Latitude Group Holdings Ltd. · ASX:LFS
Latitude — Investor Presentation (February 2024)
38 slides from Latitude's investor presentation, Feb 23, 2024
Slide 1: Latitude FY23 Results
23 February 2024 Latitude FY23 Results Latitude Group Holdings Limited ACN 604 747 391
Slide 2: Important notice and disclaimers
Important notice and disclaimers Important notice and disclaimer The following important notice and disclaimer applies to this presentation (“Presentation”) and you are therefore advised to read this carefully before reading or making any other use of this Presentation or any information contained i
Slide 3: Important notice and disclaimers (cont'd)
Important notice and disclaimers (cont’d) Information and liability To the maximum extent permitted by law, LFS and its respective affiliates and related bodies corporate and each of their respective directors, officers, partners, employees, agents and advisers (together, the “Beneficiaries”) exclud
Slide 4: FY23 Summary
FY23 Summary Bob Belan Managing Director & CEO
Slide 5: Momentum Restored & Building Into FY24
Momentum Restored & Building Into FY24 FY23 Key Metrics Challenges Volume: $7.6bn lent to customers ↓4% YoY, 2H23 ↑11% HoH Cyber: Collection activities impacted driving temporary spike in delinquencies and losses, pricing actions delayed by system disruptions Receivables: Ending at $6.2bn, ↑$16m HoH
Slide 6: Pay Division – Unlocking Customer & Partner Potential
Pay Division– Unlocking Customer & Partner Potential AU NZ NZ Extending Our Distribution Advantage Capitalising On Private Label Capabilities • Strong merchant engagement and all • Signed a 10-year agreement as David Jones’ retailer partnerships retained exclusive credit card provider • Key agreemen
Slide 7: Money Division – Powered By The New Symple Platform
Money Division – Powered By The New Symple Platform Transforming Our Capabilities Accelerating Asset Growth Q2 • Symple platform installation and • Restoring and accelerating growth back book migration complete Future benefits ... ➢ Volume ↑$176m (↑28%) vs 1H23 Future benefits ... • Increase address
Slide 8: The March cyber incident created significant disruption
The March cyber incident created significant disruption and required a focused approach to safely restore business operations Complete Complete Ongoing In Progress 1 2 3 4 Regulatory & Legal • Proactive and regular engagement with RESTORE REBOUND R E M E D I AT E REBUILD government agencies and regu
Slide 9: A renewed strategic focus on fundamentals to accelerate growth and elevate profitability
A renewed strategic focus on fundamentals to accelerate growth and elevate profitability Path to Full Potential Strategy – Phase I Progress to Date (Simplify – Optimise – Maximise) Brilliant Basics ❶ ❷ ❸ ✓ Re-engineered cost base and operating model Brilliant Portfolio Optimised ✓ Continued pricing
Slide 10: OUTLOOK...
OUTLOOK... Latitude has emerged from 2023 as a more focused business, positioned to capitalise on macroeconomic conditions that are conducive to Latitude’s core strengths. Interest rate increases appear to have peaked, with potential cuts to the cash rate forecast in the next 12 months, while contin
Slide 11: FY23 Financial Update
FY23 Financial Update Paul Varro Chief Financial Officer
Slide 12: FY23 financial snapshot
FY23 financial snapshot Cash NPAT in line with Volume recovering post Op Income % steady, Cyber TER in 6-7% target range, guidance Cyber, Receivables stabilised impacted NCO & RAI FY23 Dividend paused Cash NPAT ($m) Volume ($m) TOI/AGR (%) TER (%) 7,953 7,646 154 4,240 4,028 2H 2H 61 10.83% 10.51% 1
Slide 13: Volume building momentum post Cyber, repayments slowing to stabilise receivables
Volume building momentum post Cyber, repayments slowing to stabilise receivables Money 2H23 volume up 28% HoH Repayments reducing with ↓ household savings Volume ($m) Repayment rate (ex CC&BNPL) 2H rate ↓~300bps p.a. since covid peak 2H23 Volume ↓8% YoY, up 28% HoH ✓ PL AU ↑1% YoY in 2H23, pricing o
Slide 14: Pricing actions resumed post Cyber, further planned in 2024
Pricing actions resumed post Cyber, further planned in 2024 Operating Income yield down 7bps HoH, down 39bps YoY Operating Income (%) 2H23 HoH Key drivers: Pay A&NZ: +23bps Pay A&NZ: (35) bps • Pricing actions implemented in 2H23 post Cyber Money A&NZ: +38bps Other: 0bps Money A&NZ: (26)bps pause, o
Slide 15: Operating income margin evolution: pricing lag now closing
Operating income margin evolution: pricing lag now closing Pricing gaining traction – income yield vs Re-pricing strategies CoF yield HoH Strategic/ competitive repricing initiatives actioned across commence 2H22, slight pause PL / Auto and GO/Gem APR’s 140bps in 1H23 from Cyber, restarted in 2H23
Slide 16: Losses normalising to pre Covid long term averages
Losses normalising to pre Covid long term averages supported by steady unemployment. Rapid reduction from Cyber impacts Delinquencies reduced to near Quality of new customer originations remains strong pre-Cyber levels Pay A&NZ 30+ dpd% Money A&NZ 1 5.24% 30+ down 174bps from cyber peak 28% 31% Pre
Slide 17: Charge offs peaking in Q3 due to Cyber, sharp decrease in Q4
Charge offs peaking in Q3 due to Cyber, sharp decrease in Q4. Prudent provisioning remains Net charge off rates elevated from Cyber … …with prudent provisioning levels 1H23 2H23 3.31% 3.56% 3.83% 3.91% 3.94% 3.56% 3.37% 3.28% 3.31% 3.20% 5.50% 2.66% 2.72% 2.54% 2.37% 2.32% 4.62% 2.12% 4.46% 4.24% 4.
Slide 18: Disciplined cost control… reductions in FTE offsetting investments
Disciplined cost control… reductions in FTE offsetting investments in growth and inflation Total opex up 2% HoH 199 Key drivers HoH: 195 4 • Employee expense reduction driven by 10 7 3 0 new operating model restructure with 16% reduction in FTE Cash Opex Cash Opex Cash Opex $179m • Marketing ↑ incre
Slide 19: 2H23 Notable Items
2H23 Notable Items $62m (pre-tax) Notable Items in 2H23 include Asia goodwill impairment, David Jones, restructure costs and Cyber provision adjustments 62 Key drivers: Fixed Asset • Includes Asia goodwill write-off ($22m) • Asia goodwill write-off following Impairment $27m • BNPL related write-off
Slide 20: Diverse, cost-effective funding underpinned by prudent capital management
Diverse, cost-effective funding underpinned by prudent capital management Cost 40+ 52% Investors Diverse Funding Platform Effective Investors Offshore to A&NZ Prudent capital management approach • Programmatic issuance and balanced • Capital strength protects against adverse maturity concentration s
Slide 21: Who we are
Who we are [U3 LaTiTUDE 21
Slide 22: Senior management team focused on executing our strategy plan
Senior management team focused on executing our strategy plan Bob Belan Paul Varro Adriana Martinez Paul Byrne Stefano Tognon Managing Director & CEO CFO & EGM Finance EGM Pay EGM Money Group Treasurer Group GM, Corporate Development Areti Rapakousios Mark Brudenell Karl Hoffman Felicity Joslin Vick
Slide 23: Latitude has evolved to become the largest non-bank unsecured consumer lender in A&NZ
Latitude has evolved to become the largest non-bank unsecured consumer lender in Australia & New Zealand Range of White label Latitude is Separation from GE Establishment of Launch of IPO & Shinsei Acquisitions of International CEO Hallmark New Path to Full AGC founded acquisitions capabilities acqu
Slide 24: Unparallel scale, reach and expertise distinguish Latitude's franchise
Unparallel scale, reach and expertise distinguish Latitude’s franchise across Australia and New Zealand's consumer lending landscape Personal lending & Credit Cards portfolio size $m SCALE 14,000 Big 4 Bank $6.2bn book – 2.4x our nearest non-bank competitor Non-Bank Lenders Regional/Mid-sized Bank $
Slide 25: Simplified and efficient "twin-engine" revenue model
Simplified and efficient “twin-engine” revenue model… ❖ ❖ ❖ PAY X-SELL MONEY > > $3.5b $2.7b receivables receivables PAY and MONEY are built to maximise customer lifetime value via cross-sell and optimisation of average acquisition cost Source: Company data. Receivables data as of 31 December 2023.
Slide 26: Our Customers
Our Customers Latitude Customer Base New Originations FY23 1% 0% 11% 6% 7% 10% 17% 19% 16% 14% 18% 14% 62% 23% 33% 26% 23% 18-27 28-37 38-47 48-57 58-67 68+ <=1 year 1-3 years 3-5 years 5+ years 2% 5% 4% 7% 47% 35.7% - with mortgage 11% 53% 16.9% - no mortgage 71% Full-time Part-time Self-employed C
Slide 27: Appendix
Appendix [C3 LATITUDE 27
Slide 28: ESG FY23 highlights
ESG FY23 highlights $1m+ donated to our charity partners via Donating to Financial Counselling Australia to workplace giving since August 2017. help it support consumers doing it tough. Over 1100 hours spent by employees Supporting vulnerable customers through volunteering with local community group
Slide 29: Macro headwinds impacting revenue growth are still present but are abating
Macro headwinds impacting revenue growth are still present but are abating Household Savings below pre-COVID levels … Retail Sales (YoY) softening … 25% Peak: 25.0% 23.7% • Accumulation of • Retail sales are 20.0% 20% household savings 15.0% softening in during COVID took 10.0% discretionary 15% lon
Slide 30: Key metric trends
Key metric trends Monthly group volume… Monthly group net interest margin… $m % of average gross receivables (AGR) 800 12.00% 700 11.50% 11.00% 600 10.50% 500 10.00% 400 9.50% 300 9.00% 200 8.50% Jan 22 Apr 22 Jul 22 Oct 22 Jan 23 Apr 23 Jul 23 Oct 23 Dec 23 Jan 22 Apr 22 Jul 22 Oct 22 Jan 23 Apr 23
Slide 31: Results summary
Results summary 2H23 1H23 2H22 HoH YoY FY23 FY22 FY YoY Volume ($m) 4,028 3,617 4,240 11% (5%) 7,646 7,953 (4%) AGR ($m) 6,158 6,399 6,264 (4%) (2%) 6,282 6,291 (0%) Gross receivables ($m) 6,245 6,229 6,474 0% (4%) 6,245 6,474 (4%) Cash NPAT ($m) 11 7 61 63% (81%) 18 154 (88%) Statutory NPAT ($m) (4
Slide 32: Summary profit & loss statement (cont. ops)
Summary profit & loss statement (cont. ops) ($m) 31-Dec-23 30-Jun-23 31-Dec-22 Change % Change % FY Change FY23 FY22 2H23 1H23 2H22 HoH YoY % Interest income 483.4 476.2 450.8 2% 7% 959.7 890.2 8% Interest expense (179.0) (165.3) (127.8) 8% 40% (344.3) (214.4) 61% Net interest income 304.4 311.0 323
Slide 33: Cash NPAT to Statutory NPAT 2H23 (cont. ops)
Cash NPAT to Statutory NPAT 2H23 (cont. ops)… Amortisation of Amortisation of Asset/ Work in legacy Corporate Restructuring Cyber related Decommissioned Cash NPAT acquisition Progress Stat NPAT ($m) transaction Development Costs costs facilities intangibles Impairment costs Net interest income 304.4
Slide 34: Cash NPAT to Statutory NPAT FY23 (cont. ops)
Cash NPAT to Statutory NPAT FY23 (cont. ops)… Amortisation of Amortisation of Asset/ Work in Corporate Restructuring Cyber related Decommissioned Cash NPAT acquisition legacy Progress Stat NPAT ($m) Development Costs costs facilities intangibles transaction costs Impairment Net interest income 615.4
Slide 35: Funding: higher cash rate scenario sensitivity
Funding: higher cash rate scenario sensitivity Group cash rate sensitivity analysis 5.0% 2H23 ave cash rate 4.17% 1H23 ave cash rate 3.53% • 100bps rates = ~$40m interest expense (pre-tax, annualised)1 4.0% AU 3-yr swap rate • HoH ave rate delta was 64bps (cash)/ 42bps (3-yr swap) 3.0% • 1H23 ave ca
Slide 36: Delinquency performance over time
Delinquency performance over time Delinquencies (30+ days past due) by product, Australia Delinquencies (30+ days past due) by product, New Zealand % Accounts 30+ days past due % Accounts 30+ days past due Mar’23 9% Mar’23 9% Cyber incident 8% Cyber incident 8% 7% 7% 6% 6% 5% 5% 4% 4% 3% 3% 2% 2% 1%
Slide 37: Latitude well positioned to leverage macro reversion
Latitude well positioned to leverage macro reversion Historical trend Pre-Covid Covid Period Macro correction Tomorrow (2019-2023) (2019) (2020-21) (2022-23 | Today) Macro setting Reduced to Rapid increases to Rates will be “higher for longer” however Cash Rate1 1.5% 0.8% 0.1% 0.1% 4.4% Neutral near
Slide 38: Thank you
Thank you Investor Relations Mitchell Hawley +61 466 927 612 Media Matthew Abbott +61 402 543 128 38
Latitude Group Holdings — Investor Presentation (February 2024) on 6ix