Aeon Financial Service Co., Ltd. · TSE:8570
Aeon Financial Service — Q2 FY2023 Earnings Presentation
36 slides from Aeon Financial Service's earnings presentation, November 2023
Slide 1: Financial results for the second quarter
Let us start by outlining the financial results for the second quarter. 1
Slide 2: Contents
Contents Financial Results Highlights Priority Measures Earnings and Dividend Forecasts ME Appendix
Slide 3: Financial Results Highlights
Financial Results Highlights
Slide 4: Summary of the financial results
• I will give a summary of the financial results. • Firstly, on the first half performance. With the lifting of COVID-19-related restrictions, domestic and global consumption became active. By meeting the demand for payment and financing, revenue increased for domestic and global businesses. However
Slide 5: Interim dividend of 25 yen per share
We are not changing the forecast announced in April and plan to make an interim dividend payout of 25 yen per share. 5
Slide 6: Consolidated results for the first half
• Here are the consolidated results for the first half. ➢ Operating revenue was 237.5 billion yen, up 7% year on year. ➢ Operating profit was 20.2 billion yen, down 36% year on year. ➢ Ordinary profit was 21.3 billion yen, down 38% year on year. ➢ Profit attributable to owners of parent was 7.2 bill
Slide 7: Consolidated results for the second quarter
• Here are the consolidated results for the second quarter: ➢ Operating revenue was 120.9 billion yen, up 6% year on year. ➢ Operating profit was 11.0 billion yen, down 33% year on year. ➢ Ordinary profit was 11.7 billion yen, down 35% year on year. ➢ Profit attributable to owners of parent was 3.6
Slide 8: Domestic businesses operating profit changes
• This slide shows the breakdown of the year-on-year changes in the operating profit of domestic businesses. • Due to the management integration with AEON Credit Service, the results for AEON Financial Service are reported under the domestic businesses segment. Operating profit of 9.9 billion yen fo
Slide 9: Sales promotion measures to achieve targets
sales promotion measures to achieve the performance targets. 9
Slide 10: Credit card shopping transactions and receivables
• This slide shows the trends in credit card shopping transactions and the balance of receivables in domestic businesses. In the graph, the yellow line shows the shopping transaction volume, and the blue bars show the balance of revolving credit balance. • Shopping transactions increased by 10% year
Slide 11: Expanding usage and user convenience
of mind for users, which contributed to user increase. We will continue to expand usage by further enhancing user convenience. 11
Slide 12: Cash advance transaction volume and balance
• This slide shows the transaction volume and outstanding balance of receivables for cash advances. • Cash advance transaction volume increased by 15% year-on-year to 186.2 billion yen. In addition to recovery in the demand for personal funding, we promoted re-engaging dormant members and approachin
Slide 13: Revolving credit and cash advance receivables and bad debt ratio
• This slide shows the trends in the outstanding balance of revolving credit and cash advance receivables and the ratio of bad debt-related expenses. • The graph on the left shows revolving credit receivables in light blue bars and cash advance receivables in dark blue bars, while the red broken lin
Slide 14: Housing loan transaction volume and receivables
• Next, I will explain the transaction volume and balance of receivables in our housing loan business. • The transaction volume was 263.2 billion yen, down 7% year-on-year. With the recent changes in the interest rate environment, demand for refinancing is decreasing. On the other hand, despite the
Slide 15: ID expansion and active members
• This is the last slide from our domestic businesses. It shows the status of ID expansion. • The graph on the left shows the number of active members in the blue bars and annual usage in the yellow line. We acquired 840,000 new cardholders, which was down 4% year-on-year, partly due to the delay in
Slide 16: Global businesses results
• From here, I will explain the results of our global businesses. • The operating revenue expanded for all three areas of China, Mekong, and Malay, but operating profit decreased in Mekong and Malay areas due to increased bad debt-related expenses. The China area maintained an increase in revenue an
Slide 17: Global businesses operating profit changes
• This slide shows the breakdown of the year-on-year changes in the operating profit of global businesses for the 1H. • Operating expenses increased year-on-year by 2.7 billion yen in the Mekong area and 1.5 billion yen in the Malay area, which led to a 3.4 billion yen decrease in total operating pr
Slide 18: AEON Credit Service (Asia) Hong Kong
• I will explain the overseas trends in outstanding receivables and non-performing loans (NPL) ratio, starting with AEON Credit Service (Asia) in Hong Kong. • The graph on the left shows installment receivables in light blue and operating loans receivables in dark blue bars, while the yellow and red
Slide 19: AEON Thana Sinsap Thailand
• This slide shows the results at AEON Thana Sinsap in Thailand. • In Thailand, inflation and unemployment among the younger generation remain high, resulting in rising non-performing loans (NPL) ratios across the market, including our competitors. • The growth in outstanding receivables has plateau
Slide 20: AEON Credit Service Malaysia
• Finally, this slide shows the results for AEON Credit Service in Malaysia. • The Malaysian Government implemented a program allowing early withdrawal from pension funds in the 1Q of FY2022, which led to a significant reduction in our bad debt- related expenses as a result. Subsequently, the bad de
Slide 21: Conclusion of second quarter results
• This concludes the explanation of the consolidated results for the second quarter of FY2023. 21
Slide 22: Priority measures
• I’m Kenji Fujita, President and CEO of the Company; I will discuss our priority measures. 22
Slide 23: Environment and direction of initiatives
• This slide is from the FY2022 IR presentation material concerning the environment surrounding the company and the direction of initiatives. • The global businesses are ahead in digitalization, and domestic businesses are forging ahead with “improving profitability by strengthening sales capabiliti
Slide 24: Renewal of AEON Wallet
• For the domestic market, we started with the renewal of the AEON Wallet, the digital touchpoint with our customers. • We aim to create a touchpoint with a function as the general service counter that can address the needs of individual customers as their lifestyles, hobbies, and preferences divers
Slide 25: Strengthening regional cooperation
• Next, I will explain about strengthening regional cooperation. • FeliCa Pocket Marketing provides solutions closely related to the local community, such as community currencies and community point systems, mainly for municipalities. It became our consolidated subsidiary in 2Q. • The company has a
Slide 26: Controlling bad debt expenses in global businesses
• The next topic is global businesses. • As discussed in the first half of the briefing, the increase in bad debt-related expenses in global businesses put downward pressure on operating profit in the 1H. We recognize that controlling the volatility of results caused by bad debt-related expenses in
Slide 27: Expanding revenue in Hong Kong
• This slide shows our initiatives for expanding the revenue of global businesses. We are promoting the digitalization of customer touchpoints in Hong Kong, Thailand, and Malaysia. • In Hong Kong, we installed the UnionPay QR function in our app in August for a better customer experience, improving
Slide 28: Thailand payment initiatives
• Thailand also has a high penetration of cashless payment, and we are providing services aligned with the change in the payment environment for customers. • QR payment is quickly spreading in Thailand, increasing the demand for money transfers to QR payment apps for cash advances and personal loans
Slide 29: Malaysia personal loans and installment finance
• In Malaysia, personal loans account for a quarter of the revenue and is second only to installment. We plan to build an online system to enable the entire process from application to transfer of money to the designated bank account. • This will enable customers living in remote areas to use our se
Slide 30: Digital banking in Malaysia
• This slide is about digital banking in Malaysia. • Digital banking aims to build the AEON Living Zone in Malaysia by combining ACS Malaysia’s payment and loan products and services with banking services to the un- banked class who could not access financial services and linking data with the AEON
Slide 31: Earnings and dividend forecasts
• Finally, I will present financial performance and dividend forecasts. 31
Slide 32: Full-year forecasts unchanged
• The forecast figures remain unchanged from those announced in April. During the 1H, domestic and global businesses expanded, steadily increasing the balance of operating receivables. • For the domestic business, we will build up revolving credit and cash advance receivables, which bring a high pro
Slide 33: Restructuring the business portfolio
• Lastly, as Mr. Mitsufuji stated earlier, we are conducting various reviews to restructure the business portfolio. We cannot present specific policies today, but we aim to improve corporate value and achieve sustainable growth through the solution of social issues under our purpose of bringing “fin
Slide 34: Questions and Answers
Questions and Answers • Mr. Sato, Analyst, JP Morgan Securities Q1. You said that the explanation of the policy on business operation with capital cost awareness would be postponed, but considering reference to the restructuring of the business portfolio, if it becomes necessary to increase ownershi
Slide 35: Questions and Answers (continued)
Q. The number of new card members was 840,000. What caused the slowing in 2Q? A. Tomoyuki Mitsufuji The number of new members was relatively large in the 1Q thanks to the spring campaign. During 2Q, we implemented measures to promote use, which resulted in increased use but slower growth in new memb
Slide 36: Questions and Answers (continued)
Q2. Regarding the NPL ratio in Thailand, what was the review that resulted in the decrease from the previous quarter? In addition, will the scheduled government handout of electric money have an impact? A2. Fujita For the bad debt-related expenses, we reviewed excessive additional reserves. The Thai
Aeon Financial Service — Q2 FY2023 Earnings Presentation on 6ix