Harmony Gold Mining Co Ltd Q2 FY2026 Earnings Call

Good morning, and welcome to Harmoney Corp Limited First Half '26 Investor Presentation with David Stevens, the CEO and Managing Director, and CFO, Simon Ward presenting this morning. Many thanks for your attendance. As just a bit of housekeeping, David and Simon will do their presentation and would direct any questions to be taken to the Q&A box down the bottom of your screen, and management will happily field those questions at the conclusion of the presentation. So David, over to you, and many thanks for everyone attending.

Thanks, Michael. Hello, and welcome to Harmoney's Half year 2026 Results Presentation. I'm David Stevens, the CEO and Managing Director of Harmoney. With me today is Simon Ward, our CFO. Harmoney has produced a very strong profit result this half year, surpassing our full year profit result from last year in just 6 months. This result has been underpinned by the work we have done developing and launching Stellare 2.0 over the past 24 months. This has set us up to capitalize on the huge market opportunity we have in front of us. We are also upgrading our FY '26 cash NPAT guidance to record levels. Now turning to Slide 2. Today, I'll begin with our first half '26 key highlights, then our upgraded FY '26 profit guidance. And then I'll remind you of Harmoney's key differentiators before handing you over to Simon, who will talk you through the financial results in more detail. Finally, I'll discuss our outlook and strategic priorities before responding to your questions. Now turning to Slide 3, and then on to Slide 4. This half year, we've achieved a $6.1 million statutory net profit after tax, a massive 202% growth on the same half last year. Remarkably, the 6-month result has already surpassed our total statutory NPAT for the entire 2025 financial year. This was driven by our underlying cash NPAT, which also reached $6.1 million with non-cash adjustments netting to 0 for the half. Cash NPAT also exceeded our full year FY '25 result of $5.7 million, driven by strong loan book growth and continuing efficiency gains. This profit result delivered a 31% return on equity, a significant leap from the 13% achieved in the same half last year. Our loan book growth remains robust, up 9% overall. This was led by a standout 17% growth in our Australian loan book. In New Zealand, the book has also returned to growth, up 5% in local currency, with New Zealand originations surging 49% following the successful deployment of Stellare 2.0 in June 2025. Our net interest margin or NIM continues to be a core strength. Sustained new lending NIM of over 10% has driven our total portfolio NIM to 10.3%, an increase of 130 basis points on the same half last year. On the credit front, performance remained stable with credit losses of 3.9%, while our 90-plus day arrears improved to 58 basis points, down from 64 basis points, reflecting the high quality of our loan portfolio. Our commitment to automation continues to drive efficiency maintaining a 19% cost-to-income ratio as a loan book scales. Finally, Harmoney remains exceptionally well positioned for future growth. In December 2025, we successfully refinanced our corporate debt with one of the Australian Big-4 banks. A facility of this nature from a Big-4 bank is rare in the non-banking finance industry, so it's yet another endorsement of the strength of our business. In addition, we maintained warehouse facilities with 3 of the Big-4 banks with a total capacity of approximately $1 billion, and even after making a $7.5 million corporate debt repayment, we closed the half with $24 million in unrestricted cash. Now turning to Slide 5, then on to Slide 6. Our outstanding performance in the first half of financial year '26 has provided the confidence to further lift our guidance. We're upgrading our financial year '26 cash NPAT guidance by $1 million, an 8% increase over our previous guidance to $13 million. As you can see from the chart, this guidance represents a 128% increase on last year's record result and a phenomenal compound annual growth rate of 331% since financial year '24. This growth trajectory is driven by the continued impact of Stellare 2.0, which we expect to propel our year-end loan book to over $900 million at a net interest margin of around 10% and a risk-adjusted income of around 6%. Risk-adjusted income is our income after funding costs and actual credit losses and one of our core efficiency metrics. This upgrade is a clear reflection of the scalability of our platform and our team's ability to execute. We ended the second half of the year with strong momentum and a clear path to delivering these record results. Now turning to Slide 8. I'd like to take a moment here to provide a quick recap of what sets Harmoney apart from others. We are Australia and New Zealand's largest 100% online consumer direct lender. We have a total market opportunity of $150 billion with our current market share less than 1%, so we have a huge total addressable market in front of us. Our algorithms partner with Google to attract prime, high-intent customers at low cost, and then our direct relationship with those customers and great customer experience sees them returning again and again for their next borrowing needs at near zero acquisition cost. We use deep first-party data and AI models to deliver a prime loan book at a 6.4% risk-adjusted income. Remember, that's our income after both funding costs and credit losses. We're funded by 3 of the Big-4 Australian banks, plus public securitizations. Our Stellare automation drives a low cost-to-income ratio of 19%. And our return on equity for the half was 31%, which is exceptional in any business, especially financial services. Just a quick reminder of our products on the right-hand side of the page. Our loans are up to $100,000 with an average new loan size of $18,000, which is disbursed to customers within minutes. We offer personalized rates on borrowers' risk profiles. We don't charge any fees other than a one-off establishment fee, and all our loans are fully compliant with applicable consumer legislation. Our loans are typically used for renovations, debt consolidation, and helping people with life events such as travel, education, and weddings. Now turning to Slide 9. Now I want to spend a moment on what I believe are a couple of the most important slides in this presentation, our customer flywheel. When Harmoney acquires a customer, we're not thinking about a single transaction. We're thinking about an ongoing relationship that builds over time as customers' financing needs come and go. The data here tells a powerful story. Our history shows us that on average, our customers borrow an additional 150% after their initial loan. So if someone takes out $18,000 initially, they subsequently come back for another $27,000 over their lifetime with us so far. Here's the economics that matter. That first loan to the customer cost us around 5.6% in customer acquisition cost or CAC, so about $1,000 on an $18,000 loan. Each time that customer returns, the cost of acquisition is near 0 due to our existing direct relationship with them. This is pure margin expansion. And they don't take long to start to come back. The average time between a customer's first and second loan is 15 months. This isn't a theoretical long-term play. This flywheel spins fast. We're not in the business of one-time transactions. We're building a compounding profit engine where every customer we acquire today becomes increasingly more valuable tomorrow and over time. Now turning to Slide 10. I'll walk you through each component of the Harmoney flywheel. This slide shows the 4 interconnected stages of the Harmoney value flywheel, all powered by our Stellare platform. I'll now talk you through each stage, describing exactly how this creates compounding economics for Harmoney, Stage 1: Customer Acquisition. We start with smart targeted acquisition. Our algorithms work alongside Google's to identify prime customers who are actively looking for credit. People with strong credit histories and genuine intent. We're using 10 years of proprietary data to find exactly the right customers, and that position is hard to replicate. Next, Stage 2: Deliver Experience. We next focus on delivering an experience that makes our customers want to come back, minutes to apply, instant decision, and money in minutes, generating a 4.8 out of 5-star rating with over 60,000 reviews. This isn't just good service. This is creating customer delight at scale through automation. Every interaction builds trust and increases the likelihood they will return. Then Stage 3: Customers Returning. This is where the magic happens because we already have a direct relationship with our customers, subsequent lending CAC is near zero. And so far, on average, customers come back for a further 150% of their first loan value over time. Because we have already covered our acquisition costs, the net income on every dollar of additional lending is nearly pure margin. Then finally, Stage 4: Data Intelligence. This stage is what makes Harmoney's flywheel truly defensible. With every loan, we generate more first-party data, which makes our AI and decision models better. Better models mean better decisions, lower losses, and the ability to approve customers safely. It's a virtuous cycle that is hard for competitors to replicate. This isn't theory; these are actual results, and the beauty is the flywheel is accelerating Stellare 2.0. Now I'll hand over to Simon to present the financial results in detail.

Thanks, David, and hello, everybody. Please turn to Slide 12, summarizing our key financial metrics for the half year ending 31 December 2025. As David has mentioned, this half, Harmoney has delivered exceptionally strong growth in both our statutory and underlying cash net profit after tax, both surpassing last year's full year result. This success has been driven by strong gains across almost every key metric. I'll briefly touch on each of these now before going into more detail on the following slides. Firstly, our loan book continued its strong growth trajectory, up 9% on the same half last year to $857 million. That growth, combined with the higher portfolio interest yield, drove a 12% lift in revenue to $71.9 million. Our net interest margin, or NIM, improved by 130 basis points to 10.3% from both the higher portfolio interest yield and lower funding costs. Our risk-adjusted income, which is our margin after both funding costs and credit losses, improved by 110 basis points to 6.4%, driven by the higher NIM. Our acquisition to originations ratio improved to 3.1%, and the Stellare team delivered higher new customer conversion rates across both countries, and Harmoney's customer flywheel, where existing customers return for future borrowing and near 0 acquisition costs, begins to include those increased new customers. Our cost-to-income ratio was up slightly on the same half last year, but it remains a market-leading 18.5% and is an improvement on the full year FY '25 ratio of 18.9%. This exceptionally strong cost-to-income ratio is a direct result of the operating leverage achieved from our highly automated Stellare 2.0 platform. These improvements across key metrics have delivered our statutory NPAT of $6.1 million, up 202%, with non-cash adjustments netting to 0. Our cash NPAT was also $6.1 million, up 166%. Our capital-efficient balance sheet means that the strong profit result translates to an annualized return on equity for shareholders of 31%. On the next few slides, I'll discuss each of these performance metrics in more detail. So now turning to Slide 13, looking at our loan book and revenue. With Stellare 2.0 operating in both countries, it's driving a reacceleration of the loan book. The group loan book is up 9% on the same half last year to $857 million, and that headline growth is suppressed by the current New Zealand dollar weakness against the Australian dollar, down at its lowest level in 13 years. By way of comparison, if the exchange rate had remained at the 30 June '25 level, the group loan book will be $882 million, nearly $30 million higher. While the weaker New Zealand dollar suppresses the headline group loan book, it does not have a material impact on our profitability due to structural hedging within the business. In local currency, the New Zealand loan book was up 5% on the same half last year, an expected but nevertheless, pleasing turnaround after contracting during FY '25. Stellare 2.0 led the turnaround with a 49% increase in originations compared to the same half last year. The Australian loan book growth remained strong, up 17% on the same half last year. The Australian loan book is now 61% of the group loan portfolio. Looking at the chart on the right, accelerating loan book growth, together with an increased average portfolio rate has increased revenue growth, up 12% on the same half last year to $71.9 million. Now turning to Slide 14, looking at our lending margins. A key feature of the Harmoney business is the consistent strength of our lending margins, underpinned by our proprietary credit assessment models, which drive attractive pricing to prime borrowers in turn driving low credit losses, with those low credit losses then unlocking competitive funding rates. Looking at the chart on the top right, you can see the 3 core levers of our lending margin. The top line shows our average portfolio interest rate has continued to climb, now at 17.2% as we originate new loans at higher yields and older lower-yielding loans are paid down. The middle line shows our funding rate, the rate at which we borrow, which has reduced to 7%. Then the third line is our actual credit losses, which are up slightly but remained low at 3.9%. Looking at the chart on the bottom right, you can see the combined outcome of these underlying trends. The combination of higher lending rates and low funding costs lifted our net interest margin by 130 basis points to 10.3%. Then the ultimate measure of our portfolio's profitability is risk-adjusted margin, the income after both funding costs and credit losses. This is the key comparator between lending portfolios. In this half, Harmoney has reached an exceptional 6.4%. Next, turning to Slide 15. I'll provide more detail on our credit performance. Harmoney's consumer direct model provides rich, deep consumer data. We use this data to train our AI credit models, and this has enabled us to build a prime loan book of resilient borrowers, with 70% employed in either professional office or trade roles and 89% aged 30 years or older. Further demographic detail on the loan book is provided in the appendix to this presentation. Looking at the chart on the top right, you can see that while credit losses ticked up slightly this half, they remained largely consistent and stable with a downward trend over the past 2 years. The small uptick this half is expected to flatten or reduce over the remainder of the year. Moving to the chart on the bottom right, our 90-plus day arrears, which are a forward-looking indicator, remained very low at 0.58% and less than half the Australian market average. Next, turning to Slide 16, looking at our operating expenses. A key feature of Harmoney's business model has always been our Stellare platform and the high levels of automation that it provides, enabling us to scale our loan book without proportionately scaling operating costs. As the chart on the right shows, while our loan book grew by 9%, our cost-to-income ratio continued its long-term downward trend, down from 18.9% last year to 18.5% this half. Harmoney's combination of loan book growth, strong risk-adjusted margins, and scalable cost base underpins another record result, with this half statutory and cash NPAT of $6.1 million, surpassing the profit for all of last year, which was itself a record, and delivering a return on equity for shareholders of 31%. Next, turning to Slide 17, looking at our capital position. Harmoney has a well-diversified funding program with warehouses from 3 of the Big-4 Australian banks plus the securitization program and now an Australian Big-4 bank corporate debt facility. As is typical with warehouse funding arrangements, Harmoney's own money is also invested in its loan book. The strong credit quality of Harmoney's loan book means that we can be very capital-efficient with borrowings funding 96% of the current loan book and Harmoney providing the rest. The chart on the left shows, in the red section, Harmoney's required cash contribution of $34 million for its current loan book of $857 million. On top of this, Harmoney has an additional $5 million, which it is entitled to draw cash from funders at any point, plus $24 million of unrestricted cash on hand. These together add to $29 million of cash, which can support growing the loan book by over 75% to $1.5 billion today, without needing to raise any equity. In addition to already being able to support a loan book of up to $1.5 billion today, being profitable means Harmoney can reinvest its profits for its contribution in book growth beyond that $1.5 billion. With every $1 million of profits funding an extra $25 million of loan book growth. Finally, as a reminder, Harmoney's share buyback announced last May of up to 5% of share capital remains in place through to the end of April. So in summary, we have a profitable, scalable, and self-funding business model that is well capitalized for the significant growth ahead. And with that, turning back to Slide 18. I'll hand you back to David to take you through our outlook.

Thanks, Simon. Now let's move on to our outlook as outlined on Slide 19. We're focused on intentionally speeding up each part of our growth strategy over the next 18 months. I've already covered our past achievements, so let's focus on future plans. These initiatives are purposefully designed to enhance our growth engine. First, in customer acquisition, we are broadening our reach effectively. Our Stellare 2.0 platform has shown success, with a 27% increase in originations compared to the same period last year. We are leveraging advanced AI to approve a larger number of customers without sacrificing credit quality. We are also exploring partnerships in embedded finance with auto marketplaces, which could lead to new customer acquisition opportunities. Next, in delivering experience, we are working to enhance the value we obtain from each customer using our auto lending products. This effort goes beyond adding more products; we aim to be the go-to lending partner for significant life events. We want our customers to think of Harmoney first when they need a car loan, and early results show promise with our vehicle loan book having increased by 18% since this time last year. In terms of customer returns, we are speeding up how quickly customers return by developing a mobile app that allows one-click loan access and introducing revolving credit to ease access to additional funds. We've successfully reduced our overall customer acquisition cost to 3.1%, with further potential for improvement. Lastly, regarding data intelligence, we are investing in state-of-the-art AI for personalized services on a large scale. This strategy is akin to giving each customer their own personal banker—automated, smart, and continuously improving with each interaction. Our unique first-party data provides us a strong competitive edge that is hard to duplicate. The critical takeaway is that these efforts are interrelated. Enhanced AI enables us to serve more customers; multi-product engagements lead to higher customer lifetime value and reduced churn; quicker return cycles improve our overall economics; it’s all interconnected, and we are making substantial strides in each area. Now on to Slide 20. What does simultaneously accelerating every part of the growth engine mean? More customers, increased lifetime value per customer, and expedited loan turnover result in exceptional profit growth. This effectively supports our upgraded forecast for financial year '26, which includes a loan book exceeding $900 million attributed to Stellare 2.0, $13 million in cash NPAT, and a return on equity of 31%, reflecting the synergy of margin expansion and capital efficiency. However, I encourage you to look beyond financial year '26. We've seen over 300% growth in cash profits over the past three years. With Stellare 2.0 accelerating our growth and our auto products scaling effectively, we foresee sustained strong profit growth while continuing to uphold credit quality and leveraging reinvested profits for growth. So, when I speak of accelerating our growth engine, I mean pushing our business to achieve even higher profit levels in the coming years. The foundation is solid, our technology is validated, the unit economics are attractive, and we are executing effectively. That wraps up today's presentation, and we will now move on to your questions.

Thank you, David.

Are you going to ask the question, Mike?

Yes. The first question comes from James. Congratulations on another impressive result. Is expanding into new regions or countries on the agenda, or does the current business have enough potential to sustain the current growth rate? If you could discuss that, it would be helpful.

Yes, currently there are no short- to medium-term plans to expand beyond Australia and New Zealand. However, we are actively exploring various product adjacencies and channels at different stages. We have built a highly scalable platform, allowing us to develop new products through that channel. As we grow, achieving high percentage growth becomes more challenging, but we are confident in our ability to deliver strong results. As I mentioned earlier, we have a solid model, a great team, and a significant total addressable market ahead of us, which is very exciting.

Right. The next question is, you mentioned the accelerated flywheel. Can you please provide an update on how the development of the mobile app is going?

We have a pilot version ready, but it's not yet available on the App Store. However, it is scheduled to launch in the fourth quarter, specifically between April and June this year.

Another question about geographies is whether the Stellare platform can be transferred to other countries or if there is sufficient opportunity in Australia and New Zealand.

Yes, it is transferable, but there is no intention to do that. We are not planning on selling software off; that's just for our use.

Right. Another question, touch on your product development. We've obviously covered that, David. I think maybe the next part of the question is in relation to partnerships with other financial institutions.

Yes. Yes. Look, we're working through some options there. But look, I don't have anything to update the market at this point; too early stage.

Well, another question talking about sort of segmentation and products. Is there any other areas you see ripe for disruption or extreme growth versus what's actually existing or incumbent?

The auto market is very large in both Australia and New Zealand. Last year, we introduced a new product that differs from what traditional financiers typically provide. It allows customers to act as cash buyers instead of relying on preapprovals or seeking finance through car dealerships. Our product also caters to private buyers, enabling them to purchase cars directly without going through a dealer, as they already have the funds available. We have already seen an 18% growth in this area, but it's still in the early stages, and we expect to share more developments in the coming months. Additionally, we are working on enhancing our revolving credit offerings, which we see as a significant opportunity as we currently do not operate in that space. We aim to make our products more appealing to customers and establish a stronger presence in their decision-making processes when they require substantial funds for life events or home renovations. Our goal is to stay top of mind for those considerations, and we are putting in considerable effort to achieve this. Financial services have existed for centuries, but they constantly evolve, and we believe we are making meaningful progress, supported by our technology, which positions us at the forefront of these changes.

Our next question is, what is the outlook for funding costs given the recent cash rate changes and the outlook here in Australia?

Yes, there have been minor adjustments to the underlying rate, but to be honest, they don’t significantly affect us. We aren't in a mortgage business or a low-margin sector where every 25 basis points would drastically change our financial reporting. We also have the ability to modify our rates daily if necessary. A shift of 25 or 50 basis points doesn't worry me at all. It's not a major concern. We manage these changes and, most importantly, we aim for a 10% net interest margin and a 6% risk-adjusted income margin. If we are around those targets, we are satisfied and will adapt to whatever the rates do. We've demonstrated this adaptability over the past five years since going public, so it isn’t something that is too troubling to us.

I have a question regarding risk-adjusted margins. The company achieved an impressive 6.4%. Does your guidance of 6% suggest we are reverting back to that number? What gives you confidence in a higher net interest margin, and is it entirely related to product mix?

Yes. Look, yes, we've targeted the 10% and 6% for a while. So I don't guide to specific basis points. So I think you can take the view that if you model our business, if you stick to that 10% and 6%, certainly on the current product mix, that's where we target. So it's been very transparent. Obviously, as we bring on other new products, and the like, auto is a lower NIM, that's also lower losses. So that might bring that down a little bit over time, but we're not sort of building that into this year in any way. But for us, because we have got such a scalable platform, even if we add a lower-margin product on top, it's incremental. We're not adding cost to the business to do it. So why wouldn't you write it? If you've got the funding for it, if you've got the capital for it, you write the business every day of the week. It's good credit performance. You drive the business every day of the week. So that's the beauty of the business. We're not having to add cost to it to bring on new products. So that might, over time, change a little bit at a group level. But certainly at a product level, they're the margins that we have achieved for years and we target.

Our next question is, congratulations on a strong result and the excellent refinancing that the company recently did. Understand actual losses of below ECL provisioning rates. Could you please give some info as to why the company has sort of looked to drop the ECL provisioning rates to 4.3% from 4.5%.

Sure. I'll get Simon to that one, so I'll flick over to him.

Yes, it's really driven by the relative performance of the underlying loans in the book. Back then, I think the 4.5% was actually from this time last year. So over that period of time, especially with Stellare 2.0 coming in, the underlying performance of the loans on the book is better, and we obviously look at forward-looking economic indicators and what we think the impact will be on the current book. So those two things combined is really what's driven it down.

Thanks, Simon. Back to David. Next question is how much funding headroom do you currently have as an example, obviously, not looking at equity capital, but can you grow to $1 billion book without further securitization deals?

Yes, we currently have nearly $1 billion available in warehouse funding. We can increase our warehouse funding at any time, though we need to manage it carefully to avoid excessive unused line fees. Currently, our books stand at $857 million, which gives us about $1 billion in capacity. If our growth reaches $150 million, we can easily secure another $100 million. We routinely increase warehouse funding and utilize public securitization markets to manage and clear existing warehouses, significantly freeing up capacity. I'm not concerned about this area; we have strong funders in place, including the three major banks, which provides good diversification. We have plenty of capacity and supportive funders, and as we introduce new products, they continue to support those initiatives. Overall, this segment of the business is very well managed.

Next question is around the macro environment within New Zealand; do you see any green shoots in the New Zealand macroeconomic environment?

I live in Australia and New Zealand, so I have a clear view of both markets. In Australia, the media often portrays a more negative picture than the actual situation. New Zealand has been managing high-interest rates for a long time, but those rates have decreased. As a result, people are starting to make purchases and take out loans now that borrowing is cheaper. Employment remains strong, and the country is performing reasonably well, even with interest rates expected to rise later this year. People are utilizing the lower rates to finance things they may have postponed. Although New Zealand is a small country with a population of 5 million, we have observed a rebound in our loan book growth, and we expect this trend to continue. We believe that growth has returned, and we will keep expanding our current offerings while also introducing new products.

More question around the order book, David, just obviously growing off a low base. How do you see the acceleration of that growth and the potential of the size of that order book?

Yes. In the upcoming quarter, we have some exciting developments on the horizon. The automotive sector is significant and could potentially surpass our current scope. However, the key point for me is that we are continuing to expand our existing products, which are delivering strong returns. Any gains from the automotive sector will be an additional benefit to our overall growth. We have a scalable platform, which I will keep emphasizing because it enhances our profitability and success compared to others in the market. Our platform is fully operational and effective. I have retained the same IT team responsible for our migration and platform development; they are now focused on new products and enhancements. We're not cutting back on innovation or development; we have maintained our workforce. We aim to expand into more segments and channels, adapt our products to be more customer-centric, and sustain our growth, currently achieved with a 19% cost-to-income ratio. We will continue to reduce this ratio as we generate more revenue.

Our next question is similar, David, regarding the insights gained from the auto loan book. What have you learned about your future approach to that? I believe you've mostly answered that, but is there anything additional you would like to share?

No, I don't think so. Our product is new, so it requires some education. Initially, people may not fully understand it, but once they do, they usually find it appealing. It just takes time. We don’t incorporate new product numbers into our current year guidance because we want to ensure we get it right and avoid making hasty decisions that could affect our rollouts. While we are already seeing some progress, we have a long way to go, and it will all contribute incrementally to the business. The great thing is that the core of the business is performing well. Everything we pursue is meant to enhance what we're already doing, rather than compensating for underperformance in the core product. We're not engaging in mergers and acquisitions to make up for weak core performance; the core is thriving, and anything we do beyond that is additional growth.

Now a question around capital management. With the ROE delivery of an impressive 31%, why is cash better utilized buying back shares rather than investing in the growth of the business? And can you give us some more thoughts from management around capital allocation?

Yes, we implemented the share buyback in May of last year because we had surplus cash for a period. We couldn't repay our previous corporate debt until December, which allowed us to buy back shares during that time. Since then, we've repurchased some shares and repaid $7.5 million of corporate debt from our cash earnings, which is a significant achievement. Not many companies in our sector are paying down debt from earnings. This has used up some cash, and while share buybacks are still an option, we haven't purchased any shares recently. We may not reach the 5% target or buy more shares, but the buyback program remains in place until April, and we aren't required to take action. As I mentioned, there are many new initiatives underway, and I will likely keep the cash in the business. However, during that period, we had a reasonable amount of surplus cash, and we took the opportunity to buy back shares, especially when they were very affordable, before we repaid the debt in December.

A question here from Steve. What's the company's thoughts in relation to sort of mitigation of sort of economic downturns?

I believe this comes down to our experience with past downturns. We have a diversified loan portfolio, which is crucial during challenging times. Our loans are spread across Australia and New Zealand, reflecting the population rather than being concentrated in regions that may be more affected. We have comprehensive demographic data in our appendix and we continuously monitor this information. We analyze historical loss rates to keep track of performance, allowing us to detect changes early and make necessary adjustments. Since we operate as a direct platform, we can tighten our credit models when needed, although we haven't had to do so for many years. Our business remains robust, and while we keep an eye on the data, we don't overly fixate on it. We acquire around 10,000 customers monthly and obtain bank statements from about 6,000 to 7,000, giving us insight into their payment capabilities. If we notice an increase in stressed customers, we will adapt our strategies accordingly. Thanks to the first-party data we collect, we have better insight into market trends than many others in the industry, similar to the data smaller banks receive. We can adjust our operations based on observed improvements or declines. I believe New Zealand has likely faced the worst and is improving, while Australia's employment situation also appears stable. Global conditions are unpredictable, but we have a flexible business model that enables us to adapt as necessary.

Just a question around partnership channels. Is the company looking at sort of meaningful partnership opportunities?

Yes, we are. And as I said earlier, we're probably too early to talk to the market about some of those things. But we haven't really been able to look at those until the platform was rebuilt. So early days on some of the bigger ones, for sure. But yes, there are plenty of other ones coming through.

A question just about the uptick in loan losses to 3.9%. Is the correlation with the implementation of Stellare assessing the credit quality coming through?

It is a target range of 3% to 4%. It has fluctuated from 3.7% to 3.9% and back again, but it's not something significant to discuss. As long as it stays within that range, we're satisfied. The 90-day arrears have decreased to 58 basis points, which is one-third of the market average, indicating that there isn’t a significant problem impacting our numbers. Overall, there’s nothing substantial to report.

Question just on economic macro in New Zealand. Unemployment rate sensitivity. You've seen a tick up of 1%. Does that affect any of your origination growth plans?

Simply no.

Okay. Moving on, given the discount versus your listed comps. Why do you think the market is rewarding in terms of valuation re-rate given the growth and execution over the last 12 months?

The market will determine that, not me. For our part, we provide guidance and either meet or exceed it, and our guidance is solid. Some of our competitors are facing significant losses. I can only focus on what we can control. I hope this presentation highlights our unique strengths, such as our platform, cost-to-income ratios, growth rate, and return on equity, as well as the new opportunities we have. I can only manage my own area, and I hope the market recognizes that we are a company that fulfills its commitments and that we are a growing, profitable stock. We are not inflating our profit figures; our reports are consistent and closely aligned with our audited results. I have been managing listed companies for many years, and this is not a short-term strategy. We are transparent and reliable, and we have a compelling story ahead of us. Over time, this will build long-term shareholders and trust, which ultimately prevails. While some of my peers may currently have a higher valuation, I can't control that, but I can manage our actions, and I believe we will succeed in the long run.

Thanks, David. Just talking about returning the customer base. Does that sit with a lower loss rate versus the new customers coming through?

Yes, that's a good question. You're right. Historically, the loss rate has typically been 30% to 40% lower for existing customers compared to new ones. However, with Stellare 2.0, that gap has narrowed somewhat. We're improving our ability to originate new customers, and we are seeing positive results in our early loss cohorts. Therefore, that percentage may decrease over time. There is definite value in knowing a customer and having seen them make reliable repayments, as we only offer repeat loans to good customers. We're also extending loans to customers who have had some past payment issues. So yes, it does perform better. However, we genuinely believe we are improving our assessment of new customers as well. This is why returning customers are very valuable to us, and we emphasized that throughout the presentation.

Just for the benefit of an investor here, can you sort of give us a bit more color around your unrestricted cash and its use?

Yes, it is what it is. We don't play games with it. It's our free cash flow at the top of the company where we can use that to grow the business. We can use it to fund deals. We can use it for anything. There's no restrictions on it. The total cash number is restricted cash, which obviously, I don't even include that in the numbers I talk about because it's money that's used for funders only. It's not our money per se. It's not my free cash flow; it's a timing difference in money that's got to be repaid back to the funder each month. We obviously have to snap the cash balance at 31 December and whatever is sitting in collections accounts and the like gets included in that number. But really, it should be a net offset to borrowings. It's just the accounting standard requires you to hold it in cash because it's actually cash. But really, the right way is probably to deduct it off the borrowings number as cash received. So yes, it's a true free cash flow number; there's no restrictions on that cash.

Just a follow-on question from Jonathan, just around sort of new customers and loss rates. There's a higher loss rate for new customers added into the counts for the customer acquisition cost?

No. The customer acquisition cost is just the marketing spend. And that's got nothing to do with the loss rate. The loss rate would come through the risk-adjusted income.

Okay. We're just coming down to the final, conscious of time, we'll get through this. Stellare 2.0 appears to be obviously a driver of loan book growth, operational efficiencies. Talking about New Zealand originations up 49%, 50% after the rollout and the group achieving 10.3% NIM in the first half as you scale towards the 900-plus million book, what specific enhancements to Stellare 2.0 or the auto or any upcoming automation initiatives will further improve the risk-adjusted income and maintain your lower 19% cost-to-income ratio? So in short, enhancements around Stellare 2.0, David?

Thanks for summarizing that detailed question. I believe we have addressed a significant portion of it. Our platform is continually being enhanced, refined, and updated; it is our top asset. We will keep focusing on that. We are still targeting a risk-adjusted income of over 6%. These enhancements are designed to maintain that level. Our objectives are clear, which is why we have a team of about 35 to 40 people in product engineering and data science. Their responsibility is to ensure everything operates efficiently. We are consistently rolling out enhancements to improve our platform, leveraging a significant amount of AI. We have been using machine learning for 12 years across our platform, and we are now increasingly incorporating large language models in our operations and developing applications that aim to utilize AI for more interactive user experiences. We are undertaking numerous initiatives to improve customer acquisition and enhance their experience without increasing costs as we bring on new customers. There is a lot happening in this area, and we are very dedicated to it.

Thanks. David, last question just around your NIM of 10.3%. Talking about sustainability, just given the landscape of increased competitive pressure and reliance on Big-4 bank funding.

I prefer relying on three of the Big-4 banks for funding rather than others. We've maintained that level for quite some time. A few years ago, during a period of high interest rates, it dropped to around 9%. Currently, we are in a better funding position since interest rates are not expected to rise sharply again, which made it difficult to adjust pricing back then. We are comfortable with our current product mix around 10%. If we shift more towards autos, it may come with lower margins but also lower losses, which would be incremental to what we already do. As long as our core business continues to perform well and we can add more on top of it, we can accept slightly lower margins. Our focus is on growing shareholder returns and profit. That's our primary goal.

Right. That closes out the Q&A segment of the presentation. So just for a bit of advertising, the company will circle back in March for a formal road show for investors, potential and existing. So please feel free to reach out to myself at Ethicus Advisory Partners. I'll pass to you, David for closing remarks, post a very excellent first half FY '26 results.

Thanks, Michael. On behalf of Simon, myself, thank you for your time. Thank you for all those questions. I think that's probably the most questions I've had; I think I need a glass of water after that. But yes, look, I think in summary, we've got a fantastic platform, I'd say, best in market. But certainly, we've got a great customer acquisition model. We're building sustainable profits. We've got great new product initiatives, and we're doing this with a return on equity of 31%. It's really, I think, any way you cut it, the financial numbers don't lie, and they're really proving, we're now executing on a really strong platform and a strong business model. So I look forward to meeting some of you over the next few weeks and coming on a journey with us because I think we've got something really special here and we're excited to be executing our strategy, and hopefully, delivering even better numbers in years to come. Thank you. Have a good day.

Thank you, David. Thank you, Simon.