Cog Financial Services Limited · ASX:COG
Cog Financial Services — H1 2022 Earnings Presentation
31 slides from Cog Financial Services's earnings presentation, Feb 24, 2022
Slide 1: 1H 2022 Results
1H 2021 2022 Results 24 February 2021 26 2022 Authorised by Andrew Bennett Group Chief Executive Officer
Slide 2: About COG
About COG COG is an ASX listed provider of asset and equipment finance broking and aggregation services, and non- prime commercial and consumer lending Finance Broking & Aggregation Funds Management & Lending • Australia’s largest asset and equipment • Provider of non-prime commercial & finance brok
Slide 3: About COG
About COG Australia’s biggest asset finance broker and aggregator & trusted leader in SME and auto finance 18% Estimated market share 3
Slide 4: Our business model
About COG Our business model FB&A FINANCE & INSURANCE Brokerage Fees FUNDING Unsecured Notes and MIS Funds Management and Lending Banks, Non-Banks, Insurance Companies (75% owned) Borrowers FINANCE1 ASSETS FINANCED Management fees and net interest margin 1 Finance and operating leases, chattel mortg
Slide 5: 1H 2022 Highlights
1H 2022 Highlights Strong performance across all business units 3.5 cps(1H21:1.22 3, 4 Interim dividend declared of Revenue1 EBITDA to shareholders2 cps ) cents per share, an increase of 187% from 3,4 1H21, reflecting a payout ratio of 62% (1H21: 20% ) $153.5m $15.5m 5 5 • Continued to invest surplu
Slide 6: Priorities
Priorities 1. Continue targeted broker acquisitions - COVID-19 demonstrates 2. Increase Westlawn’s funds under management via the Managed they are resilient and robust Investment Scheme and deploy businesses with largely variable costs proceeds through COG’s broker thus able to withstand economic di
Slide 7: Summary of Group financial results
Summary of Group financial results Revenue growth of $24.1m includes organic growth Our results (+$27.5m) and government subsidies received 4 1H22 1 1H21 1, 6 Pcp 1H22 EBITDA margin compressed slightly to 15.2% $m $m Change (1H21: 18.0%) largely due to increased volume-based Revenue2 153.5 129.4 19%
Slide 8: Underlying NPATA to Shareholders growth
Summary of Group financial results Underlying NPATA to Shareholders growth In $ millions Government subsidies $0.1 $1.7 Government subsidies +7.1% +25% +17.9% 8
Slide 9: Underlying NPATA to Shareholders by segment
Summary of Group financial results Underlying NPATA to Shareholders by segment In $ millions 1H22 1H21 NPATA to NPATA to shareholders shareholders (-) Less before (-) Less before NPATA to government government NPATA to government government Segment shareholders subsidies 1 subsidies shareholders sub
Slide 10: Segment performance
Segment performance The Finance Broking & Aggregation and Funds Management and Lending segments both reported strong underlying profit gains in 1H22 10
Slide 11: Finance Broking & Aggregation: strong bottom line despite challenging conditions
Finance Broking & Aggregation Strong bottom line despite Revenue growth of $24.1m includes organic growth of 25% (+26.8m) and government subsidies received 3 challenging trading conditions EBITDA margin contracted to 12.7% (1H21: 14.5%), largely due to increased volume-based commission (COVID & supp
Slide 12: Net assets financed (NAF)
Finance Broking & Aggregation Net assets financed (NAF) $3.28bn net assets financed in 1H 2022 $m + 46% 2,154 2,917 2,198 1,604 1,720 2HY 1,403 3,284 vs PCP 2,041 2,365 2,242 1,344 1,524 1,631 1HY 2016 2017 2018 2019 2020 2021 2022 12
Slide 13: Our Aggregation & Broker Brands
Finance Broking & Aggregation Our Aggregation & Broker Brands 100% OWNED COG provides aggregation services to 75% OWNED • Independent network member finance brokers • COG equity owned finance brokers 100% COG offers finance brokers OWNED • Access to wider panel of financiers and volume-based incenti
Slide 14: National asset finance broking network footprint
Finance Broking & Aggregation National asset finance Broking Network footprint NT QLD 1 equity 6 aggregation 92 equity brokers brokers 747 aggregation WA brokers 12 equity brokers SA Aggregation brokers growth 245 aggregation brokers 9 equity brokers NSW & ACT 213 aggregation brokers 37 equity broke
Slide 15: Funds Management & Lending: Westlawn paving the way for growth
Funds Management & Lending Westlawn is paving the way for growth. Westlawn earnings growth will offset decline in TL Commercial earnings1 Revenue remained flat at $18.4m and the movement from 1H21 is comprised of organic growth in Westlawn of $1.2m and contribution from Centrepoint of $2.4m (previou
Slide 16: EBITDA to shareholders
Funds Management & Lending Organic growth in Westlawn is being achieved by the distribution of loan products through COG's broker network EBITDA to shareholders Westlawn's chattel mortgage origination volumes through the COG broker network are building strongly Westlawn has surplus cash and funding
Slide 17: The book is largely concentrated on asset backed contracts
Funds Management & Lending The book is largely Book features • The present value of the total lending book ($195.7m1) includes concentrated on asset COG’s 100% owned subsidiary TL Commercial’s legacy portfolio of $48.4m ($41.8m of lease receivables, including unguaranteed backed contracts residuals
Slide 18: Earlypay delivers significant contribution to the Other segment
Other Earlypay delivers significant Segment includes COG head office expenses, Hal Group IT business and the investment in Earlypay contribution to the Other Limited (EPY) Revenue remained flat at $3.6m and the movement segment from 1H21 is comprised of increase in share of results from associates (
Slide 19: Consolidated statement of financial position
Consolidated statement of financial position As at 31 Dec 30 Jun $m 2021 2021 Cash and cash equivalents increased by $10.4m largely due to $20.0m of Cash and cash equivalents 104.9 94.5 capital raised under a placement issue Trade and other receivables 15.7 18.2 Contract assets 2.9 2.8 Financial ass
Slide 20: Consolidated statement of cash flows
Consolidated statement of cash flows 1H22 1H21 1 Half Year ended 31 December $m $m Net cash inflow from operating activities includes Receipts from customers 256.2 198.1 $89.0m (1H21: $65.7m) relating to the lease and loan Payments to suppliers and employees (148.9) (130.4) products offered through
Slide 21: Outlook
Outlook National small business asset finance market estimated to + be $29.9b1 in FY20 Low interest rates 72.9%1 of new commercial asset finance transactions are settled through commercial brokers and a strong + + Extended government subsidies and lower interest rates infrastructure are resulting in
Slide 22: Capital management
Capital management Cash and cash equivalents Efficient capital The Group has generated significant cash over the period and the proportionate share of unrestricted cash and term deposits attributable to members at 31 December 2021 was $74.2m (see Appendices). management resulted in a Dividend On 15
Slide 23: Capital management: acquisition finance facility
Capital management Investments Acquisition finance facility COG made the following investments during the period, in line with its acquisition growth strategy: COG has established a $31 million acquisition finance facility with a major Australian Bank. • On 1 July 2021, DLV (Qld) Pty Limited (DLV) a
Slide 24: Disclaimer
Disclaimer COG Financial services Limited ('COG’) has not considered the financial position Investors should also note that COG’s past performance, including past share or needs of the recipient in providing this presentation ('Presentation'). Persons price performance, cannot be relied upon as an i
Slide 25: Appendices
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Slide 26: Statutory income statement
Appendices Statutory income statement Impairment relates to the write down of $0.2m in corporate bonds and write off of $0.5m in trail commission 1H22 1H21 Pcp receivables due to a financier contract renegotiation $m $m Change (where volume-based incentive is expected to largely Revenue 154.6 129.7
Slide 27: Reconciliation between statutory NPAT and underlying NPATA
Appendices Reconciliation between statutory NPAT and underlying NPATA Members and NCI 1 Members 1H22 1H21 Variance 1H22 1H21 Variance $m $m $m $m $m $m NPAT 12.2 (27.0) 39.2 8.0 (31.2) 39.2 Adjustments (after tax): Impairment 0.6 37.2 (36.6) 0.6 37.2 (36.6) Gain from a bargain purchase - (2.8) 2.8 -
Slide 28: Prior period reclassifications
Appendices Prior period reclassifications Funds Management & 1H21 FB&A Lending Other 1H21 (Original) Reclassifications Reclassifications Reclassifications (Restated) $m $m $m $m $m Revenue 128.4 0.1 0.2 0.7 129.4 EBITDA 26.5 0.1 (4.0) 0.7 23.3 Dividend income 0.7 - - (0.7) - Net interest expense (4.
Slide 29: Acquisition history
Appendices Acquisition history Interest Date Company Activity Acquirer acquired Price Consideration Platform Consolidated Dec-15 Aggregation platform + ownership of finance brokers COG 60% $22.9m 76% cash/ 24% equity Group (PCG) Largest independent specialist equipment finance Oct-16 Consolidated Fi
Slide 30: Acquisition history (continued)
Appendices Acquisition history (continued) Interest Date Company Activity Acquirer acquired Price Consideration Jul-19 QPF Holdings Acq of outstanding minority interests COG Outst. 5.6% $1.7m 100% cash Oct-19 Platform Consolidated Group Acq of outstanding minority interests COG Outst. 3.6% $1.1m 50%
Slide 31: Proportionate share of unrestricted cash attributable to members
Appendices Proportionate share of unrestricted cash attributable to members In $ millions COG direct Proportionate share Total Restricted Unrestricted Ownership in the attributable to Cash cash1 cash Holding Company Members PCG Group 12.9 (7.1) 5.8 99.9% 5.3 QPF Group 2.9 - 2.9 57.1% 1.5 Linx Group
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