Humm Group Ltd

ASX:HUM

Q2-2026 Earnings Call

[Operator]

Thank you for standing by, and welcome to the hummgroup's First Half 2026 Results Call. [Operator Instructions] and additionally, I would like to advise all participants that this call is being recorded.

I'd now like to welcome Angelo Demasi, Chief Executive Officer, to begin the conference. Angelo, over to you.

[Angelo Demasi, executive]

Thank you very much, and good morning all, and thank you for joining us today as we release hummgroup's interim results for half year ending 31 December 2025. I'm Angelo Demasi, the Group Chief Executive Officer; and joining me today is Tony Taylor, hummgroup's Interim Chief Financial Officer.

On Slide 3, you'll see the agenda that we'll run through this morning. And Tony and I will walk you through the investor pack follow the presentation as we go. We will go through the Group's performance, our strategic execution, business segment outcomes and how we are positioned for the remainder of this financial year.

Turning to Slide 5, where we have highlighted the key group performance metrics for the half. This half represents another step forward in our multiyear transformation. Despite external headwinds, our business delivered statutory profit after tax of $13.9 million. Importantly, this includes adjustments to the Forum Finance litigation provision related to arrangements entered into between 2018 and 2021, following the recent Federal Court judgment and other specific items. These specific items are considered irregular in nature and are included in the calculation of statutory profit after tax in accordance with the prescribed accounting standards. I will leave it to Tony to explain the shift to statutory accounting measures for reporting profit metrics, and he will walk you through these specific items on a later slide.

Annualized statutory earnings per share was $0.056 and annualized return on equity for the half was 5.4%. As I touched on a moment ago, these metrics are impacted by irregular items. However, the underlying operational momentum remains solid across all core portfolios. For the same reason, the cost to income ratio was 57.4%. I hasten to add that excluding the irregular items, the group continues to operate with improving efficiency with the cost-to-income ratio in the 52% range if adjusted to exclude such items.

The strength of our credit risk assessment, collections and recovery processes has again been demonstrated with credit losses remaining low at 1.95% of ANR, which appears in the presentation materials as 2% due to rounding. I will discuss this in further detail later in the presentation. And finally, the perpetual notes were fully repaid in FY '25. And consequently, there will no longer be any perpetual note dividend from the first half '26 onwards. This, combined with the strength of our underlying results, has enabled the Board to determine to pay a fully franked interim dividend of $0.015 per share.

I'll now move on to Slide #6, which shows our half-on-half performance through first half '24 to first half '26. The top left chart shows the growth trend of statutory profit after tax over the last 5 halves, highlighting our clear focus on profitable growth, credit discipline and cost management across our core businesses over this period. While this result is up 13% on second half '25, I do note that it is 49% down on PCP. Performance in first half '26 is more comparable to the second half of '25 than it is to PCP due to the impacts of the forward flow. In particular, PCP has a one-off benefit of approximately $7.9 million in ECL provision release as a result of this arrangement. And Tony will walk you through this in more detail in Slides 12 and 13 shortly.

The top right chart highlights the strength of our net interest income and capability to manage NIM in the face of economic headwinds and competition. Net interest income increased to $134.4 million with portfolio NIM stable at 5.5%, reflecting disciplined pricing and proactive management of our cost of funds. While headline yield was lower, this was fully offset by the improved cost -- improved funding costs. And within flexicommercial, while NIM declined as we shifted toward higher-quality credit assets with lower risk premiums, this was more than offset by NIM improvements in Cards New Zealand and humm Ireland.

You can see the output of our continued focus on the cost to income ratio on the bottom left chart. Other than the regular items mentioned previously, operating expenses reflect continued investment in capability across flexicommercial and the ongoing transformation of our Consumer business. Technology stabilization and platform upgrades are progressing well, improving processes and the overall customer experience. As the technology upgrades roll out and we progress from our current investment phase, we expect that these associated costs will subside in future years.

Final chart in the bottom right highlights our overall stable credit performance, demonstrating disciplined credit underwriting, strong customer performance and the quality of our receivables base. flexicommercial credit losses increased as anticipated, driven by the seasoning of the portfolio following excessive periods prior of growth. Importantly, these elevated losses have now peaked and are expected to trend lower in the second half '26. In Consumer, net credit losses to average net receivables increased to 2.8% in the first half of '26, primarily due to the runoff of our humm classic portfolio. If we remove the denominator impact of that runoff, net loss to ANR remains very stable, supported by continued improvements in credit settings and collections processes.

We'll now turn to Slide 7, which further details our half-on-half credit performance, the quality of our originations and the underlying strength of our balance sheet across the period from first half '24 to first half '26. The charts on the bottom showed the side-by-side comparison of net credit losses to ANR and the net credit loss to average AUM. Despite net loss to ANR edging up in first half '26 to 1.95%, net credit loss to average AUM remained at 1.8%.

I'll direct you now to Slide #8. We've introduced 2 new charts this half. I'll start with the chart on the right, which provides a breakdown of what we have previously referred to as our unrestricted cash balance of $124.1 million at 31 December 2025. Management operates to a minimum liquidity balance of $70 million, which reflects the minimum amount of cash required to be held as liquidity under prudent liquidity risk management practices. This reflects ongoing liquidity covenant requirements under corporate debt facilities and as mandated by the Group's established corporate risk appetite statement.

As at the reporting date, the drawn corporate debt balance was $63.6 million. Consequently, the liquidity amount net of corporate debt was $6.4 million. Available cash is also required to be applied as working and settlement capital or strategic growth capital as well as to meet business payment obligations or pay operating expenses such as rent, wages and overheads throughout the month.

The working and settlement capital requirement fluctuates daily due to settlement of customer loans and advances onto our group balance sheet. Funding activities being movement of assets settled on to the balance sheet into funding vehicles and other operating expenses. Given the volatility in these movements, at least $30 million is required on an ongoing basis to support these activities.

Strategic growth capital is required to support near-term receivables growth, primarily in the form of capital support requirements under securitization funding structures. Cash to satisfy large pending obligations such as the forum finance litigation outcome also needs to be provided for. And following the delivery of the judgment in that matter, $19 million of available cash has been allocated and reserved for payment of this claim.

The bottom left chart shows the NTA trend over the past 5 halves. Broadly speaking, NTA movements are driven by capital management activities, including share buyback and repayment of perpetual notes, mark-to-market movements of hedging instruments, profit or loss for the period, dividend distribution to shareholders and FX movement. You will see that our NTA grew from $376.9 million in second half '25 to $413.9 million in first half '26, an increase of $37 million. This chart shows that the business is back on NTA growth trajectory after the full repayment of perpetual notes in FY '25.

I want to emphasize that we remain committed to balancing the return to shareholders and investment in our end-to-end technology and product platforms to further improve the customer experience over time.

Now to Slide 7 (sic) [ 9 ]. Our investment focus through first half '26 has continued to be on transforming our product platforms and modernizing our IT environment to enable growth in revenue, enhance the customer and merchant experience and improve platform capability and efficiency. Through the increased CapEx investment in FY '25 and first half '26, we have made good progress in executing our transformation strategy.

humm loan is operational, and we have materially improved key credit and technology performance metrics following launch challenges in June 2025. As previously communicated, we have now turned our attention to the implementation of a new cards product platform, which commenced in the first half of '26. Implementation of our new modern data platform is well underway, enabling us to better leverage our significant data resources and unlock value through our AI initiatives across the business. We are now well advanced in the modernization of our IT environment, driving a simpler, lower cost and more resilient technology foundation.

As part of this program, we have retired more than 1,170 servers, equivalent to approximately 75% of our total fleet. And we are decommissioning our remaining physical data centers as we complete our migration to the cloud. This transition is delivering material benefits, reduced infrastructure and operating costs, a strengthened security posture and significantly improved resilience, including 99.9% availability across our cloud-hosted product systems. These improvements position us to scale more efficiently while supporting a more reliable experience for our users.

Moving to Slide 10. Our global expansion investment strategy continued to deliver positive returns in the first half of '26, supported by a balanced and sustainable growth trajectory across our key international markets as we head into the second half. Starting with Ireland, the business delivered an excellent result, generating a profit of $6.9 million, which is up 103% on PCP. This was driven by strong volume growth and a 250 basis points improvement in gross interest yield compared to PCP and reflects both disciplined portfolio management together with strong customer demand.

Turning to the U.K. We are pleased with the momentum we're seeing. Volumes in the first half of '26 were up 56% and interest income increased by 100% versus PCP. This growth reflects our deliberate strategy to follow our successful Irish merchants into the U.K., focusing on verticals where we have deep expertise and long-standing relationships. The early traction continues to validate that very approach.

Across both markets, we see significant runway for growth. Together, they provide access to a retail finance market of more than $80 billion. We believe we are well positioned to capture share by leveraging our digital platforms, our highly regarded servicing model and our strong merchant partnerships, all of which remain clear and competitive advantages.

In Canada, as we communicated previously, the operating model reset has now been completed. As a result, we've delivered $1.7 million of cost reductions in first half '26 on PCP. These related to operating model changes and are inclusive of the associated restructuring costs born in this half, and management will continue to monitor performance and adjust settings as appropriate. Pleasingly, across the group, our global profit continues to show consistent improvement.

humm's global statutory profit after tax has progressed from a $3.4 million loss in first half '25 to a $1.1 million profit in second half '25 and further to a $2.1 million statutory profit in first half of '26. This steady uplift reflects disciplined execution, targeted investment and an increasingly efficient operating model. Overall, the international portfolio is performing well, and we remain confident in the strategic opportunities ahead.

I'll now invite Tony to speak to you in more detail about our financial results. Over to you, Tony.

[Anthony Taylor, executive]

Thanks, Angelo, and good morning, all. We are pleased with the statutory profit after tax result as well as the underlying performance drivers that supported the business in first half '26. Firstly, during the half, we shifted external reporting to statutory accounting measures for reporting profit metrics. Historically, cash-based metrics have been used. However, differing definitions can make comparisons challenging for the market. By focusing on stat profit, we provide a clearer, more consistent view of performance relative to both our own history and our peers.

So I'll now turn to the metrics on Slide 12. Our statutory profit for the half year is $13.9 million. Compared to the second half '25, stat profit after tax is up 13%, supported by the absence of intangible impairments during the period, which impacted the prior period, partially offset by adjustments to the Forum Finance litigation provision that Angelo already referred to.

STI and LTI true up in second half '25 upon departure of the former CEO and other executives and assessment of STI/LTI hurdles also had an impact. This result is 49.1% down on PCP; however, reflecting the anticipated higher credit losses in Commercial as a result of portfolio seasoning, the absence of prior period benefit of the $7.9 million ECL provision release following the initial forward flow receivables sale. And the higher regular items referred to just now, including the increase in the Forum Finance litigation provision following the recent Federal Court judgment.

Our growth metrics remained stable, despite broader pressures on receivables growth across the economies in which we operate, ending the half year with assets under management of $5.4 billion. This reflects the continued growth in flexicommercial receivables, partially offset by softness in humm AU and a negative FX impact from New Zealand. If we were to adjust the first half '26 using the FX rate from the PCP, we would see an uplift of $42.7 million against PCP or $63.7 million using the second half '25 FX rate.

Group NIM was 5.5% in the first half '26, holding stable relative to prior periods. This reflects disciplined pricing, sound credit processes and the ability to drive cost of funds improvements by taking advantage of more favorable credit spreads into funding markets. Net interest income increased by -- increased to $134.4 million, supported by the stability in NIM and proactive management of our cost of funds. While headline yield moderated in this half, this was fully offset by lower funding costs.

Within flexicommercial, NIM softened as we continue to shift the portfolio towards higher-quality credit assets with lower risk premiums. However, this shift was more than offset by improved yield and NIM in Cards New Zealand and humm Ireland, which continue to generate attractive returns.

Overall, the portfolio continues to deliver consistent margin, underpinned by disciplined pricing, improved funding costs and positive offshore performance. Net operating income is up 2.6% on PCP, mainly driven by NIM. Fee and other income reduced due to changes in portfolio mix and softer consumer originations. It is also important to note, though, that movements in fee and other income as well as cost of origination largely reflect the impact of the forward flow arrangement where net interest income has been replaced with fee income. Origination fee reimbursement and cost of origination are also recognized upfront with each forward flow receivable sale.

If I now turn to Slide 13, which was introduced last year as a supplementary information slide to provide additional transparency into the underlying performance of the business. Noting there were a number of specific items in the first half '26 comprising: adjustment to the provision for the Forum Finance litigation; duplicate system costs in Consumer incurred to maintain and remediate the legacy systems alongside our new systems implementations; $0.08 million (sic) [ $0.8 million ] of legal costs incurred in responding to an ASIC inquiry; and a further $0.5 million of associated remediation costs; and a $2 million release of an onerous contract provision following the renegotiation and renewal of a key supplier agreement. The negative impact also of $800,000 due to favorable -- unfavorable New Zealand dollar foreign exchange movements impacted the half as well.

Slide 14, Commercial. I'll now look at the performance of each of the business segments, beginning with obviously, flexicommercial, led by Brendan White. This slide shows statutory 1profit after tax for flexicommercial, $13.4 million in the first half '26, down 11.8% on the second half '25 and down 52.8% on PCP. Commercial performance in first half '26 is more comparable to the second half '25 than PCP, reflecting the timing and the scale of the initial forward flow receivable sale and portfolio seasoning, which resulted in elevated net losses in the second half '25 and first half '26, but not in the PCP itself.

Compared to second half '25, the lower profit reflected improved net interest income, credit losses as the portfolio seasons and the continued investment in capability and technology uplift. The Commercial portfolio is maturing after 3 years of strong growth and continues to increase assets under management in an SME market showing early signs of recovery amid rising competition. Performance remained resilient, underpinned by disciplined underwriting standards and market-leading broker networks. The team continues to expand across geographies into rural and regional Australia and progressing new products such as Flexi-Premium and FlexiAg.

As anticipated and communicated to the market previously, flexicommercial recorded elevated losses in the first half '26 due to the seasoning of the portfolio and losses associated with FY '23 vintages. Despite the dollar increase, the net loss to ANR over the past 2.5 years remain within the targeted 1% to 1.1% range, which are industry-leading for an Equipment Finance portfolio. The year-on-year increase in losses reflects the growth of $1.6 billion in the receivables book between FY '22 and financial year '25, with losses taking 12 to 18 months to flow through the book. The return of supply chains and the normalization of the secondary market, which has driven down secondary pricing. We expect losses to normalize over the remainder of the year.

We move to Slide 15, Consumer Finance, led by -- the Consumer business led by Jacqui Hourigan, Emma Skondras and PJ Byrne. The Consumer business delivered a statutory profit after tax of $14.3 million, up 76.5% on PCP and up 180.4% on the second half '25. This was driven by strong performance in the humm Ireland and Cards New Zealand businesses. Volumes were $1.1 billion first half '26, down 13.1% on PCP, but a smaller reduction of 5.5% against the second half '25. Closing loans and advances were $2 billion, down 5.1% on PCP, driven by the reduction in the humm Australia portfolio and impacted by the weaker New Zealand dollar.

New Zealand Cards, despite macroeconomic challenges and a weakening New Zealand dollar, Cards New Zealand delivered statutory profit after tax of $8 million, an increase of 35.6% on PCP and 53.8% on the second half '25. The result was underpinned by 11.8% volume growth in the core acquiring Mastercard portfolio, outperforming the broader market and demonstrating the strength of our brands and our merchant relationships in New Zealand. Cards New Zealand volumes grew to $458.5 million, up 2.4% on PCP, while closing loans and advances declined 3.4% on PCP due to currency impacts. This growth saw our market share in New Zealand credit cards rise to 8.45% this quarter, and we remain the market leader in New Zealand card issuance, capturing 31% of newly issued cards. Net credit losses to ANR increased slightly to 3.6%, reflecting tougher market conditions.

Australia cards. Cards Australia delivered a statutory profit after tax of $3.1 million, down 16.2% on PCP and 13.9% second half '25, driven by higher operating costs associated with associated related to the ASIC inquiry, apologies there. The portfolio continued to benefit from tightening of credit settings, which helped reduce the net credit losses to 21.1% or $1.2 million on PCP, bringing net credit loss to ANR to 2.4% in the first half '26. Volume of $252.9 million increased 1% on PCP as management deliberately moderated new customer acquisition while focusing on strengthening spend volumes for existing customers.

Statutory profit after tax for the point-of-sale payment plans was $3.2 million, driven by a $1.1 million contribution from humm Australia, $6.9 million contribution from humm Ireland, partially offset by $4.8 million of investment in humm U.K. and humm Canada. Volumes were $369 million, down 32.3% on PCP, reflecting the runoff of the humm classic product and launch-related technology issues with the new humm loan, partly offset by strong growth in humm Ireland and the U.K. humm Australia has materially improved key credit and technology metrics following the launch challenges in June 2025, and the business has a defined pathway to reengage customers and merchants in the coming months.

Across our international portfolio, performance improved from a $3.4 million statutory loss after tax in the first half '25 to a $1.1 million statutory profit in the second half '25 and $2.1 million statutory profit in the first half '26. humm Ireland continues to outperform across key metrics, and humm U.K. is delivering comparable yields on its growing portfolio. In humm Canada, the strategic reset has delivered a 33.3% reduction in costs on PCP.

If I next look at the touch on the next slide, corporate segment. The group introduced a corporate reporting segment in June 2025. As a result, first half '25 has been restated with no impact on hummgroup's consolidated results. The higher corporate segment loss in the first half '26 was driven by several irregular factors, including the legal and regulatory expenses and higher provision for the Forum Finance litigation following the recent Federal Court ruling, partially offset release of the onerous contract provision following the renegotiation of a key supplier agreement. We take all of the one-offs through the corporate segment.

Credit risk management on Slide 17. Annualized net loss to ANR for the group, which excludes assets sold into the forward flow program, increased from 1.8% to 2%, 1.95% without rounding, as Angelo mentioned earlier. This reflects the natural seasoning of the Commercial portfolio. In Commercial, the net loss to ANR increased from 0.9% in PCP to 1.3% in the first half '26, in line with expectations and consistent with what we communicated to the market in our Q1 update. For the full year '26, we expect this ratio to normalize and trend back towards 1.2%. The increase was concentrated within a small segment of the portfolio originated in FY '23.

Noting that multiple credit policy changes since that time have strengthened origination quality. Losses were also impacted by a return to more normalized asset recovery rates and by the forward flow execution, which removed $680 million of early-stage loans from the book.

In Consumer, net loss to ANR increased by 30 basis points to 2.6% against PCP, primarily due to the runoff of the humm classic portfolio. Adjusting for the denominator effect, underlying loss performance remains very stable, supported by tightening of credit settings and ongoing enhancements in collection processes.

Cards New Zealand saw only 15 basis points increase in loss rates despite the challenging economic conditions and Cards Australia improved loss performance by 35 basis points, reflecting the benefits of scorecard optimization executed in recent years.

The 2 charts at the bottom of this slide highlight the depth of the uplift in origination score quality across both our Commercial and Consumer portfolios in Australia and New Zealand over the past 18 months. Based on this trend, we remain confident of further improvements in credit loss performance moving forward.

Our balance sheet provision coverage remains strong at 2.5%, around 50 basis points above actual losses, providing a solid buffer against future risk. We continue to hold a 2% provision against the Commercial portfolio, well above the current loss rates.

Our funding platform remains well diversified with warehouse funding structures. I'm referring to Slide 18 at the moment. Private and public term transactions alongside our forward flow arrangement and corporate debt facilities to manage capital give us many avenues to fund our business. We continue to be well supported by leading domestic and international banks and local and offshore credit investors. During the half, Commercial business focused on positioning for future growth, while the consumer funding platform saw incremental improvements from execution of funding activities, which improved cost of funds for those businesses, including our NZD 247 public issuance under our Q Card Master Trust program. This was executed with very favorable pricing. This funding optimization continues in U.K. and Ireland with further improvements in the process of being executed to drive cost savings and accommodate the expected growth.

If I look at the bottom right chart, our original forward flow arrangement provided capacity to fund up to $1 billion of assets of which $680 million was utilized before the availability period expired in October 2025. In January 2026, the Group executed a new forward flow program with $500 million of capacity.

The forward flow program has delivered the financial outcomes consistent with its expectations. As previously communicated, the benefits of this arrangement include increased capacity for capital-light growth in commercial without the need to raise significantly -- significant equity capital. Return on equity accretion as the facility grows fee income without equity, diversification of our funding platform to protect the business in the event of the closure of term markets, and it allows us to continue to originate. And finally, we see an opportunity to expand this program to other asset classes.

I thank you for your time, and I will now hand back to Angelo to close the presentation.

[Angelo Demasi, executive]

Thank you, Tony, and I'll move to some closing remarks, which you'll find on Slide #20. Firstly, we have and continue to build upon very strong foundations. We feel that our portfolio remains resilient with sound asset quality generated from disciplined risk settings. We continue to operate with solid liquidity and funding strength. And importantly, we remain well capitalized. We're well diversified across customers, brokers, merchants, partners, products, assets and geographies and also funding sources. These factors have allowed us to maintain quality originations in the current environment and underpin our strategy to pursue sustainable growth.

Secondly, we are seeing clear momentum. Building on our solid foundations, we are seeing promising growth momentum across some of the portfolios, while our technology and platform transformation, which is progressing well, will drive simplification and efficiency across remaining portfolios. These initiatives will continue to enhance broker, merchant and customer experience and help us to achieve greater scale.

Thirdly, we feel that the outlook is improving. flexicommercial losses have peaked, and we are expected to normalize through the second half. We remain disciplined on cost management while continuing to invest carefully in our end-to-end technology platforms. The new humm loan product is expected to expand on its merchant offerings and support improved profitability over the medium-term. We continue to work closely with merchants and other partners on initiatives to drive uptake and capture new market opportunities. We're optimistic about the prospects of the global businesses and have confidence that they will continue on their growth journey. While I acknowledge that there are corporate activities playing out these 3 points do provide a strong sense of confidence in the future.

Finally, I'd like to express my thanks to all of our staff for their continued efforts to the Board, support and of course, to our shareholders for their confidence in management. I'd like to thank you for joining us today, and we'll now open the line for questions, which we've been receiving online.

[Operator]

[Operator Instructions] I will hand over to the team to address any question received.

[Unknown Executive]

Originations in Commercial were down 10%, but that seemed to improve in December quarter. Can you discuss the cause of improvement and how you are seeing current trading?

[Angelo Demasi, executive]

Thanks for the question, and that's correct. Generally speaking, the beginning of the first quarter for us in flexicommercial is slower, and this is really a seasonal trend. It is true, however, that in Q2, we have been seeing early signs of improvement. It is also correct to say that we had an extremely strong second quarter with some of the highest volumes we've seen on record. This was supported by a renegotiated funding facility, which gave us increased confidence to drive volumes harder throughout that second quarter. On the last point of the question, despite the continued competition, we do feel good about the volume momentum that we take into the second half of fiscal '26.

[Unknown Executive]

Okay. Next question. Why did humm decide to increase the dividend to $0.015?

[Angelo Demasi, executive]

Again, thank you for the question. As a result of having paid down the perpetual note in FY '25, the group now has an increased capacity to pay our dividends. In FY '25, you might recall that we paid approximately $7.7 million according to that perpetual note dividend. That capacity now comes back to us and has allowed the Board to increase the dividend by $0.0075 in this period.

I also want to advise everybody that, that fully franked dividend does maintain itself within our payout ratio, albeit to the upper end of that payout ratio. And the Board has agreed and determined to initiate a capital management strategy and review, and that will also include our target dividend ratio for future periods.

[Unknown Executive]

Next question. Will the Canada cost savings have a more pronounced impact in second half '26?

[Angelo Demasi, executive]

The short answer is they very well might. One thing to take into consideration, and I did mention it earlier in my remarks is that the $1.7 million improvement in first half on a PCP basis was inclusive of a number of restructuring costs that were born in this exact period. And so we do expect that to improve as we go into the second half. But please just be aware that any remaining restructuring costs that we need to bear will be taken in the second half as well. So I'd say the short answer is yes, it's likely to improve. At this stage, we are certainly looking to hold the $4.4 million cost restructuring exercise that was conducted in fiscal '25.

[Unknown Executive]

Next question. Can you please give more detail on the IT system conversion time frames remaining, risks as you see them and potential costs remaining both from an OpEx and CapEx perspective?

[Angelo Demasi, executive]

Thank you again for the question. There's a few components to this. On an overall basis, we're really pleased with the progress that we're making. I'll go through each of the major investments really briefly just to give you a sense of where I think that were asked. On the humm loan product, we now consider that implemented and operational, and we're now in the mode of making enhancements that will drive future cash flows against the product as we hold as an asset on our balance sheet.

In terms of the Cards transformation, that implementation has only started in the first half of fiscal '26, and we expect to take the best part of 12 months. Please note, though, that once that product platform is developed, we'll need to undertake a migration of customer cards in both Australia and New Zealand, and that will follow the implementation, which I note is approximately 12 months.

On our infrastructure modernization and security improvements, we are very well progressed. We have now migrated out of 2 physical data centers, and we're on the precipice of migrating out of the third. Once that's done, that will only leave one data center, and we expect that we'll be out of that data center and fully modernized into the cloud by the end of August this calendar year.

In terms of ongoing costs, we would guide that the capitalization costs for the second half will be in line with or maybe slightly higher than the first half, but not too far distant from fiscal '25. And then we would guide that as we go through fiscal '27, probably more towards the second half of fiscal '27 that the transformation costs are likely to start subsiding.

In terms of risks, which is the last part of that question, as in all transformation programs, the risks are always present. We feel confident about the product structures, and we feel confident about the decisions of our suppliers and partners as we execute on these transformation programs. What I would be looking to the team here at humm to keep a really keen focus and a keen eye on activities and our change management activities.

And if I were to go back to the launch of the humm loan platform in 2025, as a result of the accelerated time line that we had to operate on, I propose that is where we probably could have done better. But in this -- in the remainder of the transformation program and specifically in relation to the Cards transformation, the time lines are of our making, they're not regulatory steps. And so I feel comfortable that we have more time to make good decisions such that we can avoid and mitigate any of those risks that we've seen in the past.

[Unknown Executive]

humm guided to a $7.8 million impact in humm AU. How was that manifest in the half given humm AU stat profit of $1.1 million?

[Angelo Demasi, executive]

I think Tony, we'll put this question to you, please.

[Anthony Taylor, executive]

The impact of the slower-than-expected take-up of the humm loan driven by the new regulation and launch-related tech issues. As a consequence of that, we saw a slower start to the year. So that impacts the first half '26 profit somewhat. We're seeing that improve, obviously, in the last 3 months, 4 months, growth is coming back there. I don't know if that's answered the question.

[Unknown Executive]

That's it. There are no further questions.

[Angelo Demasi, executive]

Thank you, Tony, and thank you to everybody for the questions submitted online. We'll now pass back to the moderator if there are no more questions coming through.

[Operator]

[Operator Instructions] And that does conclude today's conference call. Thank you for joining us. You may now disconnect.