Credit Corp Group Limited · ASX:CCP
Credit — FY2020 Earnings Presentation
25 slides from Credit's earnings presentation, Jul 28, 2020
Slide 1: FY2020 Results Presentation
FY2020 Results Presentation 28 July 2020 Thomas Beregi CEO Michael Eadie CFO
Slide 2: Leadership in the credit-impaired consumer segment
Leadership in the credit-impaired consumer segment … ANALYTICS & DISCIPLINE OPERATIONAL EXCELLENCE SUSTAINABILITY & COMPLIANCE Australian / NZ debt buying Largest database Highest asset turnover 1 No adverse orders or undertakings Target History of pricing accuracy Lowest cost to collect 2
Slide 3: … has delivered a sustained period of growth
… has delivered a sustained period of growth … NPAT AND RETURN ON EQUITY $ 85m 30.0% $ 70m 25.0% On track for FY20 growth $ 55m 20.0% of up to 18% $ 40m 15.0% $ 25m 10.0% $ 10m 5.0% ($ 5m) - FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 Total NPAT COVID adjustments NPAT ROE R
Slide 4: … and the flexibility to build cash when uncertainty emerges
… and the flexibility to build cash when uncertainty emerges … Dec-19 H1 Equity Free cash Jun-20 Cash and balance dividend raising flow balance credit lines Net cash $400m of immediate investment capacity $26m Combined with projected 12 month cash $m 0 $110m generation of $175m 1 ($216m) 2 Net (
Slide 5: … to meet client needs and prepare for opportunity
… to meet client needs and prepare for opportunity Balance sheet enables continued purchasing despite heightened risk All major clients have continued their commitment to debt sale Some US clients anticipating growth in sales volumes of up to 80 percent in 6 to 12 months’ time Reported incre
Slide 6: Disciplined investment has required assessment of the outlook
Disciplined investment has required assessment of the outlook … Experience to date Since March 2020 customers have been less prepared to agree and maintain longer-term repayment plans Producing a sharp initial decline in collections and a rise in arrears More recently, increased willingness
Slide 7: … resulting in impairment and provisions, impacting FY2020
… resulting in impairment and provisions, impacting FY2020 … FY2020 NPAT, pre COVID-19 adjustments $79.6m Less: COVID-19 pre-tax impairments and provisions Impairment of 13.5% of carrying value reflects the expectation of an 18% 1. PDL impairment ($68.6m) reduction in collections for 2 years before
Slide 8: … masking the achievement of solid operating outcomes
… masking the achievement of solid operating outcomes … Post-COVID Pre-COVID FY2019 Var % 2 FY2020 FY2020 1 AU/NZ debt buying $183.4m $225.3m $189.5m 18.9% 13% US debt buying $30.6m $57.3m $40.8m 40.4% growth in pre- AU/NZ lending $99.4m $99.4m $94.0m 5.7% COVID NPAT Revenue total $313.4m $382.0m $3
Slide 9: … and proven debt buying operating capability
… and proven debt buying operating capability All sites operating effectively in a combination of work-from-home and office-based activity Solid operating metrics Capacity maintained FY2020 1 ∆ FY2019 AUS/NZ Collections $363m 12% debt buying Productivity $269 per hour 6% Operations headcount 2
Slide 10: Leading compliance record is important to clients during COVID
Leading compliance record is important to clients during COVID … FY2020 H1 AU EDR Rate 1 12 months to Mar-20 US Dispute Rate 2 Continued industry leadership Credit Corp Credit Corp Lowest EDR rate in AU and low US dispute rate Highest rating from consumer stakeholders Publicly traded No regu
Slide 11: … and has contributed to a solid purchasing outlook
… and has contributed to a solid purchasing outlook PDL INVESTMENT $ 300m Clients putting more emphasis on compliance record $ 250m Majority of existing forward commitments have been $ 200m re-negotiated to sustainable pricing FY2021 purchasing US pricing yet to adjust for consumer outlook $ 1
Slide 12: The consumer loan book has run-off
The consumer loan book has run-off … CONSUMER LENDING BOOK AND REVENUE $ 230m $ 212m Demand impacted by temporary support $ 203m $ 183m $ 181m Tightened underwriting focused on: $ 172m $ 156m $ 161m Employment risk Limiting individual customer exposure Arrears within pro-forma $ 85m Revi
Slide 13: … and is starting to stabilise, as volumes recover
… and is starting to stabilise, as volumes recover Lending volume index to pre-COVID expectation 100% 100% 79% New customer approval rate at 41% of pre COVID levels 80% Demand from existing customers improved in June 64% 60% Further recovery expected as temporary support eases 38% 40% 19% 20%
Slide 14: Strong platform established for a return to growth
Strong platform established for a return to growth … Financial strength to absorb the risk of investing during uncertainty $400m of cash and undrawn lines at June 2020 $175m of free cash flow after allowing for baseline purchasing Renewed client interest in debt sale Outlook for rising sal
Slide 15: … enabling guidance for solid FY2021 earnings despite uncertainty
… enabling guidance for solid FY2021 earnings despite uncertainty FY2021 guidance PDL investment $120 - $180m Net lending ($5) - $5m NPAT $60 - $75m EPS (basic) 89 - 112 cents DPS 45 - 55 cents Credit Corp Group FY2020 Results Presentation 15
Slide 16: Questions
Questions 16
Slide 17: Appendices: Key Operating Metrics
Appendices: Key Operating Metrics Appendix 1: Operating cash flow and gearing Appendix 2: Pricing discipline and accuracy Appendix 3: Collections life cycle Appendix 4: Productivity Appendix 5: Payers base Appendix 6: Operational and total headcount Appendix 7: Baycorp 17
Slide 18: Operating cash flow and gearing
APPENDIX 1 Operating cash flow and gearing Operating cash flows and gearing Jun 2020 Dec 2019 Jun 2019 Dec 2018 Pre-tax operating cash flow $212.3m $182.4m $167.3m $163.4.m Tax payments ($7.8m) ($27.4m) ($28.9m) ($12.1m) PDL acquisitions, net lending and ($94.1m) ($227.7m)1 ($148.7m) ($144.1m) capex
Slide 19: Pricing discipline and accuracy
APPENDIX 2 Pricing discipline and accuracy PRICING DISCIPLINE AND ACCURACY Cumulative collections $ 3,500m Actual cash $ 3,000m collections $ 2,500m $ 2,000m $ 1,500m $ 1,000m Initial projections $ 500m - * For all PDLs held at June 2008, initial projections represent the forecast at June 2008 Credi
Slide 20: Collections life cycle
APPENDIX 3 Collections life cycle PDL COLLECTIONS BY VINTAGE +21%1 $ 160m $ 140m $ 120m 33% $ 100m 31% 32% 34% 29% 30% 31% 32% 33% 32% 30% 30% 12% $ 80m 32% 30% 32% 16% 16% 18% $ 60m 15% 15% 12% 11% 14% 18% 17% 15% 10% 13% 14% 17% 23% 23% 19% 15% 15% 16% 23% $ 40m 19% 15% 19% 21% 22% 21% 25% 37% $ 2
Slide 21: Productivity
APPENDIX 4 Productivity PDL COLLECTIONS PER HOUR $ 350 Full year average $ 300 FY2020: $257 FY2019: $249 $ 250 2019/20 $ 200 2018/19 $ 150 $ 100 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Credit Corp Group FY2020 Results Presentation 21
Slide 22: Payers base
APPENDIX 5 Payers base PORTFOLIO SUMMARY: AU/NZ DEBT BUYING ONLY Total portfolio Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Face value $5.9b $6.0b $6.2b $6.4b $7.8b $7.7b Number of accounts 710,000 710,000 753,000 786,000 1,268,000 1,193,000 Payment arrangements Face value $1,300m $1,300m $1,300m $1,
Slide 23: Operational and total headcount
APPENDIX 6 Operational and total headcount PERIOD END HEADCOUNT (FTE) PERIOD END HEADCOUNT (FTE) 2,000 Jun-18 Jun-19 Jun-20 1 1,800 Debt buying 1,600 1,208 1,250 1,378 operations 1,400 Agency 77 90 251 1,200 1,000 Lending 110 119 118 800 Support 102 108 135 600 400 Total 1,497 1,567 1,882 Jun-18 Jun
Slide 24: Baycorp acquisition achieving pro-forma
APPENDIX 7 Baycorp acquisition achieving pro-forma The Aug-19 acquisition is achieving pro-forma 1 NPAT of $6.4m v pro-forma of $6.0m Debt purchase transition complete Integration is ahead of schedule Annualised cost of savings of $13m achieved Combined agency operations outperforming
Slide 25: Thank you.
—— Credit Corp Group Thank you.