Credit Corp Group Limited · ASX:CCP

Credit — H1 FY2020 Earnings Presentation

27 slides from Credit's earnings presentation, Jan 28, 2020

  1. Slide 1: H1 FY2020 Results Presentation

    H1 FY2020 Results Presentation 28 January 2020 Thomas Beregi CEO Michael Eadie CFO

  2. 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  History of pricing accuracy  Lowest cost to collect 2  Low c

  3. Slide 3: Has delivered sustained growth and returns

    …has delivered sustained growth and returns… NPAT AND RETURN ON EQUITY $ 90m 30% NPAT CAGR 20% $ 75m 25% On track for $ 60m 20% FY20 growth of up to 18% $ 45m 15% $ 30m 10% $ 15m 5% - - FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 (projected)* Total NPAT ROE *Midpoint of gui

  4. Slide 4: With all segments driving growth in H1 of FY2020

    …with all segments driving growth in H1 of FY2020… FY2020 H1 FY2019 H1 Var % AU/NZ debt buying 1 $112.7m $97.4m 16% 15% US debt buying $28.0m $17.4m 61% AU/NZ lending $50.2m $44.4m 13% growth in NPAT Revenue total $190.9m $159.2m 20% US and consumer AU/NZ debt buying 1 $25.7m $23.0m 12% lending are

  5. Slide 5: And continued opportunity

    … and continued opportunity SEGMENT MARKET CONDITIONS CREDIT CORP POSITIONING AU/NZ  Reduced access to bank funding  Strong capital position debt buying  Heightened compliance sensitivity - - $170m of debt headroom exclusion of some competitors by  Compliance leadership maintained issuers  Rece

  6. Slide 6: Investment growth in all segments

    Investment growth in all segments… PDL INVESTMENT AND NET LENDING  Baycorp acquisition and recent $ 270m AU/NZ debt buying wins $ 240m $ 210m  Continued US debt buying and net 64% lending growth $ 180m $ 150m $ 120m $ 90m $ 60m $ 30m - FY2018 H2 FY2019 H1 FY2019 H2 FY2020 H1 FY2020 H2 projected Ne

  7. Slide 7: With substantial headroom to further step-up investment

    …with substantial headroom to further step-up investment FACILITY HEADROOM AND GEARING $ 400m $375.0m $375.0m 50% $350.0m $ 350m  Banking facilities increased to $375m $300.0m $ 300m 40% maturing in 2022 and 2023 $ 250m $211.9m $205.8m  Debt headroom will near $200m at $ 200m $184.0m 30% year-end,

  8. Slide 8: The Baycorp acquisition is on track

    The Baycorp acquisition is on track…  The Aug-19 acquisition is achieving pro-forma  H1 NPAT of $2.9m and on track for $6m for FY2020  Debt purchase transition almost complete  Australian PDLs on core operating system  NZ PDLs to be cut over shortly  Integration is ahead of schedule  Annualis

  9. Slide 9: And is contributing to strong operational performance

    … and is contributing to strong operational performance AU/NZ PDL COLLECTIONS AND PAYMENT ARRANGEMENT BOOK  Total collections up 18% over the pcp  AU/NZ collections up 10% over the $ 1.4Bn pcp to record levels $ 200m  Productivity up 5% over the pcp1 $ 150m $ 1.3Bn  Total cumulative collections

  10. Slide 10: Ongoing compliance and sustainability leadership

    Ongoing compliance and sustainability leadership… FY2019 AUS EDR COMPLAINT RATE PER $1m COLLECTED 1 Credit Corp Other debt buyers  Industry-leading Australian EDR complaint rate in FY2019  Low complaint rate with US 0 1 2 3 4 5 6 7 8 regulator 2019 US CFPB COMPLAINT RATE PER $1m COLLECTED 2  No r

  11. Slide 11: Has contributed to a strong purchasing outlook

    … has contributed to a strong purchasing outlook PDL INVESTMENT FY2020 purchasing guidance $ 300m $310 - $320m $ 250m  Baycorp acquisition $ 200m FY2020 purchasing pipeline  Recent share gains in AU/NZ of $298m contracted at $ 150m January 2020  Initial purchasing from new US issuer $ 100m Baycor

  12. Slide 12: Investment in building a large and profitable US business

    Investment in building a large and profitable US business… US COLLECTIONS AND ARRANGEMENT BOOK (A$m) $ 200m $ 150m $ 100m  Cost to collect increased to 43% (39% $ 50m pcp) on rapid headcount growth -  Collections 57% higher than pcp FY2017 H1 FY2017 H2 FY2018 H1 FY2018 H2 FY2019 H1 FY2019 H2 FY202

  13. Slide 13: With continued expansion of operational capacity

    … with continued expansion of operational capacity… US HEADCOUNT 800 700 700  Utah at practical capacity Second site, 600 Washington  Second site (Washington State) off to State (~270 a solid start (current FTE of 40) 500 seats)  Focus on filling Washington State over 400 the next 18 months 300 

  14. Slide 14: And the opportunity to grow purchasing

    … and the opportunity to grow purchasing US PURCHASING FY2020 US MARKET SHARE1 $ 120m Est. CCP market share 3.5% $ 100m FY2020 purchasing  Currently purchasing guidance from 6 issuers $ 80m $95 - $100m  Market share of financial $ 60m services of 3.5% FY2020 purchasing  Scope for significant pipe

  15. Slide 15: Existing economics support our competitiveness

    Existing economics support our competitiveness Asset Cost to turnover collect  Operating metrics benchmark well against publicly traded competitors Credit Corp Group 0.7x 42.8%  Opportunity for further improvement as headcount growth moderates Portfolio Recovery Associates (NASDAQ: PRAA)1 0.7x 40.

  16. Slide 16: Continued consumer lending book and earnings growth

    Continued consumer lending book and earnings growth… CONSUMER LENDING BOOK AND REVENUE EARNINGS AND RETURN ON ASSETS +13% NPAT ROA $ 230m $ 25m 15% $ 212m $ 203m $ 183m $ 20m $ 172m $ 156m $ 161m H2 10%  Loan book growth of $ 15m 13% over pcp $107m H2  H1 NPAT growth of 20% H2 $ 10m 5% H2 $ 5m H1

  17. Slide 17: Driven by strong customer acquisition and retention

    … driven by strong customer acquisition and retention CUSTOMER SETTLEMENTS $ 140m  Total settlements 14% higher than pcp +14% $ 120m  New customer settlements 8% higher than the pcp $ 100m  Customer acquisition and retention $ 80m supported by: $ 60m  Strong consumer proposition (refer Appendix

  18. Slide 18: On track for up to 18% NPAT growth in FY2020

    On track for up to 18% NPAT growth in FY2020 FY2019 FY2020 Variance ACTUALS GUIDANCE (Refined Jan 2020) PDL investment $ 228.0m $310 - $320m 36 - 40% Net lending $ 64.1m $60 - $65m - NPAT $ 70.3m $81 - $83m 15 - 18% EPS (basic) 141.9cps 149 - 151 cents 5 - 6% Credit Corp Group H1 FY2020 Results Pres

  19. Slide 19: 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: Superior consumer lending proposition

  20. Slide 20: Operating cash flow and gearing

    APPENDIX 1 Operating cash flow and gearing Operating cash flows and gearing Dec 2019 Jun 2019 Dec 2018 Jun 2018 Pre-tax operating cash flow $182.4m $167.3m $163.4.m $155.0m Tax payments ($27.4m) ($28.9m) ($12.1m) ($16.8m) PDL acquisitions, net lending and capex ($160.0m) ($148.7m) ($144.1m) ($114.1m

  21. Slide 21: Pricing discipline and accuracy

    APPENDIX 2 Pricing discipline and accuracy PRICING DISCIPLINE AND ACCURACY $ 3,500m Cumulative collections $ 3,000m Actual cash $ 2,500m collections $ 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

  22. Slide 22: Collections life cycle

    APPENDIX 3 Collections life cycle PDL COLLECTIONS BY VINTAGE $ 140m +18%1 $ 120m $ 100m 31% 32% 29% 30% 31% 32% 33% 32% 30% 30% $ 80m 32% 30% 32% 16% 16% $ 60m 15% 15% 12% 11% 14% 15% 10% 13% 14% 17% 17% 23% 23% 15% 16% 23% $ 40m 19% 15% 15% 19% 21% 22% 21% 25% $ 20m 38% 30% 29% 34% 36% 38% 38% 36%

  23. Slide 23: Productivity

    APPENDIX 4 Productivity PDL COLLECTIONS PER HOUR $ 300 Half year average $ 250 FY2020 H1: $250 FY2019 H1: $237 12m to Dec-19 $ 200 12m to Dec-18 $ 150 $ 100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Credit Corp Group H1 FY2020 Results Presentation 23

  24. Slide 24: 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 Face value $5.9b $6.0b $6.2b $6.4b $7.8b Number of accounts 710,000 710,000 753,000 786,000 1,268,000 Payment arrangements Face value $1,300m $1,300m $1,300m $1,300m $1,400m Number of

  25. Slide 25: Operational and total headcount

    APPENDIX 6 Operational and total headcount PERIOD END HEADCOUNT (FTE) PERIOD END HEADCOUNT (FTE) 2,200 Jun-18 Dec-18 Jun-19 Dec-19 2,000 1,800 Debt buying 1,208 1,202 1,250 1,455 operations 1,600 1,400 Agency 77 90 90 281 1,200 1,000 Lending 110 119 119 126 800 Support 102 103 108 133 600 400 Total

  26. Slide 26: Superior consumer lending proposition

    APPENDIX 7 Superior consumer lending proposition • Most sustainable product in the Credit Corp Price1 segment cheaper by • Priced below mainstream pricing cap Credit Corp Wallet Wizard $148 - • Cheaper than competitors • Cheaper than not for profit alternative Typical cash loan competitor $440 66% •

  27. Slide 27: Thank you

    —— Credit Corp Group Thank you.

Credit Corp Group — H1 FY2020 Earnings Presentation on 6ix