Cyber attacks wipe $76m from Latitude results

Personal finance company Latitude Group (ASX: LFS) has reported a $98.2 million statutory loss after tax for the first half of 2023, with performance weighed down by a cyber incident in March that led to the theft of almost eight million driver's licence numbers alongside millions of other private documents.

The result compares to a $30 million net profit after tax (NPAT) for the same period in 2022.

The cyber incident has clocked up $76 million worth of pre-tax costs and provisions for Latitude, which compares to the $53 million in after-tax provisions and costs flagged in May, although the end result is in line with the group's guidance of a statutory loss of $95-105 million.

Latitude notes some of the $76 million may be mitigated through cooperation with the company's insurers on claims, while the company is also cooperating with regulators as they review Latitude’s information handling practices.

New account originations and collections were closed or severely restricted for around five weeks after the breach, and the consequences can now be seen in Latitude's operational results. Money division Australia-New Zealand volumes were "significantly impacted by the business system shut down during the cyber incident", down 19 per cent year-on-year at $637 million.

Volumes for Latitude's sales finance Australia-New Zealand business, which includes GO Mastercard and Gem Visa, were down 6 per cent year-on-year at $1.8 billion, but disruption from the cyber incident was just one contributing factor as well as inflationary and cost of living pressures on consumers and lower retail sales.

When comparing the difference in results year-on-year and taking into account reported costs and provisions relating to the cyber incident, Latitude's financial performance may well have swung into the red regardless. In today's announcement, Latitude managing director and CEO Bob Belan discussed the difficult economic environment more broadly.

He said the first six months of 2023 have been amongst the most challenging in Latitude’s history.

"That said, I am proud of the extraordinary resilience and response of my colleagues and pleased with the strength of the rebound we are now beginning to see," said Belan, who became managing director after the cyber incident in April, having previously led Latitude Money after the company he founded, Symple Loans, was acquired by the group in 2021. 

"Latitude’s half-year result what has been a persistently difficult macro environment for financial services businesses and of course, the operational disruptions caused by the March cyber attack on our company.

"We have and will continue to work diligently to continuously review and enhance the security of our systems and importantly, accelerate the delivery of our refreshed strategy focused on improving the experience for our customers and elevating the financial performance in our core Pay and Money divisions."

Latitude's 28° Global Platinum Mastercard has benefited from strong demand for international travel with volumes of $1 billion, up 29 per cent year-on-year, which is on track with pre-COVID full-year volumes of approximately $2 billion.

The business also signed new merchants in the first six months of 2023 including JB Hi-Fi (ASX: JBH) in Australia and New Zealand, and BSR Group, both in-store and online. A strategic partnership with David Jones is due to go live in early 2024, and the group highlights a strong pipeline of new merchants is in place.

Another highlight for the half was the sale of the Hallmark Insurance business to St Andrew’s as part of a strategy to simplify the business, releasing around $99 million in capital to bolster the company's balance sheet. Latitude did however note an $18.7 million discontinued operations loss from the sale of Hallmark.

Latitude has also reconfirmed its full-year cash NPAT guidance of $15-25 million for 2023.