Credit Corp Group Limited · ASX:CCP
Credit — FY2014 Earnings Presentation
21 slides from Credit's earnings presentation, Aug 5, 2014
Slide 1: FY14 Results Presentation
FY14 Results Presentation 5 August 2014 Thomas Beregi Chief Executive Officer Michael Eadie Chief Financial Officer
Slide 2: Leveraging our leadership in the credit-impaired consumer segment
Leveraging our leadership in the credit-impaired consumer segment Core Australian debt buying business Credit-impaired consumer lending Leverage • Apply our experience with credit- strengths to impaired consumers • Sustainable and affordable products expand into high • Segment not serviced by mainst
Slide 3: Core business has delivered strong earnings growth…
Core business has delivered strong earnings growth… FY14 Financial Results FY13 FY14 % Change Underlying (1) Revenue $174.0m $138.3m 26% NPAT $34.8m $29.9m 16% EPS (basic) 75.4 cps 65.2 cps 16% Dividend per share 40.0 cps 37.0 cps (2) 8% (1) FY13 results are underlying and exclude a one-off item wit
Slide 4: … and growth momentum will now switch to lending
… and growth momentum will now switch to lending $ million FY14 B/(W) H1 H2 ∆ • Reduced PDL acquisitions in the second half PDL outlay $86.5 $58.7 ($27.8) • Lending volumes offset reduced PDL acquisitions Net lending $17.0 $31.6 $14.6 • Lending on track for profit in FY15 Lending NPAT ($2.0) ($0.5)
Slide 5: New businesses already delivering at the top-line
New businesses already delivering at the top-line • Core business revenue driven by consecutive years of record purchasing • Lending generated 40% of total revenue growth Revenue movement vs. pcp $6m $174m $14m $11m $143m FY 13 Core Business Consumer US FY 14 Revenue lending Revenue FY2014 Results 5
Slide 6: Operating cash flow fully invested for growth
Operating cash flow fully invested for growth $ million FY14 FY13 FY12 Operating cash flow 184.3 158.2 136.5 PDL acquisitions, lending and capex (197.3) (148.5) (99.6) Net operating (free) cash flow (13.0) 9.7 36.9 PDL and consumer loan carrying value 203.7 161.1 132.7 Net bank debt 35.7 4.9 - Net d
Slide 7: Return disciplines remain in place…
Return disciplines remain in place… Cumulative 1,200 Collections Actual cash $m collections 1,000 800 600 Initial Projections 400 200 - Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Note: For all PDLs held at June 2008, initial projections represent the f
Slide 8: …at a time when PDL prices have increased…
…at a time when PDL prices have increased… • PDL collection multiples have compressed as prices have increased • Returns have been maintained by faster PDL liquidation PDL turnover ratio Implicit multiple from PDL amortisation (Collections / average PDL carrying value) (Collections / amortisation) 3
Slide 9: …leading to reduced purchasing
…leading to reduced purchasing • 2H purchasing $28m lower than 1H o Reduced share of major forward flows o Unexpected one-off sales in the first half $145m $137m Purchases $m $93m $92m $90m FY15 Purchasing $65m Guide: $70 - $90m $36m Contracted as at July 2014 (1) FY10 FY11 FY12 FY13 FY14 FY15 Actua
Slide 10: Lending volumes now more than offset reduced PDL acquisitions
Lending volumes now more than offset reduced PDL acquisitions • Both lending and PDL acquisitions target the same rate of return $ Capital deployed (Quarterly) Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 PDL acquisitions Lending volume Average capital deployed (last 24 months) FY2014 Results 10
Slide 11: Operational metrics remain intact – collection life-cycle
Operational metrics remain intact – collection life-cycle PDL collections by date of purchase 75.0 $m 70.0 65.0 24% 25% 24% 25% 60.0 55.0 24% 25% 23% 25% 13% 50.0 28% 12% 27% 12% 12% > 3 years 27% 27% 45.0 32% 34% 31% 13% 14% 2-3 years 34% 13% 16% 40.0 9% 13% 17% 20% 12% 20% 1-2 years 10% 12% 35.0 8
Slide 12: Operational metrics remain intact - productivity
Operational metrics remain intact - productivity Debt purchase productivity (direct collection staff only) PDL PDL collections collections per hour Domestic Productivity per hour Total Productivity $400 $350 $350 $300 $300 $250 $250 $200 12 mth avg. 12 mth avg. $200 FY13/14 $286 $150 FY13/14 $196 FY
Slide 13: Operational metrics remain intact – payers base
Operational metrics remain intact – payers base Total Portfolio Jun 14 Dec 13 Jun 13 Dec 12 Jun 12 Face value $4.7bn $4.5bn $4.0bn $3.8bn $3.6bn Number of accounts 744,000 759,000 711,000 650,000 598,000 Payment arrangements Face value $909m $791m $742m $666m $639m Number of accounts 120,000 111,000
Slide 14: Operational capacity increased in core business and lending
Operational capacity increased in core business and lending Headcount (FTE) 1100 1000 900 Support 800 Financial Services 700 Mercantile 600 Debt Purchase Ops 500 400 300 200 100 0 FY10 FY11 FY12 FY13 FY14 Function FY10 FY11 FY12 FY13 FY14 Debt Purchase Ops 516 615 770 831 919 Mercantile 4 4 4 13 12
Slide 15: Continued strong growth in the consumer lending book
Continued strong growth in the consumer lending book Gross loan book excluding provisions $63m $35m $19m $11m $6m $2m 1H12 2H12 1H13 2H13 1H14 2H14 FY2014 Results 15
Slide 16: Additional products are contributing to growth
Additional products are contributing to growth Credit-impaired consumer lending products % of loan Pro-forma book economics Secured Term: 3 - 4 Years 13% Principal: Up to $20K (avg. $16K) Term: 1 - 3 Years Principal: Up to $5K 80% Unsecured (avg. $3K) Term: 1 - 12 months Principal: Up to $2K (avg. $
Slide 17: Lending business on track for profitability in FY15
Lending business on track for profitability in FY15 • FY14 H2 loss of ($0.5m) vs H1 of ($2.0m) • MoneyStart interest revenue now exceeds the up-front provision on new loans written MoneyStart monthly revenue and up-front provisioning $'m 1.5 1 0.5 0 Interest revenue Loss provision expense FY2014 Res
Slide 18: US operational performance positive but pricing is unfavourable
US operational performance positive but pricing is unfavourable • Operational performance has continued to improve • Pro-forma returns on purchases being achieved • Legal collections will deliver back-end returns • Regulatory flux reduced supply and increased prices • Prices have now stabilised • Ba
Slide 19: US strategy adjusted for current conditions
US strategy adjusted for current conditions Objective • Contain losses while positioning for upside when prices moderate Actions • Operation reduced to 100 staff in a single location • Selective purchasing at compromised returns • Admission to further issuer panels • Purchasing diversified into othe
Slide 20: FY15 initial guidance
FY15 initial guidance FY15 Initial Guidance PDL acquisitions $70 - $90m Net lending $40 - $50m NPAT $36 - $38m EPS (basic) 78 - 83 cents Dividend per share 39 - 42 cents FY2014 Results 20
Slide 21: Questions
Questions Thomas Beregi Chief Executive Officer Michael Eadie Chief Financial Officer