Credit Corp Group Limited · ASX:CCP
Credit — FY2018 Earnings Presentation
27 slides from Credit's earnings presentation, Jul 31, 2018
Slide 1: FY18 Results Presentation
FY18 Results Presentation 31 July 2018 For personal use only 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: Sustained financial performance: EPS, DPS and ROE
…has produced sustained financial performance… For personal use only Earnings Per Share, Dividends Per Share and Return on Equity Cents ROE % per share 150 24% EPS CAGR 27% 120 135 90 117 98 8% 60 83 75 70 58 30 47 67 58 44 50 12 24 31 37 40 29 8 20 4 4 - FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16
Slide 4: Delivering 17% earnings growth in 2018
…delivering 17% earnings growth in 2018… For personal use only FY18 Financial results FY18 FY17 $ change % change Aus/NZ debt buying 1 $195.7m $186.4m + $9.3m + 5% Aus/NZ lending $79.3m $66.4m + $12.9m + 19% US debt buying $24.0m $13.1m + $10.9m + 83% Revenue total $299.0m $265.9m + $33.1m + 12% Aus
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’s response • Continued pricing competition • Momentum into FY19 provided by strong operational Aus/NZ performance Debt buying • Compliance is an increasing sensitivity for cre
Slide 6: Solid momentum in Aus/NZ debt buying
Solid momentum in Aus/NZ debt buying… For personal use only • Collections growth of 4% despite reduced investment • Stable bank of recurring payment arrangements provides a strong starting position for FY19 • FY19 Aus/NZ collections and earnings on track to achieve FY18 levels Aus/NZ purchasing, col
Slide 7: Supported by improved operational performance
Supported by improved operational performance For personal use only Pricing accuracy and returns on track Efficiency • Total cumulative collections above aggregate pricing expectations • Productivity up by 10% over the prior year • Aus/NZ productivity up by 7% over the prior year • Total collections
Slide 8: Heavily differentiated compliance model
Heavily differentiated compliance model… • Peerless compliance record For personal use only - No regulatory orders or undertakings despite being the largest and longest established operator - No reportable External Dispute Resolution (EDR) systemic issues • Superior EDR complaint rate 1 • Clear lead
Slide 9: Underpins a solid purchasing outlook
…underpins a solid purchasing outlook For personal use only • Purchasing outlook comparable to FY18 at the same point • Compliance position has delivered uncontested purchasing • Key US forward flows renewable in early FY19 PDL Investment $ 300m $ 195m $ 200m FY19 purchasing guide $ 150m $150 - $170
Slide 10: Financial capacity in place to seize additional opportunity
Financial capacity in place to seize any additional opportunity For personal use only • Free cash flow has reduced gearing to 41% • Strong cashflow will increase headroom over FY19 Facility headroom and gearing $m Gearing $ 300m 50% 40% $ 200m 30% $ 100m 20% - 10% FY16 FY17 FY18 H1 FY18 H2 Net borro
Slide 11: Consumer loan book on accelerating growth trajectory
Consumer loan book on accelerating growth trajectory… For personal use only Consumer lending book and revenue +6% +3% $ 183m $ 172m $ 156m $ 161m $ 135m $ 121m $ 100m $ 85m Yield $ 72m maintained $ 63m Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Gross loan book (excl. provisions)
Slide 12: Strong customer acquisition and retention
…due to strong customer acquisition and retention… For personal use only • Total settlements up by 11% over the prior year • H2 settlements up by 19% over the pcp • H2 new customer settlements up by 21% over the pcp Customer settlements ($m) $ 100m $ 75m Pre-existing customers $ 50m New customers $
Slide 13: Driving impressive earnings growth
…which is driving impressive earnings growth… • 31% increase in lending NPAT to $16.1m in FY18 For personal use only • On track for strong growth in FY19 • Target returns achieved Earnings growth NPAT ROA $ 20m 15% NPAT $ 15m 10% NPAT projected H2 ROA $ 10m ROA projected H2 5% $ 5m H2 H1 H1 H1 - - F
Slide 14: New lending opportunities emerge
…while new lending opportunities emerge For personal use only • Changing compliance standards are resulting in tighter rationing of credit - Increasing demand in Credit Corp’s segment • Credit Corp’s auto lending product pilot showing encouraging results - Existing ‘vend and lend’ product book grew
Slide 15: US debt buying economics in line with competitors
US debt buying economics in line with established competitors… • US asset turnover comparable to listed competitors despite limited ‘tail’ of collections For personal use only • Cost to collect also similar despite the operation still ramping up and up-front expensing of legal costs US debt buying e
Slide 16: Focus on growth and improvement
…while we continue to focus on growth and improvement… • New facility opened in June to enable more rapid headcount growth For personal use only • Productivity improvement over H2 - New technology improving contact rates - Technology enhancements and skill development driving conversion to paying ou
Slide 17: Capturing the market opportunity
…to capture the market opportunity… • Strong growth in unsecured credit For personal use only • Charge-offs rates increasing to 3.8% - Still below long-term historical average of 4.5% - 5.0% • Pricing remains favourable with recent operator failures preventing excess demand - SquareTwo bond default
Slide 18: Grow profits in the US
…and grow profits • US is now profitable, achieving an NPAT of just under A$2m in FY18 For personal use only • Despite planned headcount growth, profitability will increase in FY19 • Profitability to accelerate in FY20 with increased investment and ongoing operational improvement • Availability of l
Slide 19: Outlook is for a year of solid earnings growth
Outlook is for a year of solid earnings growth For personal use only FY19 guidance PDL acquisitions $150 - $170m Net lending $45 - $50m NPAT $67 - $69m EPS (basic) 140 - 144 cents DPS 70 - 72 cents Credit Corp Group FY18 Results Presentation | 19
Slide 20: Questions
For personal use only Questions Credit Corp Group FY18 Results Presentation | 20
Slide 21: Appendix | Key operating metrics
For personal use only Appendix | Key operating metrics Credit Corp Group FY18 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-18 Dec-17 Jun-17 Dec-16 Pre-tax operating cash flow $155.0m $150.0m $139.6m $134.5m Tax payments ($16.8m) ($15.8m) ($9.3m) ($1.4m) PDL acquisitions, net lending and capex ($114.1m) ($135.8m) ($12
Slide 23: Appendix | Pricing discipline and accuracy
Appendix 2 | Pricing discipline and accuracy For personal use only Pricing discipline and accuracy Cumulative collections $ 2,800m $ 2,400m Actual cash collections $ 2,000m $ 1,600m $ 1,200m Initial projections $ 800m $ 400m - * For all PDLs held at June 2008, initial projections represent the forec
Slide 24: Appendix | Collections life cycle
Appendix 3 | Collections life cycle For personal use only PDL collections by vintage +7% 1 $ 100m 30% 30% 31% $ 80m 30% 32% 29% 33% 32% 31% 30% 32% 32% 13% 14% $ 60m 11% 14% 16% 15% 12% 10% 15% 17% 17% 15% 21% 21% 22% 25% 23% $ 40m 15% 19% 23% 16% 19% 15% 15% $ 20m 36% 38% 38% 38% 36% 37% 38% 31% 33
Slide 25: Appendix | Productivity
Appendix 4 | Productivity For personal use only PDL collections per hour $ 300 Average FY18: $224 $ 250 FY17: $203 2017/18 $ 200 2016/17 $ 150 $ 100 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Credit Corp Group FY18 Results Presentation | 25
Slide 26: Appendix | Payers base
Appendix 5 | Payers base For personal use only Portfolio summary Total portfolio Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Face value $5.3bn $5.7bn $5.8bn $5.9bn $6.0bn Number of accounts 673,000 699,000 716,000 710,000 710,000 Payment arrangements Face value $1,171m $1,235m $1,300m $1,300m $1,300m Number
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) 1,500 1,300 Jun 15 Jun 16 Jun 17 Jun 18 1,100 Debt buying operations 1,004 1,096 1,198 1,208 Agency 11 13 81* 77 900 Lending 104 108 95 110 700 Support 88 96 101 102 500 Total 1,2