Credit Corp Group Limited · ASX:CCP
Credit — Investor Presentation (April 2020)
34 slides from Credit's investor presentation, Apr 29, 2020
Slide 1: Market update and equity raising
Market update and equity raising 29 April 2020 Thomas Beregi CEO Michael Eadie CFO
Slide 2: Disclaimer
Disclaimer This presentation (the Presentation) has been prepared by Credit Corp Group Limited ABN 33 092 697 151 (Credit Corp or the Company) and is dated 29 April 2020. Summary information: This Presentation contains summary information about the Company's activities current as at the date of this
Slide 3: Summary
Summary All segments performing well prior to COVID-19 Initial customer impacts may have been cushioned by government support Market update All businesses remain operational with a significant number of staff working from home Our response to date has been to protect cash flow while preservi
Slide 4: All segments in a strong position pre Covid-19
All segments in a strong position pre Covid-19… ANALYTICS & DISCIPLINE OPERATIONAL EXCELLENCE SUSTAINABILITY & COMPLIANCE Australian / NZ debt buying Largest database Highest asset turnover1 No adverse orders or undertakings History of pricing accuracy Lowest cost to collect2 Low complai
Slide 5: …with solid metrics leading into the pandemic
…with solid metrics leading into the pandemic For the 9 months to March 2020: collections up 9% over pcp AUS/NZ productivity up 4% over pcp debt buying headcount capacity up 16% over pcp Record face value of accounts under arrangement of $1.4b at March 2020 representing 80% of collections
Slide 6: Initial customer impact may have been cushioned by government support
Initial customer impact may have been cushioned by government support Top line customer results for April 2020 to date: Collections below pre COVID-19 expectations Aus/NZ by 15% US by 16% Loan book arrears up by 2ppts on run rate (still within pro-forma) Loan application volumes halved fro
Slide 7: All businesses remain operational while ensuring the safety of our people
All businesses remain operational while ensuring the safety of our people Aus/NZ debt purchase and support functions > 75% of onshore staff working effectively from home, with the remainder working from company offices Despite lockdown in Manila, 60% of staff now working US debt purchase Utah
Slide 8: We are protecting cash flow while preserving capacity and the ability to realise future opportunity
We are protecting cash flow while preserving capacity and the ability to realise future opportunity Short-term cost reductions of ~$2m per month Directors’ fees and CEO salary reduced by 50% Support and other executive salaries reduced by 25% Executive short term incentives zeroed Significan
Slide 9: Capital position will remain solid
Capital position will remain solid FACILITY HEADROOM AND GEARING $ 400m $375.0m $375.0m 50% $350.0m $ 350m $300.0m 40% $ 300m $205.8m $219.9m $ 250m 30% Banking facilities of $375m maturing $211.9m in 2022 and 2023 $ 200m $ 150m 20% $120.0m $ 100m FY20 Q4 gearing post 10% $ 50m equity raising1 - -
Slide 10: Equity raising strategic imperative
Equity raising strategic imperative Strengthening the balance sheet Management has stress-tested the balance sheet to assess a range of downside scenarios from the more benign to extremely severe Under all scenarios, Credit Corp’s balance sheet can withstand these extreme economic ‘shocks’ In
Slide 11: Equity raising
Equity raising Offer details Offer timetable 11
Slide 12: Offer details
Offer details Placement size and • Fully underwritten institutional placement (“Placement”) to raise approximately $120 million structure • Approximately 9.6 million new shares to be issued (“New Shares”), representing 17.5% of Credit Corp’s existing shares on issue • Proceeds from the equity raisin
Slide 13: Offer timetable
Offer timetable Event Date Record date for the SPP 7pm (Sydney time), Tuesday, 28 April Trading halt, announcement of the Placement and SPP Wednesday, 29 April Placement bookbuild Wednesday, 29 April Placement completion announcement Thursday, 30 April Trading halt lifted Thursday, 30 April Settleme
Slide 14: Key risks
Key risks Overview of risks Key risks General risks 14
Slide 15: Overview of key risks
Overview of key risks There are a number of factors, specific to Credit Corp and of a general nature including those that are COVID-19 related, which may affect the future operating and financial performance of Credit Corp and the industry in which it operates. This section discusses some of the k
Slide 16: Key risks (1/7)
Key risks (1/7) COVID-19 Credit Corp has observed that in response to COVID-19 a growing number of governments globally are imposing restriction on the movement of their citizens and limiting non-essential services and activities. Given the high degree of uncertainty surrounding the extent and d
Slide 17: Key risks (2/7)
Key risks (2/7) Macroeconomic risks The prevailing unemployment rate is the key macroeconomic risk in the segments in which Credit Corp operates. The unemployment rate is increasing in each market in which Credit Corp operates as a result of COVID-19. In debt buying, increased unemployment will im
Slide 18: Key risks (3/7)
Key risks (3/7) Adverse regulatory and legislative change Credit Corp operates in highly regulated industries and is subject to extensive laws and regulations in Australia, New Zealand and the United States. In the COVID-19 environment, there is a risk of additional government intervention and/or
Slide 19: Key risks (4/7)
Key risks (4/7) Withdrawal from debt sale by credit issuers There is the risk that some (or even all) credit issuer clients who sell books of charged-off debts to Credit Corp withdraw from selling debts, which may be elevated in the COVID-19 environment. This could, for example, be in response to
Slide 20: Key risks (5/7)
Key risks (5/7) Deterioration in compliance performance Credit Corp relies upon having a strong compliance and sustainability record to mitigate the risk of experiencing adverse regulatory and legislative changes and withdrawal from debt sale by credit issuers who sell charged-off debts. Complianc
Slide 21: Key risks (6/7)
Key risks (6/7) Lack of access to capital In order to sustain growth in earnings, Credit Corp requires access to capital to maximise investment across its segments. In the COVID-19 environment it may be more difficult for it to access debt capital on acceptable terms. Lack of access to capital wil
Slide 22: Key risks (7/7)
Key risks (7/7) Information technology Credit Corp relies heavily on information technology to conduct an efficient and cost effective business. Therefore, any significant or sustained failure or inadequacy in Credit Corp’s core technology systems or cyber security could have a materially adverse
Slide 23: General risks (1/4)
General risks (1/4) General equity market risk There are general risks associated with investments in equity capital, particularly given elevated levels of volatility and the potential of a recession or even depression created by COVID-19. The trading price of shares in Credit Corp may fluctuate w
Slide 24: General risks (2/4)
General risks (2/4) Liquidity risk There can be no guarantee of an active market in the shares in Credit Corp or that the price of the shares in Credit Corp will increase. There may be relatively few potential buyers or sellers of Credit Corp shares on the ASX at any time. This may increase the vo
Slide 25: General risks (3/4)
General risks (3/4) Risk of dividends not being paid The payment of dividends by Credit Corp is determined by the Board from time to time at its discretion, dependent on the profitability and cash flow of Credit Corp's business and Credit Corp’s strategic priorities. Circumstances may arise where
Slide 26: General risks (4/4)
General risks (4/4) Litigation Legal proceedings and claims may arise from time to time in the ordinary course of Credit Corp's business and may result in high legal costs, adverse monetary judgements and damage to Credit Corp's reputation which could have an adverse impact on Credit Corp's financ
Slide 27: Appendices: Key Operating Metrics
Appendices: Key Operating Metrics Appendix 1: Pricing discipline and accuracy Appendix 2: Collections life cycle Appendix 3: Productivity Appendix 4: Payers base Appendix 5: Summary of underwriting agreement 27
Slide 28: Pricing discipline and accuracy
APPENDIX 1 Pricing discipline and accuracy PRICING DISCIPLINE AND ACCURACY $ 4,000m Cumulative collections $ 3,500m $ 3,000m Actual cash collections $ 2,500m $ 2,000m $ 1,500m $ 1,000m Initial projections $ 500m - * For all PDLs held at June 2008, initial projections represent the forecast at June 2
Slide 29: Collections life cycle
APPENDIX 2 Collections life cycle PDL COLLECTIONS BY VINTAGE $ 140m +19%1 $ 120m $ 100m 31% 32% 34% 29% 30% 31% 32% 33% 32% 30% 30% $ 80m 32% 30% 32% 16% 16% 18% $ 60m 15% 15% 12% 11% 14% 17% 15% 10% 13% 14% 17% 23% 23% 19% 15% 16% 19% 23% $ 40m 19% 15% 15% 21% 22% 21% 25% $ 20m 38% 38% 33% 30% 29%
Slide 30: Productivity
APPENDIX 3 Productivity PDL COLLECTIONS PER HOUR $ 300 Quarterly average $ 250 FY2020 Q3: $241 FY2019 Q3: $250 $ 200 12m to Mar-20 12m to Mar-19 $ 150 $ 100 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Market update and institutional placement 30
Slide 31: Payers base
APPENDIX 4 Payers base PORTFOLIO SUMMARY: AUS/NZ DEBT BUYING ONLY Total portfolio Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Mar-20 Face value $5.9b $6.0b $6.2b $6.4b $7.8b $7.8b Number of accounts 710,000 710,000 753,000 786,000 1,268,000 1,232,000 Payment arrangements Face value $1,300m $1,300m $1,300m $1
Slide 32: Summary of underwriting agreement
APPENDIX 5 Summary of underwriting agreement Credit Corp has entered into an underwriting agreement with the Lead Manager (Underwriting Agreement) pursuant to which the Lead Manager has been appointed as the sole lead manager, bookrunner and underwriter of the Placement. The Underwriting Agreement c
Slide 33: Summary of underwriting agreement (cont'd)
APPENDIX 5 Summary of underwriting agreement (cont’d) In addition, the following termination events will depend on whether the Lead Manager has reasonable and bona fide grounds to believe and does believe that the relevant event (i) has, or may have, a material adverse effect on the marketing, settl
Slide 34: Thank you.
—— Credit Corp Group Thank you.
Credit Corp Group — Investor Presentation (April 2020) on 6ix