Credit Corp Group Limited · ASX:CCP
Credit — FY2022 Earnings Presentation
23 slides from Credit's earnings presentation, Aug 2, 2022
Slide 1: FY2022 Results
2 AUGUST 2022 RESULTS Thomas Beregi Michael Eadie Cc Credit Corp Group
Slide 2: Leadership of the credit impaired consumer segment …
Leadership of the credit impaired consumer segment … ANALYTICS & DISCIPLINE OPERATIONAL EXCELLENCE SUSTAINABILITY & COMPLIANCE Australian / NZ debt buying Large database High asset turnover 1 Low dispute rate History of pricing accuracy Low cost to collect 2 $1.4b in ongoing repayment
Slide 3: … has produced sustained earnings growth
… has produced sustained earnings growth NPAT AND RETURN ON ASSETS 18.0% $ 105m 16.0% +9% $ 90m 14.0% $ 75m 12.0% 10.0% $ 60m 8.0% $ 45m 6.0% $ 30m 4.0% $ 15m 2.0% - - 1 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 Total NPAT (LHS) COVID adjustments NPAT (LHS) ROA (RHS) 1. FY2022 N
Slide 4: Solid growth driven by US and lending …
Solid growth driven by US and lending … AU/NZ debt buying run-off offset by Radio Rentals book acquisition FY2021 FY2022 Var % AU/NZ debt buying $219.4m $229.9m 5% US debt buying $76.5m $87.3m 14% AU/NZ lending $78.9m $94.0m 19% Revenue total $374.8m $411.2m 10% AU/NZ debt buying $54.1m $55.0m 2%
Slide 5: … supported by strong debt buying operational metrics …
… supported by strong debt buying operational metrics … AU/NZ Capacity maintained Constant share of diminished market US Outcomes impacted by resourcing constraints in tight labour market FY2022 ∆ FY2021 AU/NZ Collections $371m 6% debt buying Productivity $315 per hour 8% Operations headco
Slide 6: … and an acceleration in lending volume …
… and an acceleration in lending volume … Record volumes written in H2, accelerated book growth FY23 outlook boosted by book size CONSUMER LENDING BOOK AND REVENUE $ 300m $ 200m $251m $ 250m +36% $ 150m $ 200m $184m $ 110m $ 150m $ 100m $ 100m $ 50m $ 50m - - Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 D
Slide 7: … with favourable credit loss experience
… with favourable credit loss experience Excess provision of $14.4m ($10.1m net of tax) released to account for repayment of previously provided loans Remaining provision well above pre-COVID levels Release offset the impact of additional lending volume on upfront loss provision expense LOSS P
Slide 8: Record level of investment …
Record level of investment … During H2: - US PDL supply increased - AU/NZ cash loan demand accelerated PDL INVESTMENT AND LENDING VOLUME $ 700m $ 600m 267 $ 500m $ 400m 198 193 215 $ 300m 183 223 124 79 $ 200m 85 60 80 148 75 $ 100m 135 143 108 97 67 - FY2018 FY2019 FY2020 FY2021 FY2022 AU/NZ debt
Slide 9: … has temporarily impacted cash flow
… has temporarily impacted cash flow FREE CASH FLOW $150m $115m $100m $65m $50m $38m ($3m) - FY2019 FY2020 FY2021 FY2022 FY2023 Projected ($50m) ($100m) ($100m) 1 ($150m) 1. Free Cash Flow = Operating Cash Flow – Investing Cash Flow. Credit Corp CreditFY2022 Results Market Presentation Corp Group Up
Slide 10: FY2023 has started with a strong US PDL investment pipeline …
FY2023 has started with a strong US PDL investment pipeline … PDL INVESTMENT $ 450m $ 400m $ 350m $ 300m FY2023 purchasing $ 250m guidance $220 - $260m $ 200m 9 $ 150m FY2023 purchasing $150m pipeline of $180m $ 100m contracted as at $ 50m July 2022 $30m - FY2019 FY2020 FY2021 FY2022 FY2023 AU/NZ de
Slide 11: … reflecting improved US PDL supply …
… reflecting improved US PDL supply … Substantial increase in charge-off volumes reflecting strong re-growth in unsecured credit balances US REVOLVING CREDIT MARKET US PURCHASING (A$m) $ 900bn 5% $250m $ 850bn 4% $200m $ 800bn 3% $150m $ 750bn 2% $100m $ 700bn 1% $ 650bn $50m $ 600bn - 2019 2019 2
Slide 12: … but the likelihood of a recovery in 'organic' AU/NZ PDL volumes is limited
… but the likelihood of a recovery in ‘organic’ AU/NZ PDL volumes is limited In the absence of a sizeable one-off purchase AU/NZ PDL earnings will continue to run-off AUS INTEREST BEARING CONSUMER CREDIT CARD AUS BANK CREDIT CARD 90+ DAYS PAST DUE RATES 2 BALANCES 1 1.4% $29bn 1.2% $27bn 1.0% $25b
Slide 13: Resourcing to service increased US purchasing will be required …
Resourcing to service increased US purchasing will be required … Philippines evening shift has commenced with ~100 FTE augmenting onshore resourcing Potential to grow this component of the workforce US HEADCOUNT 500 484 393 PH Evening Shift 400 349 300 200 100 - Jun-21 Dec-21 Jun-22 Credit Corp
Slide 14: … to achieve investment returns and grow segment earnings
… to achieve investment returns and grow segment earnings US COLLECTIONS and NPAT (A$m) $28m $240m $210m $24m $180m $20m $150m $16m $120m $12m $90m $8m $60m $4m $30m $0m $0m FY2019 FY2020 FY2021 FY2022 Projected FY2023 US NPAT (LHS) US Collections (RHS) Credit Corp FY2022 Credit CorpResults Group Pr
Slide 15: Solid outlook for FY23
Solid outlook for FY23 FY2023 guidance Ledger investment $220 - 260 million Net lending $50 - 60 million NPAT $90 - 97 million EPS (basic) 133 - 143 cents Credit Corp FY2022 Credit CorpResults Group Presentation Market Update 15
Slide 16: 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: Industry leading compliance and sustai
Slide 17: Operating cash flow and gearing
APPENDIX 1 Operating cash flow and gearing Operating cash flows and gearing FY19 FY20 FY21 FY22 Pre-tax operating cash flow $330.7m $394.7m $413.5m $420.6m Tax payments ($41.0m) ($35.2m) ($27.5m) ($33.9m) PDL acquisitions, net lending and capex ($292.8m) ($321.8m) ($321.0m)1 ($487.0m)2 Net operating
Slide 18: Pricing discipline and accuracy
APPENDIX 2 Pricing discipline and accuracy PRICING DISCIPLINE AND ACCURACY Cumulative collections $ 5,000m $ 4,000m Actual cash collections $ 3,000m $ 2,000m $ 1,000m Initial projections 1 - 1. For all PDLs held at June 2008, initial projections represent the forecast at June 2008. Credit Corp FY202
Slide 19: Collections life cycle
APPENDIX 3 Collections life cycle PDL COLLECTIONS BY VINTAGE +9% $ 160m $ 140m $ 120m 33% 34% 29% 30% 33% 33% 35% 32% $ 100m 33% 33% 33% 32% 32% 34% 12% 19% 30% 30% 31% 34% 34% 12% 18% $ 80m 13% 19% 15% 14% 20% 15% 15% 13% $ 60m 14% 14% 16% 16% 18% 16% 16% 18% 17% 25% 19% 18% 18% 18% 26% 26% 19% 19%
Slide 20: Productivity
APPENDIX 4 Productivity PDL COLLECTIONS PER HOUR $ 400 $ 350 Full Year average $ 300 FY2022: $314 FY21 FY2021: $290 $ 250 FY22 $ 200 $ 150 $ 100 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Credit Corp FY2022 Credit CorpResults Group Presentation Market Update 20
Slide 21: Payers base
APPENDIX 5 Payers base PORTFOLIO SUMMARY: AU/NZ DEBT BUYING ONLY Total portfolio Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Face value $7.7b $8.6b $8.5b $7.9b $7.6b Number of accounts 1,193,000 1,392,000 1,326,000 1,252,000 1,236,000 Payment arrangements Face value $1,350m $1,550m $1,600m $1,555m $1,433m Nu
Slide 22: Operational and total headcount
APPENDIX 6 Operational and total headcount PERIOD END HEADCOUNT (FTE) PERIOD END HEADCOUNT (FTE) Jun-20 Jun-21 Jun-22 2,000 1,800 Debt buying operations 1,378 1,261 1,296 1,600 Agency 252 218 229 1,400 1,200 Lending 118 111 162 1,000 Support 135 143 153 800 600 Total 1,882 1,733 1,840 400 Jun-20 Jun
Slide 23: Industry leading compliance and sustainability
APPENDIX 7 Industry leading compliance and sustainability H1 FY2022 AUS EDR rate 1 12 months to Mar-22 US dispute rate 2 Credit Corp Credit Corp Publicly traded Other debt buyer A Continued industry leadership debt buyers Publicly traded Lowest EDR rate in AU 1 and low US dispute debt buyer B ra