Credit Corp Group Limited · ASX:CCP
Credit — H1 FY2018 Earnings Presentation
26 slides from Credit's earnings presentation, Jan 30, 2018
Slide 1: FY18 H1 Results Presentation
For personal use only FY18 H1 Results Presentation 30 January 2018 Thomas Beregi, CEO Michael Eadie, CFO
Slide 2: Leadership in sustainable financial solutions
Leadership in sustainable financial solutions… For personal use only • Long-term growth ANALYTICS & OPERATIONAL SUSTAINABILITY • ROE 16% - 18% DISCIPLINE EXCELLENCE & COMPLIANCE • Low gearing Core Australian / NZ debt buying • Largest database • Highest asset turnover 1 • No adverse orders or • Hist
Slide 3: Growth opportunities across different markets
…has created growth opportunities across different markets… For personal use only Segment Market share Competitive strengths Aus/NZ 25% 1 • Operational leadership through technology and workforce management debt buying • Largest database of credit impaired consumers • Accurate pricing to a narrow ba
Slide 4: Increasingly diversified earnings
…and increasingly diversified earnings… For personal use only • New businesses on track to deliver 33% of revenue and 28% of profit in FY18 Segment NPAT $ 70m $ 55m Aus/NZ debt buying $ 40m Aus/NZ lending $ 25m $ 10m US debt buying ($ 5m) FY16 FY17 FY18 Projection * * Based on mid-point of current g
Slide 5: 18% growth in H1 of FY18
…with 18% growth in H1 of FY18… For personal use only FY18 H1 Financial results FY18 H1 FY17 H1 $ change % change Aus/NZ debt buying 1 $99.8m $93.7m + $6.1m + 7% Aus/NZ lending $37.6m $29.7m + $7.9m + 27% US debt buying $10.2m $5.7m + $4.5m + 79% Revenue total $147.6m $129.1m + $18.5m + 14% Aus/NZ d
Slide 6: Despite reduced investment over the last months
…despite reduced investment over the last 12 months For personal use only PDL investment and net lending ($m) $ 200m $ 150m $ 100m $ 50m - 1 2 FY16 H1 FY16 H2 FY17 H1 FY17 H2 FY18 H1 PDL acquisitions Net lending 1. Includes one-off NCML acquisition 2. Includes one-off Cashfirst acquisition FY18 H1 R
Slide 7: Aus/NZ PDL investment 30% lower than FY17
Aus/NZ PDL investment 30% lower than FY17… • Aus/NZ purchasing conditions are expected to remain challenging For personal use only - Several competitors have flagged increased investment - Continued availability of capital to sector • Increase in investment pipeline in the Aus/NZ market late in H1 -
Slide 8: Collections grow and operating metrics improve
… while collections grow and operating metrics improve For personal use only Pricing accuracy and returns on track Efficiency and productive capacity • ) • Total cumulative collections above aggregate • Productivity up by 7% over the pcp (YTD December) expectations • Total collections up 7% over the
Slide 9: Financial capacity intact
Financial capacity intact For personal use only • Gearing remains conservative at 44% • $300m of funding lines in place • Increased headroom projected over balance of year • Capacity to seize opportunities as they arise Facility headroom and gearing $m Gearing $ 300m 50% $m Gearing 40% $ 200m 30% $
Slide 10: Wallet Wizard is the most sustainable loan in the segment
Wallet Wizard is the most sustainable loan in the segment… • Lowest cost, most affordable offering in credit impaired segment For personal use only Loan feature Credit Corp Typical cash loan Wallet Wizard loan competitor Price 1 $148 $440 Loan amount Up to $5k Up to $2k Duration Up to 3 years <12 mo
Slide 11: Continued growth in the consumer lending book
…resulting in continued growth in the consumer lending book… For personal use only Consumer lending book and revenue $ 172m $ 161m $ 156m $ 135m $ 121m $ 100m $ 80m Yield maintained $ 72m $ 63m $ 35m Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Gross loan book (excl. provisions) An
Slide 12: Driven by continued growth in lending volume
…driven by continued growth in lending volume For personal use only • Continued new customer acquisition and strong retention of existing customers Customer settlements ($m) $ 100m $ 80m Pre-existing $ 60m customers $ 40m New customers $ 20m - Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 FY18 H1 Results Prese
Slide 13: Consumer lending projected FY18 returns in line with pro-forma
Consumer lending projected FY18 returns in line with pro-forma For personal use only • Projected ROA of 12% in FY18 in line with the hurdle 15% ROE with 20% gearing NPAT ROA Lending NPAT and Return on Assets $ 16m 16% $ 12m 12% H2 $ 8m H2 8% H1 H1 $ 4m H2 4% H1 H1 H1 H1 H1 H1 - - FY16 FY17 FY18 Fore
Slide 14: US investment has increased as favourable conditions continue
US investment has increased as favourable conditions continue For personal use only • 50% increase in face value acquired in H1 - Lower prices on re-bidding - 13% increase in purchasing outlay • Supply conditions continue to be favourable - Charge-off rates increased from 3.47% (Q4 2016) to 3.57% (Q
Slide 15: Operating metrics maintained as productive capacity grows
Operating metrics maintained as productive capacity grows • US headcount has increased by 35% versus the pcp while maintaining productivity For personal use only • Payment arrangement book growing - now 60% of collections • Continued focus on growing productive capacity - New site in process of bein
Slide 16: US operation now profitable
US operation now profitable • On track to produce a full year profit and achieve up to ~$3m turnaround from FY17 For personal use only • Purchasing at current levels will allow for significant profit growth in coming years US NPAT $ 3m $ 2m US NPAT guide of $1 - $2m $ 1m - ($ 1m) ($ 2m) ($ 3m) FY15
Slide 17: Positioned for growth into FY19 and beyond
Positioned for growth into FY19 and beyond For personal use only Segment Strategic priorities Aus/NZ • Focus on continued operational improvement to retain competitive strengths debt buying • Maintain purchasing discipline and capital position to exploit opportunities as they arise Aus/NZ • Continue
Slide 18: Updated FY18 Guidance
Updated FY18 Guidance For personal use only Updated guidance Updated guidance Nov 2017 Jan 2018 PDL acquisitions $170 - $190m $190 - $200m Net lending $35 - $45m $35 - $45m NPAT $62 - $64m $62 - $64m EPS (basic) 130 - 134 cents 130 - 134 cents FY18 H1 Results Presentation | 18
Slide 19: Questions
For personal use only Questions FY18 H1 Results Presentation | 19
Slide 20: Appendix - Key operating metrics
For personal use only Appendix - Key operating metrics FY18 H1 Results Presentation | 20
Slide 21: Operating cash flows and gearing
Appendix 1 | Operating cash flows and gearing For personal use only Dec-17 Jun-17 Dec-16 Jun-16 Pre-tax operating cash flow $150.0m $139.6m $134.5m $123.7m Tax payments ($15.8m) ($9.3m) ($1.4m) ($11.6m) PDL acquisitions, net lending and capex ($135.8m) ($122.0m) ($179.9m) ($158.9m) Net operating (fr
Slide 22: Operational metrics - pricing discipline and accuracy
Appendix 2 | Operational metrics - pricing discipline and accuracy For personal use only Cumulative collections $2.5bn $ 2,500m $2.0bn Actual cash $ 2,000m collections $1.5bn $ 1,500m Initial projections $1.0bn $ 1,000m $0.5bn $ 500m - * For all PDLs held at June 2008, initial projections represent
Slide 23: Operational metrics - collection life-cycle
Appendix 3 | Operational metrics - collection life-cycle For personal use only PDL collections by vintage +7% 1 $ 100m 30% $ 80m 30% 32% 29% 33% 32% 31% 30% 32% 32% 28% 13% $ 60m 29% 31% 32% 11% 14% 15% 12% 10% 15% 12% 17% 17% 15% 13% 21% 14% 15% 22% 15% 19% 21% 25% $ 40m 16% 22% 19% 15% 15% 25% 23%
Slide 24: Operational metrics - productivity
Appendix 4 | Operational metrics - productivity For personal use only Debt purchase productivity (direct collection staff only) PDL collections per hour $ 300 YTD average FY18: $222 FY17: $207 $ 250 2017/18 $ 200 2016/17 $ 150 $ 100 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun FY18 H1 Results Pre
Slide 25: Operational metrics - payers base
Appendix 5 | Operational metrics - payers base For personal use only Total portfolio Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Face value $5.1bn $5.3bn $5.7bn $5.8bn $5.9bn Number of accounts 687,000 673,000 699,000 716,000 710,000 Payment arrangements Face value $1,099m $1,171m $1,235m $1,300m $1,300m Num
Slide 26: Operational and total headcount
Appendix 6 | Operational and total headcount For personal use only Period end headcount (FTE) Period end headcount (FTE) 1,500 1,300 Support 1,100 Lending Agency 900 Debt buying ops 700 500 Jun-15 Jun-16 Jun-17 Dec-17 Function Jun 15 Jun 16 Jun 17 Dec 17 Debt buying operations 1,004 1,096 1,198 1,19