Aeon Financial Service Co., Ltd. · TSE:8570
Aeon Financial Service — FY2023 Earnings Presentation
44 slides from Aeon Financial Service's earnings presentation, Apr 9, 2024
Slide 1: IR Presentation on FY2023 Financial Results: Script and Q&A
IR Presentation on FY2023 Financial Results: Script and Q&A Time and Date: Thursday, April 9, 2024 PM 5:00-6:00 Presenters: Kenji Fujita, President and CEO Tomoyuki Mitsufuji, Director, Managing Executive Officer and General Manager of the Finance and Accounting Division 1
Slide 2: Presentation outline
・In today’s presentation, Director and Managing Executive Officer Mitsufuji will first discuss the highlights of our financial results for the full year of fiscal 2023 and then the establishment of management indicators. This will be followed by President and CEO Fujita’s explanation of AEON Financi
Slide 3: FY2023 consolidated financial results
The consolidated financial results for the full fiscal year ending February 2024 were as follows. ○ Operating revenue was 485.6 billion yen, up 7% year on year. ○ Operating profit was 50.0 billion yen, down 15% year on year. ○ Ordinary profit was 51.1 billion yen, down 17% year on year. ○ Profit a
Slide 4: Domestic business operating profit change
This slide shows the breakdown of year-on-year change in the operating profit of our domestic business. As shown on the left-hand side of the graph, the results for AEON Financial Service have been reported under the domestic segment since the second quarter due to the management integration bet
Slide 5: Domestic ID expansion
First, let me explain about our progress in domestic ID expansion. We acquired 1.58 million new cardholders, down 13% year on year. The number of valid domestic members increased from the beginning of the term by 670 thousand to 31.49 million. We spent a large sum of expenses on online campaigns
Slide 6: Building a more profitable membership base
more profitable membership base within our eco-system. We will continue to build an environment to increase use through such efforts as launching AEON Pay functions in applications offered by other companies. 6
Slide 7: Transaction volume and outstanding receivables
I will now discuss the trends in the transaction volumes and outstanding receivables of shopping and cash advance transactions in our domestic business. ・ The graphs show transaction volume in yellow lines and the balance of outstanding receivables in blue bars. ・ Please look at the shopping trans
Slide 8: Cash advance transactions and balance
designated accounts 24 hours a day, seven days a week. As a result, transaction volume increased to 370.8 billion yen, up 10% year on year. The balance of cash advances also increased for the full year, after four straight years of decline since fiscal 2019, to 412.3 billion yen, up 4% year on yea
Slide 9: Receivables balance and bad debt expense ratio
This slide shows the trends in the outstanding balance of revolving credit, installment credit, and cash advances, as well as the ratio of bad debt related expenses. The graph shows revolving credit and installment credit receivables in light blue bars and cash advance receivables in dark blue b
Slide 10: Housing loan and asset management business
I will next discuss the transaction volume and balance of receivables of our housing loan business and the status of our asset management business. The transaction volume was 558.6 billion yen, increasing 14% year on year. We were able to make up for the slower-than-expected performance in the f
Slide 11: AEON Bank consultations
The number of consultations offered at AEON Bank offices increased by 16% during January and February. We are hoping to propose various services to customers who visit our offices to receive consultation on the purchase of trusts and other investment options. 11
Slide 12: Global business results
・ From here, we will move on to global business. ・ The operating revenue for the full year marked a record high for all three areas of China, Mekong, and Malay. ・ Although profits declined in the Mekong and Malay areas due to an increase in bad debt related expenses, the China area achieved a record
Slide 13: Global business operating profit change
・ This slide shows the breakdown of the year-on-year change in the operating profit of the global business. ・ Total profit of the global business decreased by 4.2 billion yen due to the impact of the year-on- year increase in bad debt related expenses by 3.8 billion yen in the China area, 2.3 billio
Slide 14: Overseas receivables and NPL ratios
・ I will explain the trends in the outstanding receivables and non-performing loan (NPL) ratio of our three overseas subsidiaries. ・ The graphs show installment receivables in light blue and operating loans receivables in dark blue bars, while the yellow and red lines show the NPL ratio and the rati
Slide 15: Malaysia receivables and bad debt expenses
implemented in the first quarter of fiscal 2022 in Malaysia led to a significant reduction in bad debt related expenses. This, in turn, resulted in a year-on-year increase in bad debt related expenses in the following fiscal year of 2023. However, the steady increase in the outstanding balance of op
Slide 16: Management indicators
・ From this slide on, I will discuss the management indicators we have established as our guidepost to the future of our business. 16
Slide 17: ROE and PBR as management indicators
・ First, about our current status: Our price price-to-book ratio (PBR) remained at a little over 1 up to fiscal 2018. ・ However, with the restrictions on activities and downturn in consumption caused by the global spread of the COVID-19 pandemic, we saw a decline in our outstanding balance of high-
Slide 18: Concept for improving ROE
・ This slide shows the concept of how we plan to improve our ROE. ・ Some of the following terms are defined in a slightly different way compared to other business companies: ○ “Return on assets” as represented by “operating revenue ÷ balance of receivables” ○ “Productivity” as represented by “profit
Slide 19: Increasing receivables balance and high-yield share
・ First, we will build a stable recurring revenue base by increasing the overall balance of receivables and the share of high-yielding receivables, as a measure to improve our “return on assets.” ・ As a short-term target, we aim to increase the total balance of high-yielding receivables such as revo
Slide 20: Credit screening and collection with AI
・ Next, let’s look into how we intend to advance the accuracy of credit screening and repayment collection in overseas markets, which are important factors in improving “productivity.” ・ Regarding credit screening, one measure is the introduction of the AI-based credit scoring service offered by Glo
Slide 21: Basic capital management policy
・ The last point from me is our basic capital management policy. ・ While striking a balance between profitability and financial security, we will invest in growth areas and productivity improvement to achieve stable and sustainable shareholder returns. ・ Targeting a financial leverage of around 15 t
Slide 22: Initiatives to improve corporate value
・ I am Kenji Fujita, President and CEO. ・ From here, I will discuss the future directions of AEON Financial Service and our initiatives to improve corporate value. 22
Slide 23: Vision for 2030
・ As a company that stands closest to the daily lives of the local community in Japan and the Asian countries where we operate, we have offered financial services tailored from the perspective of the general consumer, which is the advantage of a financial services group born from a retailer. ・ We ha
Slide 24: Medium-Term Management Plan
・ The current Medium-Term Management Plan, which ends in fiscal 2025, embraces the basic vision of “The Second Founding: value chain transformation and new network creation,” positioning the five-year term as the “transformation phase” to ensure corporate growth towards our “Vision for 2030.” 24
Slide 25: Business portfolio transformation
・ We are currently taking on the challenge of transformation. Taking the business environment into consideration, we are reviewing our business portfolio through selection and concentration to maximize customer value, and building a new business model utilizing digital technologies without persistin
Slide 26: Expanding the AEON Living Zone
・ AEON Financial Service operates in Japan and 10 other countries in Asia, and in each of the 11 countries, we serve as an infrastructure that connects customers, local communities, merchants, business partners, and AEON Group by providing financial services rooted in the community. ・ We will contin
Slide 27: Transforming customer touchpoints
・ As the first step to expanding the AEON Living Zone, we will transform our customer touchpoints by linking them together. ・ We have set up various touchpoints, including brick-and-mortar shops, websites, applications, etc., as a point of access for consultation and application for each of our prod
Slide 28: AEON Wallet renewal
・ This slide shows smartphone screenshots of AEON Wallet, which underwent a renewal to become a comprehensive access point for financial services in September last year. To accommodate ever-diversifying customer needs, the application has been renewed so that users can now navigate to different serv
Slide 29: Priority measures for fiscal 2024
・ Now, let’s look into our priority measures for fiscal 2024 based on the policies I have just explained. 29
Slide 30: Expanding AEON Pay and merchant network
・ In addition to creating a seamless customer experience through the touchpoint transformation I mentioned and the enhancement of the functions of AEON Wallet, we will further focus efforts on building an environment where users can use our services everywhere by expanding our merchant network. ・ To
Slide 31: Reorganizing physical touchpoints
・ Next, let’s turn our eyes to physical touchpoints. We will reorganize our physical touchpoints from the customers’ perspective to build a user-friendly environment where people can feel free to consult us. ・ We believe that it is one of our strong advantages to have the opportunity to communicate
Slide 32: Domestic payment and receivables targets
・ As already explained, by steadily advancing our touchpoint transformation towards expanding the AEON Living Zone, we will enhance our customer base, increase opportunities for service use, expand the transaction volume of credit card shopping and other payment services, and boost the balance of op
Slide 33: Global business outlook and credit quality
・ While the situation varies by country in the global market, Malaysia, in particular, is expected to sustain stable economic growth in terms of GDP growth and other indicators. ・ On the other hand, Thailand continues to see a negative consumer price index, and in Hong Kong, the GDP growth is rather
Slide 34: Digital bank launch in Malaysia
・ Next, I will explain the launch of a new digital bank in Malaysia, which we have been preparing for some time. ・ In the first quarter of fiscal 2024, we are launching Malaysia’s first digital banking business based on Islamic financing. It will start by accepting personal deposits and issuing debi
Slide 35: Human resource development
・ As our business and the surrounding environment continue to significantly change, we are working to foster human resources who share our aspirations and can flexibly respond to change. ・ We aim to develop human resources who can not only execute operations in strict adherence to the procedures but
Slide 36: AFS Academy and digital training
・ To give an example, the AFS Academy established in 2023 offers a broad range of courses, an electronic library, and e-learning programs to deepen various knowledge, skills, and cultural understanding beyond business operation skills. ・ In addition to invited lectures by leaders and intellectuals o
Slide 37: FY2024 forecast and dividends
・ The last topic is the business forecast and dividends expected for fiscal 2024. 37
Slide 38: FY2024 consolidated performance targets
・ We plan to put the domestic business back on the growth track through expansion of operations and improvement of productivity by increasing transaction volumes, accumulating the balance of high-yielding operating receivables, and transforming our customer touchpoints. ・ In the overseas business, i
Slide 39: Q&A: JPMorgan Securities Japan
[Q&As] ■ JPMorgan Securities Japan / Analyst Sato (1) Please tell us how you see your domestic operating expenses in relation to your performance forecast for fiscal 2024. Operating expenses have increased by around 12 billion yen compared to the previous fiscal year, but considering the transfer of
Slide 40: Q&A: non-organic growth and SMBC Nikko
(2) What areas do you have in mind for investment in non-organic growth areas? (Tomoyuki Mitsufuji, Director, Managing Executive Officer and General Manager of the Finance and Accounting Division) First of all, we will reduce loss-making businesses. As for areas in which we will expand investment, w
Slide 41: Q&A: Daiwa Securities
was a question about future cost reduction. Reshuffling the business portfolio is also important from the viewpoint of reducing costs by integrating various services into a one-stop shop. ■ Daiwa Securities / Analyst Watanabe (1) Please tell us the factors behind the increase and decrease in profit
Slide 42: Q&A: interest rates and Citigroup
(2) Please tell us about any factors impacting your plans for fiscal 2024, such as rising Japanese interest rates and the depreciation of the yen. (Tomoyuki Mitsufuji, Director, Managing Executive Officer and General Manager of the Finance and Accounting Division) I think housing loan interest rates
Slide 43: Q&A: AEON Pay and ID unification
Group is promoting the adoption of common IDs, so obtaining an AEON Pay ID means obtaining a common ID for the entire AEON Group. Thus, expanding AEON Pay users translates into expanding the Living Zone. We believe that the use of AEON Pay will lead to the use of credit cards and bank accounts, furt
Slide 44: Q&A: ROE target timing
environment, there are various factors that affect the timing of when we can achieve our targets, such as non-organic growth and withdrawal from unprofitable businesses. I won’t explicitly specify until when we will achieve the targets. All I can say for now is that we want to achieve them within se
AEON Financial Service — FY2023 Earnings Presentation on 6ix