Credit Corp Group Limited · ASX:CCP
Credit — FY2019 Earnings Presentation
28 slides from Credit's earnings presentation, Jul 29, 2019
Slide 1: FY2019 Results presentation
FY2019 Results presentation For personal use only 29 July 2019 Thomas Beregi, CEO Michael Eadie, CFO
Slide 2: Leadership in the credit-impaired consumer segment
Leadership in the credit-impaired consumer segment… For personal use only • Long-term growth ANALYTICS & DISCIPLINE OPERATIONAL EXCELLENCE SUSTAINABILITY & COMPLIANCE • ROE 16% - 18% • Low gearing Australian / NZ debt buying • Largest database • Highest asset turnover 1 • No adverse orders or undert
Slide 3: Delivered sustained growth, strong returns and increased diversification
…has delivered sustained growth, strong returns and increased diversification… For personal use only Segment NPAT and Return on Equity $ 85m 30% $ 70m 25% NPAT CAGR 21% $ 55m 20% $ 40m 15% $ 25m 10% $ 10m 5% ($ 5m) - FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 US deb
Slide 4: FY2019 Financial results
…with the US and consumer lending driving growth in FY2019… For personal use only FY2019 Financial results FY2019 FY2018 $ change % change Aus/NZ debt buying 1 $189.5m $195.7m ($6.2m) (3%) Aus/NZ lending $94.0m $79.3m + $14.7m + 19% US debt buying $40.8m $24.0m + $16.8m + 70% Revenue total $324.3m $
Slide 5: Positioning CCP to seize opportunity across all segments
…while positioning CCP to seize opportunity across all segments For personal use only Segment Market conditions Credit Corp positioning Aus/NZ • Increased issuer compliance sensitivity • Further reduction in EDR 1 complaint rate in debt buying FY2019 • Extended period of high pricing showing in sign
Slide 6: Recent step-up in investment
Recent step-up in investment… For personal use only • Investment growth of 18% more than double the April projection of an 8% increase • Recent Aus/NZ debt buying wins mark a return to core business investment growth • Strong growth in US debt buying and net lending PDL investment and net lending $
Slide 7: Substantial capital headroom to fund a further step-up in investment
…and substantial capital headroom to fund a further step-up in investment For personal use only Facility headroom and gearing • Banking facilities recently expanded and extended 50% - Limits increased to $350m, maturing in 2022 and 2023 $ 350m - Headroom ~$230m at year-end FY2019 40% $ 280m • Procee
Slide 8: Strong operational performance in Aus/NZ debt buying
Strong operational performance in Aus/NZ debt buying… For personal use only • Aus/NZ operational performance sustained despite two and a half years of reduced purchasing - Collections in line with FY2018 record levels (FY2019 just 3% below FY2018) - Payment arrangement book underpinning sustained pe
Slide 9: Supported by strong metrics and approaches
…supported by strong metrics and approaches For personal use only Pricing accuracy and returns on track Efficiency • Total cumulative collections above aggregate pricing expectations • Productivity up by 11% over the prior year • Total collections up 6% over the prior year • Aus/NZ collections track
Slide 10: Ongoing compliance and sustainability leadership
Ongoing compliance and sustainability leadership… For personal use only • Industry-leading EDR complaint rate in FY2018 (last reporting) • Further reduction in Credit Corp EDR volumes since commencement of AFCA - contrast to 35% increase in reported total dispute volumes 3 • Highest rating from key
Slide 11: Strong purchasing outlook
…has contributed to a strong purchasing outlook For personal use only • Improved Aus/NZ purchasing outlook - Pipeline likely to increase substantially early in FY2020 as processes finalise • Number of US forward flows to be re-tendered early in FY2020 PDL investment $ 250m $ 228m FY2020 purchasing g
Slide 12: Strong loan book growth provides an enhanced FY2020 starting position
Strong loan book growth provides an enhanced FY2020 starting position… For personal use only Consumer lending book and revenue +16% $ 212m $ 203m $ 183m $ 172m $ 156m $ 161m $ 135m $ 121m $ 100m $ 98m Yield maintained $ 72m $ 63m Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18
Slide 13: Unexpectedly strong Wallet Wizard new customer growth
…underpinned by unexpectedly strong Wallet Wizard new customer growth… For personal use only • Total settlements up by 17% for FY2019 • New customer settlements up by 18% in FY2019 • Tighter prime lending standards contributing to new customer growth • Strong consumer proposition supports customer a
Slide 14: Expansion of the auto lending pilot
…and expansion of the auto lending pilot For personal use only • Auto settlements up by 93% in FY2019 versus FY2018 • Expansion into a traditional “finance only” product has driven broker-originated volume across both “finance only” and “vend-and-lend” • Further expansion subject to review of underw
Slide 15: The US opportunity remains substantial and attractive
The US opportunity remains substantial and attractive… For personal use only • Supply conditions remain favourable - No signs of pricing pressure despite competitors growing purchasing 1 - Unsecured credit and charge-off rates growing • Credit Corp remains a very small part of a large and growing ma
Slide 16: Operational capacity is expanding rapidly
…and operational capacity is expanding rapidly For personal use only • Headcount now 363 in the existing Salt Lake City, UT site and we are on-track to fill the site during Q1 FY2020 • Second location scheduled to open during Q2 FY2020 for a combined capacity of 700 seats US Headcount and capacity 7
Slide 17: Purchasing is growing and new relationships are in place
Purchasing is growing and new relationships are in place For personal use only • Investment increased by 40% to $85m in FY2019 • New relationships established during FY2019 • Substantial room to grow purchasing from existing sellers US Purchasing composition $ 100m $ 80m Other $ 60m Marketplace lend
Slide 18: Existing economics support our competitiveness
Existing economics support our competitiveness… For personal use only • Operating metrics benchmark well against publicly-traded competitors • Opportunity for further improvement when growth moderates (FY2021) US debt buying operating metrics Asset turnover 4 Cost to collect CCP 1 0.7 40.8% ECPG 2 0
Slide 19: On track for strong US segment earnings growth
…and we are on track for strong US segment earnings growth For personal use only • US profit expected to increase significantly in FY2020 US NPAT (A$m) $ 10m $8-9m $ 8m $ 6m $ 4m $ 2m - ($ 2m) ($ 4m) FY2016 FY2017 FY2018 FY2019 FY2020 Projection Credit Corp Group FY2019 Results Presentation | 19
Slide 20: FY2020 initial guidance
FY2020 initial guidance For personal use only FY2020 guidance PDL acquisitions $220 - $240m Net lending $60 - $65m NPAT $75 - $77m EPS (basic) 138 - 140 cents DPS 72 cents Credit Corp Group FY2019 Results Presentation | 20
Slide 21: Supporting materials
Supporting materials For personal use only Credit Corp Group FY2019 Results Presentation | 21
Slide 22: Appendix | Operating cash flows and gearing
Appendix 1 | Operating cash flows and gearing For personal use only Operating cash flows and gearing Jun-19 Dec-18 Jun-18 Dec-17 Pre-tax operating cash flow $167.3m $163.4.m $155.0m $150.0m Tax payments ($28.9m) ($12.1m) ($16.8m) ($15.8m) PDL acquisitions, net lending and capex ($148.7m) ($144.1m) (
Slide 23: Appendix | Pricing discipline and accuracy
Appendix 2 | Pricing discipline and accuracy For personal use only Pricing discipline and accuracy Cumulative collections $ 3,000m Actual cash collections $ 2,500m $ 2,000m $ 1,500m Initial projections $ 1,000m $ 500m - * For all PDLs held at June 2008, initial projections represent the forecast at
Slide 24: Appendix | Collections life cycle
Appendix 3 | Collections life cycle For personal use only PDL collections by vintage +6% 1 $ 105m $ 90m 32% 35% 30% 30% 31% 34% 34% 30% $ 75m 32% 29% 33% 32% 13% 14% 16% $ 60m 11% 14% 16% 16% 15% 10% 18% 18% 12% $ 45m 22% 21% 15% 19% 21% 25% 23% 23% 19% 23% 19% 20% $ 30m 3… 37% 36% $ 15m 36% 38% 31%
Slide 25: Appendix | Productivity
Appendix 4 | Productivity For personal use only PDL collections per hour Full year average FY2019: $249 $ 300 FY2018: $224 $ 250 2018/19 2017/18 $ 200 $ 150 $ 100 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Credit Corp Group FY2019 Results Presentation | 25
Slide 26: Appendix | Payers base
Appendix 5 | Payers base For personal use only Portfolio summary - Aus/NZ debt buying only Total portfolio Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Face value $5.8b $5.9b $6.0b $6.2b $6.4b Number of accounts 716,000 710,000 710,000 753,000 786,000 Payment arrangements Face value $1,300m $1,300m $1,300m $1
Slide 27: Appendix | Operational and total headcount
Appendix 6 | Operational and total headcount For personal use only Period end headcount (FTE) Period end headcount (FTE) 1,600 1,400 Jun-16 Jun-17 Jun-18 Jun-19 Debt buying operations 1,096 1,198 1,208 1,250 1,200 Agency 13 81* 77 90 1,000 Lending 108 95 110 119 800 Support 96 101 102 108 600 Total
Slide 28: Appendix | Superior consumer lending proposition
Appendix 7 | Superior consumer lending proposition For personal use only • Most sustainable product in the segment - Priced below mainstream pricing cap - Cheaper than competitors - Cheaper than not for profit alternative • Unaffected by recommendations from recent senate inquiry Credit Corp Price 1