deals, private placements, refinances, and forward flow. This is including executing new funding lines in Ireland and the U.K. to support growth in this market, along with accessing additional mezzanine that was executed just last week. Our funding platform is a combination of warehouse structures, public and private transactions, and the forward flow program. We're very pleased with our returns to the commercial market with the commercial term deal in June of this year.
These programs are all supported by leading local and international banks, along with local and international debt investors. We continue to take advantage of favorable credit markets, which have delivered savings during the period. The bottom left-hand graph shows that over the period, the team focused on balancing cost-effective funding with capital efficiency targets. We saw us strategically manage our funding drawdowns to contain interest expense over the year. Under our forward flow program, we sold $682 million of assets in two tranches in October and June. The forward flow program has delivered the financial outcomes consistent with our expectations. The benefits of this facility include increased capacity for capital-like growth in commercial without the need to raise equity. It improves ROE as a facility grows fee income without the need for equity. It diversifies our funding platform to protect the business in the event of closure of term markets.
Finally, we see an opportunity to expand this program into other asset classes. I'd like to thank you for your time, and now I would like to hand back to Angelo to close our presentation.
Thank you, Adrian. To wrap up on slide 20, looking forward, we are focused on profitable growth and returns that build upon our strong credit performance, alongside further investment in our products and technology platforms to enhance customer, broker, and merchant experience. As a business, we're well capitalized and well diversified in terms of customers, merchant partners, products, geographies, and funding sources. Factors we see as an advantage in this economic environment. Our stable balance sheet and committed funding facilities provide comfortable capacity to focus on profitable growth. Credit quality will remain stable as receivables season. However, we do anticipate the continuation of heightened losses in the commercial business in H1 FY 2026 before we expect losses to normalize through the remainder of the year.
Cost management remains a top priority alongside strategic considered investment in our end-to-end technology platforms to deliver platform resilience and enhance user experience across our brokers, merchants, and customers. We see the group delivering consistent performance across key metrics with a focus on restoring volumes in our Humm AU business as we continue to refine our new regulated Humm loan product offering. We are pleased with the performance of the business in FY 2025, and management is clear on the FY 2026 agenda to work through the continued execution of our transformation strategy, the restoration of Humm loan volumes in Australia, and management through what we expect to be heightened losses for the H1 period of FY 2026 in our commercial business. I look forward to working with the board and the executive team to successfully lead this business into the next phase of growth and transformation.
Thank you, and I will now hand back to the moderator for Q&A.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speaker phone, please pick up the headset to ask your question. We have received some online questions. Your first question reads, "Can you tell me about the offshore investment and the progress you are making?
Thank you. I'll take this question to Angelo. I've actually just returned from a trip both to Ireland and the United Kingdom. What I'd share with the market is I was extremely impressed with the efforts on the ground under the leaders hip of PJ Bryan, who is now taking carriage also of the Canadian business following the operating model reset that we executed in FY 2025. As we've stated, the Irish business is performing extremely well with really good returns and a consistently low credit loss. I was struck by the sale of marketing efforts on the ground in Ireland and just our prominence, which translates into a market-leading position for the product that we put into the market. From a U. K. point of view, it's extremely pleasing to see that we've had our first month of break-even growth on a cash flow front.
I was struck in the United Kingdom by the size and potential of the market. I'm really pleased with the strategy that PJ and his team have executed on the ground there to follow many of our best merchants coming out of Ireland. Canada is the area where we have work to do as we turn the corner into FY 2026. Management feels confident that with the restructuring of the operating model and the reduction in the annualized run rate from a cost point of view that we've noted, we've also cleaned up the quality of the book, the credit quality of the book as we close the FY 2025 period. We feel that we have a clean run going into FY 2026 to refocus on growth in that part of our business. Thank you. Back to the moderator, please.
Thank you. Your next question reads, "Commercial equipment finance system growth has been slower. How is Flexi Commercial performing?
Thank you for the question. I'll take this again. We're really pleased with the volume in FY 2025 that we've been able to achieve in the commercial business. We note that our best market information tells us that overall the market seems to be down by about 5%. We note that we're flat on a year-on-year basis in terms of our volume growth. We've discussed and highlighted a number of times here that we are working through the heightened loss rates in the commercial business. We do expect that they will work through that in the first half of FY 2026 before they normalize to our expected rates in the back end of FY 2026. Overall, the commercial team has done a really good job in diversifying their product offering, diversifying across industries and across assets, and also diversifying from a geographic standpoint as well.
I might just invite Adrian Fisk to add any comments from a financial perspective on that.
Yeah, look, I think the team's doing a very good job. You can imagine in a lower growth environment, there's a bit of pressure on NIM. I think the team has been managing that very well. NIM is only down 10 basis points, which is a combination of, I think, good pricing efforts by the team being selective and taking a portfolio approach to their NIM alongside good cost reduction from a cost of funds perspective, treasury team. You know they're doing a good job on that front.
Thank you. We have a phone question from Phillip Chippindale from Ord Minnett . Please go ahead.
Hi, good afternoon, gents. Thanks for taking the time to take some questions. Thanks also for the extra disclosure. Firstly, just on the volume outlook for 2026, I think, Angelo, earlier you mentioned that you'd expect some softness in Humm AU at the start of FY 2026. What's the outlook look like from a volume perspective for the commercial business?
Yeah, Phil, Adrian here. We are expecting an increase in volume over the full year. I'd say the first couple of months of the year have been flatter than we would expect, just given the economic environment. Our anticipation is that the second half, by then, hopefully rates will have dropped. There'll be a lot more confidence in the economy, and we'll start to see a turnaround in that second half.
Okay, thanks. Just staying with the commercial segment, you've mentioned that losses should remain a little bit elevated in the near term before you expect an improvement in the second half. What's driving that confidence for the second half improvement?
The confidence really is driven by our understanding of where the arrears have come from, and we've been able to link them back to the FY 2023 vintage of loans. As we track those vintage of loans through a 12 months- 18 months arrears position, we often expect that the heightened loss period exists at around the 18-month mark. We're seeing that very thing now, which explains why in the back half of FY 2025, we started to see those losses wash through. When you follow that same vintage of loans, we expect it to be approximately the same as if we go through H1 of FY 2026. What we've also seen is that as you move beyond the FY 2023 vintage of loan, the arrears bucket start to drop notably. We've also seen a reduction in dishonors and late payments that follows that as well.
We feel that the leading indicators are starting to turn. I do just want to be clear this is something that we'll have to monitor on a daily, weekly, monthly basis. That's our best forecast as to how this is going to pan out over the next 3 months-6 months.
Okay, thanks. Just looking at the OpEx side of things, you know that the cost-to-income ratio continues to trend downwards in the year, it's 51.7% for the year, but it was 52.4% in the first half. It implies sort of around the 51% mark in the second half. You also mentioned you're obviously trying to get to below that 50% level. Is it sort of too early to say that you might be able to get to that level at some stage during FY 2026, or is that more likely to be a sort of 2027 or onwards phenomenon?
Yeah, look, it's a little bit early at the moment. That's certainly our focus. You know, the big effort, we have done a lot of work across procurement, sort of removing legacy products and systems. We've done a lot of good work in that space. The next phase of cost reduction relates to the technology implementation that we're making. We're anticipating to be able to get below that number, but I suspect it's probably later in next year as opposed to earlier.
Okay, thanks. Last one from me, just on the CapEx side of things, you spent over $21 million in 2025 on IC development. The year prior was around $15 million. The reason for the 2025 increase was that hybrid products. What does that 2026 number look like? Have you got a budget for us that you can sort of guide us to?
Yeah, we expect it to be the same or slightly higher than FY 2025 as we finalize the transformation program that you'll note in the investor pack. What I would say, though, is that the progress in that transformation journey has been quite pleasing. We feel like we're definitely on track. This is not a forever investment program. We expect that we'll have the majority of or all of the transformation program done by the end of calendar year 2027. We do expect that we'll have a continued level of investment in CapEx at or slightly above the number you see here today before it starts to recede in future years.
Okay, thanks, Phillip. That's all for me.
Thank you.
Thank you. Your next phone question comes from Larry Gandler from Shaw and Partners. Please go ahead.
Thanks, guys, for taking my questions. A lot of them were just asked, but I might continue with a couple more. Just with regards to the new disclosure on corporate costs, the size of that expense seems sizable given the size of the company. I'm just wondering if maybe you can elaborate on what's in there. Are there any one-offs? I know it's improved year over year, but perhaps there's an opportunity to reduce that further.
Yeah, I definitely think so, Larry. I mean, what's in that cost is quite a number of items, right? We've got the rental that we've talked about in terms of the item that we've put back into cash profit. We've got insurance costs across the business. We've got audit fees across the business. Those sort of items. Obviously, it has some of the central business units, whether it be finance or legal, etc. Look, we're continuing to drive efficiency across the entire business. This allows us to really focus on this and really get focused from a benchmarking perspective. I did some benchmarking before we did this work, and it didn't look too out of whack from comparable organizations. I'm not expecting significant moves on this front, but certainly this will enable us to focus on this area.
Okay. I'm always getting that significant. That's fine. With regards to switching topics back to commercial and the seasoning of the losses there, when you say normalize, are you talking getting back to under 1% or around 1%? What's sort of normal in your mind?
Yeah, Larry, for the three years that I've been here, we've always been focused on that 1% number. That's where we feel that the portfolio sort of lands around. It was, you know, obviously over the last couple of years, it's lifted, but that's really because we had that exceptional growth that was happening. We're effectively getting new loans which don't have losses on them. As the portfolio starts to mature, it should hit around that 1%. If the portfolio growth kicks up again, that's something that could cause it to go lower. Look, our focus is really around the 1% number.
I'd hasten to add, Larry, that even at 1% compared to market, we just think that's an exceptional number.
It is. Yeah, without a doubt. That's right. Okay, that's great. In the second half, in the June half, while on a full-year basis, as you mentioned, Adrian, the team did a good job to protect NIM with only a 10% reduction, there was quite a bit of volatility. It was 3.7% in the first half and then probably like 3.1% in the second half, which is a little bit scary. Does that second half NIM continue into F 2026, or does it bounce around a little bit?
Yeah, so we're expecting over the next year to have a pretty consistent NIM. It'll tighten a little bit just with some of the competitive pressures we're seeing in commercial. My anticipation is it'll be around there or thereabouts. We're not expecting, you're getting a bit of tightening of competitive pressures, but we're also seeing tightening of credit spreads as well across the market. We're hoping the combination of those items should be pretty flat. Let's see what the year has in store for us.
Okay. The last question from me, guys, is you're not going to be funding the perpetual notes in 2026. I know with Andrew, you're on the call here. What's your thinking around how you're going to deploy those funds, possibly dividends, share buybacks? What are you thinking there?
Yeah, look, we've set in a presentation that it sort of frees up about $7.7 million worth deployed. We basically released that $50 million worth of perpetual notes through activities such as the forward flow. I think what we'll do is wait for the new year, work with the board on what our capital management strategy is. We've obviously done a bit of significant capital management strategy through dividends, through purchases of relative shares, through buybacks over the years. In the next slip of the board, we'll work through what the next capital management strategy is. We're very pleased that we're able to achieve that and reduce high-cost debt through the payment of that perpetual loan.
Okay, very good. Thank you very much, gentlemen.
Thanks, Larry.
Thanks, Larry.
Thank you. We have received a few similar questions online and have grouped them together. Why were the results delayed, and why is the dividend small?
On the delay in results, what I would say is that this is the result of ongoing financial and audit processes. We appreciate that we're in an NBIO process in market at present. We felt it was really important that we had good deliberation on the results and that we provided an increased level of transparency to the market. I just encourage the market to understand that in doing that, that takes time. We've done our best to be as transparent as we can. We apologize for the lateness, but here we are and we're showing it to you in all of its glory. On the dividend, I might just cue you and Adrian to talk about the dividend compared to prior periods, please.
Yeah, we've declared the dividend of 0.75%. That takes the dividend for the year to $0.02 a share, which is consistent with where we were last year. The Board have determined to reduce that dividend on the result of lower performance in the second half versus the first half, which you can see in our profit results where we've shared the half-on-half comparison. It sits within our 30%- 40% free cash flow range that we discussed and that we've shared with the market framework.
Thank you. Your next question comes from Carl Paolucci. What is the status of the takeover proposal?
We don't have anything to add other than what we've announced to market thus far, which is that the independent board committee has been established. A due diligence process has been initiated, and we're awaiting or expecting a revised bid from the TAG Group at or around the middle part of September. We don't have any other information to add at this point. As you might imagine, management is completely focused on the operating of the business.
Thank you. Your next question comes from Jason Familton . Ireland ROCE of 29.7% is outstanding. How sustainable is this?
Look, you know we've been in that market now for quite some time. The business has really got to a dominant sort of market position, and it's performing very, very well. We've just put some additional mezzanine into that business, which will improve the ROE even further. We're quite optimistic about the Irish business. It's very well run, we're in a good position, and we're very pleased with it. Yeah.
Thank you. That concludes our question- and- answer session. I'll now hand back to Mr. DeMasi for closing remarks.
Thank you very much. Thank you to everybody who's joined. I want to thank the full employee base of the Humm Group for a tremendous effort throughout FY 2025. I'm pleased to say that we're very clear on our agenda of work for FY 2026, as I've already mentioned. I will just restate that I'm personally looking forward to working with the Board and the executive team to successfully lead this business into the next phase of growth and transformation. On that note, we'll close the call. I'll say thank you to all involved and wish everybody a good afternoon.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.