Cog Financial Services Limited · ASX:COG
Cog Financial Services — Consolidated Operations Group — Macquarie Emerging Leaders Forum 2019
32 slides from Cog Financial Services's conference presentation, Jun 20, 2019
Slide 1: Macquarie Emerging Leaders Forum
For personal use only Macquarie Emerging Leaders Forum 20 June 2019
Slide 2: Important notice and disclaimer
Important notice and disclaimer For personal use only IMPORTANT: YOU MUST READ THE FOLLOWING BEFORE CONTINUING The following General Disclaimer applies to this Information Presentation and you are therefore required to read this carefully before reading or making any other use of this Information Pr
Slide 3: Contents
For personal use only Contents 0101 Introduction Insert divider title 3 02 A Industry Insert overview divider title 10 7 03 Business overview 17
Slide 4: Introduction
For personal use only Introduction 01
Slide 5: Introduction: Presenting today
Introduction For personal use only Presenting today Andrew Bennett Group CEO ⚫ Over the last 3.5 years, Consolidated Operations Group (COG) has transformed from a listed investment company to Australia’s leading SME finance broker network ⚫ COG’s next stage of growth is premised on expanding its sui
Slide 6: Investment highlights
Investment highlights For personal use only Strong growth in SME — With 2.3m SMEs employing 4.7m people, SMEs are a large and significant part of the Australian economy lending market — While there has been some improvement, SMEs still have lower access to finance and pay higher interest compared to
Slide 7: Overview of COG
Overview of COG For personal use only COG's core operations are an SME equipment finance broking and aggregation business and a provider of non-prime commercial equipment leasing Finance Broking & Aggregation Commercial Equipment Leasing Other ⚫ Australia’s largest equipment finance ⚫ Provider of no
Slide 8: Company history
Company history For personal use only COG is a young, entrepreneurial and agile company that has moved quickly over the last 3.5 years to develop into a specialist SME finance business with the largest equipment broking and aggregation network in the market Platform Consolidated Acquisition of Acqui
Slide 9: Strategic objective
Strategic objective For personal use only COG is building the leading Australian SME business equipment finance adviser Grow origination of ✓ company owned products Current Position and shareholder returns Value Critical mass Expand in-house established leasing products Leveraging company’s broker d
Slide 10: Trusted SME finance adviser
Trusted SME finance adviser For personal use only COG is Australia’s leading SME finance adviser with an estimated 17% market share of broker intermediated finance for SMEs Finance Broker Synergies Finance Product • Aggregation platforms • Prime equipment • IT • Prime auto • Compliance Owned Finance
Slide 11: Industry overview
For personal use only Industry overview 02
Slide 12: SMEs in Australia
SMEs in Australia For personal use only Small and medium-sized enterprises are a significant part of the Australian economy, comprising 98% of all businesses and employing 44% of people in the private, non-financial sector Key statistics1 Number of SMEs in Australia1 2.3m 2,500 No of small businesse
Slide 13: Lending to SMEs
Lending to SMEs For personal use only SMEs borrow less and pay higher interest for bank debt compared to larger businesses and their perception of access to finance has deteriorated over recent periods Business lending by banks1 Small business lending by banks2 Interest rate spreads on business debt
Slide 14: SME lending products
SME lending products For personal use only COG currently focuses on the equipment financing segment of the SME lending market, which has grown at 10% CAGR over the last 5 years Key financing products for small businesses Equipment finance commitments1 5-yr CAGR: 10.0% Financing Advantages for small
Slide 15: Broker distribution
Broker distribution For personal use only Due to the complexities around lending to SMEs, brokers play an important facilitation role between SMEs and lenders Complexities surrounding SME lending Key aggregator competitors to COG ⚫ Potential overlap between businesses’ finances and owners’ finances
Slide 16: Regulatory framework
Regulatory framework For personal use only In an environment where banks are pulling back from lending to SMEs, the Financial Services Royal Commission Final Report did not identify any issues with how the sector operated Regulatory environment and competitive dynamics Business loans under $2m Regul
Slide 17: Infrastructure spending
Infrastructure spending For personal use only The significant pipeline of infrastructure projects along the Australian East Coast, driven by road and rail projects, will continue to drive demand for equipment and equipment financing by SMEs Greenfield infrastructure projects by jurisdiction and sect
Slide 18: Business overview
For personal use only Business overview 03
Slide 19: Group structure diagram
Group structure diagram For personal use only COG has acquired full ownership or majority stakes in a number of Broking & Aggregation businesses over the last 3.5 years, and improved the operations of its legacy leasing business Group structure diagram including key subsidiaries COG1 66% 100% 100% 5
Slide 20: Finance brokers & aggregation: Overview
Finance brokers & aggregation Overview For personal use only Supported by an inorganic growth strategy, COG’s Net Asset Finance have increased by more than 50% in 1H19 vs 1H16 Net Asset Finance (NAF) Pro-forma 1H19 NAF split1 Key components of revenue 4,000 Significance Revenue Detail of revenue — C
Slide 21: Finance brokers & aggregation: Key subsidiaries
Finance brokers & aggregation Key subsidiaries For personal use only The key businesses within the Broking & Aggregation segment are 2 brokers (Linx and QPF), 1 aggregator (CFG) and 2 broker aggregators (Platform and Centrepoint) Platform CFG Centrepoint Linx QPF Overview Percentage ownership 66%1 8
Slide 22: Finance brokers & aggregation: Broker footprint
Finance brokers & aggregation Broker footprint For personal use only COG has an Australia-wide broker footprint, with aggregator brokers in all States and Territories and equity brokers in QLD, NSW, ACT, VIC, TAS and WA NT 13 aggregation brokers QLD 32 equity brokers 992 aggregation brokers WA 5 equ
Slide 23: Finance brokers & aggregation: Aggregator brand and IT system
Finance brokers & aggregation Aggregator brand and IT system For personal use only COG’s aggregation platforms will continue to attract brokers, driven by the advanced IT systems on offer and the consolidation of the 3 platforms into a single “COG Partners” brand Unifying COG's aggregation platforms
Slide 24: Finance brokers & aggregation: Acquisition pipeline
Finance brokers & aggregation Acquisition pipeline For personal use only With a structural tailwind of ageing brokers, COG has a strong pipeline of potential opportunities which would be acquired through its key broking subsidiaries Overview of approach to acquisitions ⚫ COG operates predominantly i
Slide 25: Commercial equipment leasing: Overview
Commercial equipment leasing Overview For personal use only COG’s Commercial Equipment Leasing division comprises TL Rentals, which provides equipment financing to non-prime commercial borrowers Brand — TL Rentals Target segment — Non-prime commercial equipment leasing Equipment financed — No indust
Slide 26: Commercial equipment leasing: Revenue model
Commercial equipment leasing Revenue model For personal use only COG earns revenue in the form of net interest income as well as inertia lease payments and sale of equipment above residual value at the end of the lease term Illustrative example of leasing economics and impact on P&L Key revenue and
Slide 27: Commercial equipment leasing: Credit assessment process
Commercial equipment leasing Credit assessment process For personal use only TL Rentals is primarily a low doc lender with a matrix that determines potential borrowers’ eligibility for loans and the applicable interest rate Primary asset matrix Standard matrix Maximum amount financed — $75,000-$150,
Slide 28: Commercial equipment leasing: Overview of loan book
Commercial equipment leasing Overview of loan book For personal use only TL Rentals’ leasing business is diversified across low doc / full doc, industries, asset types and the state the client is in Industry by OEC – low doc Asset type by OEC – low doc State by OEC – low doc FY17-1H19 Total Original
Slide 29: Commercial equipment leasing: Funding arrangements
Commercial equipment leasing Funding arrangements For personal use only TL Rentals has diverse, albeit uncommitted, funding arrangements with a number of lenders as well as retaining some exposures on its balance sheet Current funding sources Higher Lower Credit quality New funder Old Funder Debentu
Slide 30: Overview of growth initiatives
Overview of growth initiatives For personal use only With the first stage of its strategic priorities partially complete, COG’s growth initiatives include further broker bolt-on acquisitions and developing in-house products Further acquisition of brokers Increasing manufacturing of lending products
Slide 31: Timing of product manufacturing
Timing of product manufacturing For personal use only Following the launch of the prime lending product in January 2020, COG intends to extend its product suite to include other key SME lending products 2019 2020 2021 2022 • Preparation for prime Preparation for prime equipment product well progress
Slide 32: New products – prime vs mid-prime
New products – prime vs mid-prime For personal use only COG estimates that mid-prime products have a higher ROE than prime products, driven by a higher yield and excess spread, partially offset by higher losses and opex Prime: illustrative spread breakdown Mid-prime: illustrative spread breakdown Pr
Consolidated Operations Group — Macquarie Emerging Leaders Forum 2019 on 6ix