Latitude posts $158.5m loss for "most challenging year"

Personal finance group Latitude Group (ASX: LFS) has reported a $158.5 million net loss for 2023, citing last year’s malicious cyber-attack and rising interest rates as to why the group's performance was weighed down.

In a trading update released this morning, Latitude says the hack impeded volume and receivables growth, delayed pricing actions, elevated charge-off rates and led to incurred costs of $68.3 million.

The group reported its profit before one-off items and costs dropped 88 per cent to $18.4 million, which was in line with guidance. Total operating income was down eight per cent to $657.6 million.

Latitude managing director and CEO Bob Belan said that 2023 was undoubtedly the most challenging year in Latitude’s history.

“Macro conditions led to lower consumer lending demand and higher funding costs, and inflationary pressures have impacted our ability to deliver profit growth for our shareholders,” Belan said.

“Our financial performance was further impacted by the criminal cyber-attack on Latitude in March which disrupted core operations, halted new lending and debt collection and delayed management actions to offset margin compression.”

The financial update follows a data breach in March 2023 which led to the theft of around 8 million Australian and New Zealand drivers licence numbers, 53,000 passport numbers, less than 100 financial statements and 6.1 million records containing personal information like names, addresses, telephone numbers and dates of birth.

Latitude also noted that the cyber attack, combined with the impacts of interest rate rises since 2022 in Australia and New Zealand, had a “materially negative impact” on earnings.

Volumes for Latitude's sales finance Australia-New Zealand business, which includes GO Mastercard and Gem Visa, were down 4 per cent year-on-year at $7.6 billion, but the group noted it was rebounding through to December 23 despite a challenging retail sales environment.  

Latitude's 28° Global Platinum Mastercard has benefited from strong demand for international travel with volumes of $2.1 billion, up 17 per cent year-on-year and exceeding pre-COVID levels.

The company also signed on Fantastic Furniture, Betta and David Jones as new partners, with the last to launch a private label credit card next month. Major retailers Amart, JB Hi-Fi (ASX: JBH) and Noel Leeming also re-signed as partners.

Looking ahead, the Melbourne-based group said interest rates appeared to have peaked and it expects repayment rates to continue to reduce in line with household savings.

“Interest rate increases appear to have peaked, with potential cuts to the cash rate forecast in the next 12 months, while continued low unemployment supports a positive turnaround in credit demand, helping to offset softer retail conditions,” the company said in an update to shareholders.

“Latitude expects repayment rates to continue to reduce in line with household savings, ensuring the positive volume momentum in 2H23 is reflected in future receivables.

“These lower repayment rates are expected to result in the normalisation of loss outcomes in line with long-term averages.”

Latitude did not declare any dividends for shareholders.