Aeon Financial Service Co., Ltd. · TSE:8570
Aeon Financial Service — Q1 FY2023 Earnings Presentation
39 slides from Aeon Financial Service's earnings presentation, Jul 11, 2023
Slide 1: Results for the First Quarter of FY2023: Script and the QAs
Results for the First Quarter of FY2023: Script and the QAs Date & Time: Tuesday, July 11, 2023, 17:00-18:00 Presenter: Tomoyuki Mitsufuji, Director and Managing Executive Officer in charge of Group Corporate Management Thank you very much for taking time out of your busy schedule to attend our fina
Slide 2: Flow of today's briefing
This will be the flow of today’s briefing. First, I would like to outline the financial results for the first quarter, second, the measures that we are focusing on, finally, earnings and dividend forecasts.
Slide 3: Financial results for the first quarter
I would like to start by outlining the financial results for the first quarter.
Slide 4: Key points of the financial summary
Before going into the detailed figures, I will briefly explain the key points of the financial summary. First is the increase in transaction volume. In our domestic businesses, we saw revenue increase due to business expansion particularly in the credit card business. As for global businesses, opera
Slide 5: Bad debt expenses and merger with AEON Credit Service
In the global businesses, the increase of bad debt-related expenses compared to last year is partly due to special factors such as specific measures taken by the respective governments during the same period of the previous year. At the same time, it is also true that the collection rate has been de
Slide 6: Consolidated results for the first quarter
Here are the consolidated results for the first quarter. As you can see, ⚫ Operating revenue was 116.6 billion yen, up 9% year on year. ⚫ Operating profit was 9.1 billion yen, down 40% year on year. ⚫ Ordinary profit was 9.5 billion yen, down 41% year on year. ⚫ Profit attributable to owners of pare
Slide 7: Operating profit change, domestic businesses
This slide shows the breakdown of the year-on-year changes in the operating profit of domestic businesses. Operating revenue (indicated by the yellow bars) has increased by 3.1 billion yen thanks to such factors as increase in revenue of the credit card business and gain on securitization of receiva
Slide 8: Credit card shopping transactions and receivables
This slide shows the trends in credit card shopping transactions and outstanding balance of receivables. Look at the figure on the left. The yellow line shows shopping transaction volumes and the blue bars show the balance of revolving credit receivables. Shopping transaction increased by 9% year on
Slide 9: Expanding usage by enhancing user convenience
We will continue to expand usage by further enhancing user convenience.
Slide 10: Cash advance transaction volume and receivables
This slide shows the transaction volume and outstanding balance of receivables in cash advances. Cash advance transaction volume increased by 17% year on year to 100.4 billion yen. In addition to recovery of personal credit demand, measures such as optimizing credit lines (which had been tightened d
Slide 11: 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 thereto 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
Slide 12: Housing loan business
This is the last slide from our domestic businesses. It shows the transaction volume and outstanding balance of receivables in our housing loan business. The transaction volume was 138.8 billion yen, down 10% from the same period of the previous fiscal year. With the recent changes in the interest-r
Slide 13: Global businesses results
From here, I would like to explain the results of our global businesses. As you can see on the slide, 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. In the China Area, es
Slide 14: Operating profit change, global businesses
This slide shows the breakdown of the year-on-year changes in the operating profit of global businesses. Bad debt-related expenses increased year on year by 2.7 billion yen in Mekong Area and 3.9 billion yen in Malay Area, which led to a 4.7 billion yen decline in total operating profit of global bu
Slide 15: External environment behind bad debt expenses
Now let me explain the external environment behind the increase in bad debt-related expenses. First, as an overall situation, the rapid rise of commodity and energy prices is increasing pressure on household finance. In Thailand, the consumer price index has been rising for 23 consecutive months, wh
Slide 16: AEON Credit Service (Asia) receivables and NPL ratio
First, let me show you the trends in the outstanding balance of operating receivables and non-performing loans (NPL) ratio for AEON Credit Service (Asia). The graph on the left shows installment accounts receivable in light blue bars and operating loans receivable in dark blue, while the yellow brok
Slide 17: AEON Thana Sinsap results in Thailand
This slide shows the results at AEON Thana Sinsap in Thailand. The outstanding balance of receivables continues to increase at Thana Sinsap as well, but the growth rate has settled down due to tightening of screening standards based on the recent environment. As I explained earlier, NPL ratio is on
Slide 18: AEON Credit Service Malaysia results
Finally, this slide shows the results for AEON Credit Service in Malaysia. As explained earlier, the temporal resumption of early pension fund withdrawal and other special factors contributed to a significant drop in bad debt-related expenses in the first quarter of the previous fiscal year. This in
Slide 19: Measures we are taking
From here, I would like to introduce the measures we have been and will be taking in the first and second quarter and going forward.
Slide 20: Boosting membership in domestic businesses
First, let’s look at our domestic businesses. As for our efforts to boost membership, which is the basis for business expansion, we acquired 470,000 new AEON card members in the first quarter. We have started to issue credit cards in collaboration with Welcia from this April, but the provision of be
Slide 21: Acquiring members through partners and Welcia
We are strengthening our approach to acquire new card members utilizing different channels according to age range and other attributes of the customers In addition to approaching customers at our own stores and through online campaigns, we are also enhancing alliance with partner companies as an opp
Slide 22: Cooperation with Green Beans online supermarket
Let me introduce our initiative in cooperation with Aeon Group’s new online supermarket brand, Green Beans as was reported on the Nikkei newspaper this morning. Green Beans is an online market targeting double-income couples and relatively young generations mainly in the Tokyo metropolitan area. We
Slide 23: Improving initial card usage
Now let’s look into our initiatives to expand our card shopping transaction volume. First, I would like to explain the measures we are taking to improve initial usage. As shown in the table on the right, when comparing customers who use their card within two months after membership registration and
Slide 24: Mechanisms to encourage initial and continued use
We will build mechanisms to encourage initial and continued use leveraging contact points on the app to improve both usage rate and amount used by each user.
Slide 25: Expanding housing loan transaction volume
This is a slide showing our initiatives to expand our housing loan transaction volume. AEON Bank was awarded first place overall among 108 banks in Japan in the online banking category of 2023 Oricon Customer Satisfaction Ranking. AEON Bank offers the advantages of both an online bank and a real sto
Slide 26: Global businesses: reducing bad debt expenses
The next topic is global businesses. As I discussed earlier, the increase in bad debt-related expenses in global businesses put downward pressure on operating profit in the first quarter. To address this situation, we are stepping up efforts in each of the process of application, screening, and debt
Slide 27: Improving debt collection through digitalization
By ensuring thorough implementation of these initiatives, we will improve debt collection rate and streamline operational processes through digitalization, thereby reducing bad debt-related expenses.
Slide 28: Expanding revenue of global businesses
This slide shows our initiatives for expanding revenue of global businesses. Installment finance for individual products such as motorcycles is an important service in Malaysia. We have developed a system in which users can complete the entire process online, from application to product purchase by
Slide 29: J-Premier Platinum Card promotion in Thailand
In Thailand too, we are running a promotional campaign for the J-Premier Platinum Card which offers benefits for those traveling to Japan such as discounts and travel insurance to capture the demand of tourists to Japan.
Slide 30: Our Purpose
We have recently formulated “Our Purpose” to define the aims of the AEON Financial Service (AFS) Group and our reasons for existence. Since AFS Group started business in 1981 as Nihon Credit Service Co., Ltd., an issuer of credit cards, it has continuously expanded its business to other countries in
Slide 31: Solving social issues and pursuing corporate growth
by utilizing human capital and all other means available. We will work together combining the goals of solving social issues and pursuing corporate growth so as to consequently maximize the value we provide to customers and improve corporate value.
Slide 32: Financial performance and dividend forecasts
Finally, I will present financial performance and dividend forecasts.
Slide 33: Forecasts remain unchanged
The forecast figures remain unchanged from those announced in April. We believe we made a good start in the first quarter in terms of operating revenue both in domestic and global businesses. In the domestic businesses, we have been building up revolving credit and cash advance receivables which bri
Slide 34: Questions and Answers: Daiwa Securities
Questions and Answers ■ Daiwa Securities / Analyst Watanabe (1) Q: What are the factors behind the increase in balances of Revolving Credit and Cash Advance in the card business? Also, regarding promotional expenses, there seems to be a significant increase in point costs while advertising expenses
Slide 35: Questions and Answers: Mitsubishi UFJ Morgan Stanley Securities
■ Mitsubishi UFJ Morgan Stanley Securities / Analyst Tsujino (1) Q: The gain on sale of receivables shows a profit of 1.8 billion yen. Could you provide a breakdown? Is it in line with the plan? A: Tomoyuki Mitsufuji The gain on sale of receivables appears larger due to the suspension of securitizat
Slide 36: Questions and Answers: international business outlook
securitization. (2) Q: The progress rate of international business is below 20%. Considering the pace of increasing credit costs, what is the outlook for 2Q onwards? A: Tomoyuki Mitsufuji In Malaysia, the increase in credit costs was included in the budget, considering the impact of the government's
Slide 37: Questions and Answers: SBI Securities
■ SBI Securities / Analyst Otsuka (1) Q: Can you share the changes, including revenue and profit aspects, related to the group reorganization? A: Tomoyuki Mitsufuji As the merger was completed on June 1, there are currently no numerical figures available. However, there have been positive effects in
Slide 38: Questions and Answers: JP Morgan and UBS
■ JP Morgan Securities / Analyst Sato (1) Q: How is the progress on the review of business reorganization and optimization of sales touchpoints? A: Tomoyuki Mitsufuji The review of touchpoints is steadily progressing, and we are working to achieve some results. (2) Q: Regarding the digital bank in M
Slide 39: Questions and Answers: Mitsubishi UFJ Morgan Stanley Securities
■ Mitsubishi UFJ Morgan Stanley Securities / Analyst Tsujino (1) Q: The gain on sale of receivables shows a profit of 1.8 billion yen. Could you provide a breakdown? Is it in line with the plan? A: Tomoyuki Mitsufuji The gain on sale of receivables appears larger due to the suspension of securitizat
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