humm Group Limited
A letter to the Independent Board Committee on the Chairman's offer to acquire the Company
4 July 2025
Andrew Darbyshire, Teresa Fleming, and Robert Hines
Independent Board Committee
humm Group Limited
Level 1, 121 Harring Street
The Rocks NSW 2000
Dear Members of the Independent Board Committee,
Reject Offer from TAG and Conduct Formal Sales Process
I hold 310,000 shares of humm Group Limited (“the Company”). I am writing to express my opposition to the non-binding indicative offer from the Chairman, Andrew Abercrombie, acting via his entity The Abercrombie Group Pty Ltd (“TAG”), to acquire all the ordinary shares of the Company which it does not already own for $0.58 per share (“Offer”). The Offer is grossly inadequate, highly opportunistic, and must be rejected.
The Offer is grossly inadequate
The Offer of $0.58 per share is grossly inadequate and does not reflect the intrinsic value of the Company. The Offer implies a low multiple of earnings and a significant discount to book value – multiples significantly below comparable businesses and industry transactions. The inadequacy of the Offer is not a matter of opinion; it is a matter of the Chairman’s own public record. In May 2022, the Chairman himself led the campaign to block Latitude’s offer of $0.68 per share for a mere portion of the Company – the consumer finance division. He is now brazenly asking shareholders to accept $0.10 per share less for the entire Company. Relevantly, when the Chairman rejected Latitude’s offer, the Company’s earnings were lower and declining. Today revenue is significantly higher and earnings are higher are growing rapidly. The IBC cannot seriously expect shareholders to approve an offer that is significantly less than the bidder himself previously rejected.
The Offer price is also significantly below the price a member of the Independent Board Committee (“IBC”), Mr Hines, was prepared to pay to purchase shares on-market as recently as November 2024 (when he purchased 74,000 shares for greater than $0.67 per share). With the business having only improved since that time, we cannot imagine that any endorsement of the Offer is forthcoming from Mr Hines.
The Offer is highly opportunistic
The Offer is highly opportunistic and was made at a time when the Company’s share price was near all-time lows. We believe that at that time the Company’s share price did not reflect intrinsic value but rather was a function of investor fatigue and selling by substantial shareholder Tanarra Capital. That the Company’s share price was near all-time lows could also be in part due to a perceived governance overhang of the Chairman’s blocking stake and his history of opposing offers to acquire part of the business. That he now seeks to take advantage of the Company’s depressed share price invites scrutiny as to whether the Offer is truly in the best interests of all shareholders.
The timing of the Offer is particularly concerning as it comes just as the Company’s business is at a positive inflection point, evident by the fact that:
earnings are growing significantly, with cash profits (after tax) up 119% in 1H25;
costs are down, with the cost-to-income ratio improving 18% in 1H25;
management has guided to significant further cost savings totalling $16m which are not yet reflected in reported financials including:
$6.5m in annual cash flow savings from repayment of the perpetual notes;
$4m in annual savings from cost reductions at humm Canada (with management stating that this product – currently losing $11.6m per year – is being closely monitored suggesting it could be wound up);
$2m in annual savings from humm UK reaching breakeven from June 2025; and
$3.5 million of one-off costs in 1H25 (new share plan and redundancy costs) which will not be repeated in future periods;
the Company is poised to benefit from recent interest rate cuts, a tailwind not yet reflected in financial results; and
credit performance has been stable and significantly below provision coverage.
The further cost savings alone would increase the Company’s cash profits approximately 25% and capitalised at a modest 5x equate to $0.15 per share of value.
The Offer also comes at a time when the Company is in rude financial health. We estimate that the Company has approximately $95m in unrestricted cash (adjusting the 1H25 cash position for repayment of perpetual notes and cash generated in 3Q25), $62.3m of corporate debt, and $27m in franking credits available for distribution to shareholders. This pristine balance sheet position – $33m in net cash and $27m in franking credits – is a considerable asset of the Company and presents the IBC with significant capital allocation optionality. The value of the Company’s net cash and franking credit balance alone is worth approximately $0.113 per share. By accepting the Offer, shareholders would lose the benefit of the Company’s franking credits and the Chairman would immediately benefit from the Company’s net cash position.
The Offer is a clear indication that the Chairman is confident that the Company has a bright future. He is attempting to acquire the business near all-time lows just as it is in the early stages of a meaningful improvement. To accept the Offer now would be to surrender all right to participate in the upside that would be captured by the Chairman alone.
Conduct a formal sales process
The relationship between the bidder and the Company requires that you as members of the IBC apply strict scrutiny to the Offer. The bidder is the founder, Chairman, substantial shareholder, and now hostile bidder. He is an insider with considerable influence and knowledge of the business and its future prospects. As such, there is a heightened risk that the Offer is not in the best interests of all shareholders. The only credible path forward is for the IBC to reject the Offer and immediately initiate a full, transparent, and competitive sales process to maximise value for all shareholders. This is not merely corporate governance best practice – it is the only way to ensure any transaction is demonstrably fair and not entered into to favour the Chairman at the expense of minority shareholders. TAG, of course, should be invited to participate in that process on equal footing.
The IBC should also consider strategic alternatives, such as rejecting the Offer and returning capital to shareholders via dividends and/or share buybacks. With shares trading at a significant discount to intrinsic value, share buybacks would be highly value accretive to continuing shareholders. The Chairman could hardly object to such a course given that he clearly sees value in the shares at $0.58.
Conclusion
In conclusion, I call on the IBC to reject the Offer and conduct a formal sales process. The Offer is highly opportunistic and does not reflect the Company’s intrinsic value, which is rapidly growing as the business positively inflects. I sincerely hope that the IBC will act in the best interests of all shareholders and not merely represent the narrow interests of the Chairman rather than the shareholders to which you owe legal obligations.
Yours sincerely,
Disclosure and disclaimer
The author, and entities controlled by the author, holds shares in the company referred to in this post. The contents of this post is not, and is not intended to be, financial product advice or personal financial advice. This post is not a recommendation to buy, hold or sell securities in the company referred to in this post or any other company. Nothing in this post is an endorsement by the author of the company or any securities of the company (including, without limitation, shares (or options or warrants to acquire shares) in, or bonds issued by, the company) referred to in this post. In preparing the contents of this post, the author has not taken into account your investment objectives, financial situation or needs. You should obtain independent licensed financial advice before making any investment decisions. The author does not guarantee that the contents of this post is accurate, complete or up-to-date. The author will not be responsible or liable, directly or indirectly, in any way for any loss or damage of any kind incurred as a result of, or in connection with, your use of, or reliance on, any of the contents of this post.