Aeon Financial Service Co., Ltd. · TSE:8570
Aeon Financial Service — Q3 FY2023 Earnings Presentation
52 slides from Aeon Financial Service's earnings presentation, Jan 11, 2024
Slide 1: FY2023 Third Quarter IR Presentation Material
This is an abridged translation of the original Japanese document and is provided for informational purposes only. If there are any discrepancies between this and the original, the original Japanese document prevails FY2023 Third Quarter IR Presentation Material January 11, 2024 fag AEON Financial S
Slide 2: Presentation overview and speakers
• In today’s presentation, Director and Managing Executive Officer Mitsufuji will first explain the highlights of our third quarter financial results and then our earnings and dividend forecasts. This will be followed by President and CEO Fujita’s explanation of the third point, AEON Financial Servi
Slide 3: Third quarter financial results highlights
• First, I will explain the highlights of our third quarter financial results. 3
Slide 4: Key points of latest financial highlights
• There are three key points in today’s presentation on the latest financial highlights. • First, our third-quarter financial results were difficult, with a consolidated operating profit of 26.1 billion yen, which represented 63% of our consolidated operating profit in the same quarter in the previo
Slide 5: Portfolio concentration, AEON Product Finance sale and dividend
concentration using various methods, including alliances with external partners and M&As. As part of this strategy, we today announced the sale of AEON Product Finance Co., Ltd. We also made progress in planting seeds for our further growth, including the launch of new business overseas. • The third
Slide 6: Consolidated financial results for the third quarter
• I will now explain the consolidated financial results for the third quarter. ➢ Operating revenue was 355.7 billion yen, up 7% year on year ➢ Operating profit was 26.1 billion yen, down 37% year on year ➢ Ordinary profit was 27.0 billion yen, down 39% year on year ➢ Profit attributable to owners of
Slide 7: Consolidated results on a single quarter basis
• Here are the consolidated financial results for the third quarter of the fiscal year ending February 2024 on a single quarter basis. ➢ Operating revenue was 118.2 billion yen, up 8% year on year ➢ Operating profit was 5.8 billion yen, down 40% year on year ➢ Ordinary profit was 5.7 billion yen, do
Slide 8: Domestic business operating profit change
• This slide shows the breakdown of year-on-year change in the operating profit of our domestic business. • As shown in the left-hand side of the graph, the results for AEON Financial Service are reported under the domestic business segment from the second quarter due to the management integration w
Slide 9: Domestic business expenses and promotion
including TV commercials from December last year. However, targeted spending was made based on a review of online promotion methods and of project contents. • FPM, which was consolidated in the current year, generates revenue mainly in March. As a result, their expenses were recorded for the 3Q resu
Slide 10: Domestic shopping transactions and receivables
• I will now explain shopping transactions and receivables in our domestic business. On this graph, the yellow line shows the transaction volume, while the blue bars show the revolving credit balance. • Shopping transaction volume increased by 9% year on year to 5,257.1 billion yen. The shopping tra
Slide 11: Installment credit balance
The installment credit balance was 37.3 billion yen, up 14% year on year, or an increase of 2.8 billion yen from the beginning of the term. Both continued to make a two-digit year-on-year growth. • The “repayment simulation function” introduced in the first quarter to show the estimated payment amou
Slide 12: Cash advance volume and balance
• Next, I will explain cash advance transaction volume and outstanding balance of receivables. Cash advance transaction volume increased by 12% year on year to 285.9 billion yen. • In addition to the recovery in funding demand of individuals, we continued promoting reaching out to idle members and a
Slide 13: Revolving 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, with the red line indica
Slide 14: Housing loan transaction volume and receivables
• I will explain the transaction volume and balance of receivables in our housing loan business. • The transaction volume was 417.2 billion yen, up 8% year on year. We made up for the slower-than-expected performance in the first half of the fiscal year and recovered to the level above the previous
Slide 15: Housing loan growth outlook
We will further increase our housing loan transaction volume going forward. 15
Slide 16: Status of ID expansion
• 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 1.24 million new cardholders, which was down 9% year on year. We spent a large su
Slide 17: Card use rate and small payments
million. We aim to improve card-use rate by promoting its use for small payment that credit cards are often not used or convenient payments, and to organize more profitable members into our eco system. 17
Slide 18: Global business overview by area
• Now, we will move to global business. The operating revenue expanded for all three areas of China, Mekong, and Malay. • In the China area, transaction volume steadily grew, especially in Hong Kong, at a pace exceeding an increase in bad debt related expense. As a result, revenue and profits contin
Slide 19: Global business operating profit change
• This slide shows the breakdown of the year on year change in our operating profit of global business for the 3Q. • The profit decreased by 5.4 billion yen year on year due to the impact of year on year increases in bad debt related expense by 4.4 billion yen in the Mekong area and by 5.0 billion y
Slide 20: AEON Credit Service (Asia) receivables and NPL
• • 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 r
Slide 21: ACS Asia loan restructuring and bad debt outlook
against sudden bankruptcy risk, we are contacting the customers to discuss loan restructuring contracts to control bad debt-related expenses. • We expects the bad debt-related expense ratio to reach its peak in the 2H and will appropriately absorb risks and increase profits through the steady increa
Slide 22: AEON Thana Sinsap Thailand results
• This slide shows the results at AEON Thana Sinsap in Thailand. • In Thailand, inflation and unemployment rate among the young generation remain high, resulting in rising non-perforiming loans（NPL）rations across the market, including our competitors. • As Thana Sinsap tightened its credit screening
Slide 23: ACS Malaysia results
• Next, I will explain the situation of ACS Malaysia. • In Malaysia, ACS Malaysia is improving customer convenience through the digitalization of customer touchpoints for personal loans and installment finance such as motorcycle loans, which are its core business. For personal loans, ACS Malaysia’s
Slide 24: Delinquent loans in Thailand and Malaysia
• Finally, this slide shows the situation of delinquent loans in Thailand and Malaysia. • In Thailand, we need to continue to closely monitor the country’s economic recovery. Thanks to the stricter credit screening and the implementation of collection measures, the ratio of delinquent loans seems to
Slide 25: Earnings and dividend forecasts
• Before ending my presentation, I will explain our earnings and dividend forecasts. 25
Slide 26: Earnings and dividend forecasts unchanged
• There is no change to the figures we released in April. • In the domestic business, we are trying to accumulate highly profitable revolving shopping credit receivables and cash advance receivables while enhancing cost control. In addition, we will work on increasing revenue through the expansion o
Slide 27: Business portfolio review and priority measures
• I am President and CEO Fujita. From now on, I will explain the business portfolio review we are currently conducting to improve our corporate value and the details of actions we are currently focusing on. 27
Slide 28: Business portfolio review to raise corporate value
• We are currently reviewing our business portfolio to further raise our corporate value. • As our business environment and customer needs change at an ever increasing speed, the AFS Group must challenge ourselves to speedily transform our business. Following the "Purpose" announced this year, we ar
Slide 29: M&A and external resources in portfolio review
of our global business. • We will proactively use external resources and execute M&As in our business portfolio review. • The business integration of AFS and AEON Credit Service executed in June last year was part of these efforts. • We have been working on various initiatives toward a review of our
Slide 30: Transfer of AEON Product Finance shares to Orient Corporation
• Today, we announced the transfer of shares of AEON Product Finance to Orient Corporation. • The Japanese installment credit industry has been experiencing a slide into oligopoly, in addition to the increasing diversity of payment methods and loan types. In light of these changes, we continued to e
Slide 31: Alliance with Orico
• We have begun discussing with Orico how to maximize our value proposition by utilizing and complementing the strengths of both companies not only through a transfer of shares but also through future alliances in various business areas. • This new partnership is expected to expand our services and
Slide 32: Growth of core business
• The growth of our core business is essential for us to strengthen our foothold and to develop our global business, which is a growth area, and future new businesses. • We will fully utilize the low interest rate and stable funding capability of AEON Bank deposits, while further enhancing our advan
Slide 33: Expansion of AEON Pay touch points
• The first is the expansion of AEON Pay touch points. • AEON Pay membership reached 9.5 million as of the end of November last year and is expected to reach 10 million by the end of this year. The locations where AEON Pay can be used have also increased by 530,000 year to date to 1.25 million, main
Slide 34: Cross-selling via AEON Wallet
• Next, I will talk about cross-selling. • In September 2023, we renewed the AEON Wallet app, a digital touchpoint with customers. The purpose of the renewal was to establish its position as a touchpoint that could cater to the needs of each customers. The number of applications via the app before a
Slide 35: Regional cooperation and local governments
• Next, I will discuss about strengthening regional cooperation to expand our economic zone. • In the second quarter, we made FeliCa Pocket Marketing (FCP) our consolidated subsidiary. FCP provides community-based solutions such as local currencies or local points to local governments. We are workin
Slide 36: Strengthening credit card business foundation
• Next, I would like to discuss strengthening the foundation of our credit card business. • To strengthen our structure to eliminate the negative customers’ experience, we have restructured our centers based on their purposes instead of their business processes and have created a structure that enab
Slide 37: Alliance with Monex
• This is about the alliance with Monex, Inc. • AEON Bank and Monex, Inc. began their tie-up business on January 4, 2024, based on a comprehensive business alliance in financial intermediary services formed between the two companies and announced in December 2022. • As the interest in asset building
Slide 38: Global business initiatives
• I will explain our initiatives in the global business, a growth area. • AFS has been operating in Asia for more than 30 years and currently have operations in 10 countries, excluding Japan. We expect significant growth in the future, led by Hong Kong, Thailand and Malaysia, where we are locally li
Slide 39: Initiatives in Vietnam
• First, I will explain our initiatives in Vietnam. 39
Slide 40: Acquisition of a finance company in Vietnam
• In October 2023, we released its decision to acquire a finance company in Vietnam. • We entered the Vietnam market in 2008 and only acquired a license to operate retail business and kept waiting for approval to operate finance business while offering installment credit such as home appliances and
Slide 41: Vietnam market growth
• Vietnam has a young generation, a growing population, and a remarkably growing economy. Consumption activity is also expected to expand in the future. We therefore expect a further increase in funding needs and a rise in the needs for cashless payments. • The number of credit cards issued, transac
Slide 42: AEON Group presence in Vietnam
• The AEON Group also positions Vietnam as one of its priority countries based on the future economic growth. The Group already has over 200 stores in Vietnam, including shopping malls, GMS, food supermarkets, and convenience stores. • As the AEON Group’s network continues to expand, we will work on
Slide 43: Malaysia digital bank
• Next, I will explain our new initiative in Malaysia, a Digital Bank, which will become our new business model. 43
Slide 44: AEON Bank Malaysia license and services
• We obtained a business license from Malaysia’s central bank for a Digital Bank, which has been preparing for the launch of its business. • We will provide products and services based on the Islamic financial system, which is widely used in Malaysia. It will be the first Digital Bank in Malaysia us
Slide 45: Digital banking infrastructure and rollout
• Digital banking is a totally new banking service, as evidenced by its system infrastructure. Unlike traditional banks that create a huge information system from scratch and maintain it, digital banks will create their infrastructure by combining apps. This allows them to offer agile services at lo
Slide 46: Summary of portfolio review
• Today, I explained a business portfolio review we are working on to the extent I can reveal at present. We are having various discussions to further improve our corporate value. • Our business results for the 3Q has been challenging as we made upfront investments to create a strong basis as we wen
Slide 47: Q&As
[Q&As] ■Mizuho Securities / Analyst Sakamaki (1) On the transfer of equities of AEON Product Finance, I understand that payment for the transfer you will receive is 25.0 billion yen. How do you plan to use the surplus capital created for the improvement of corporate value? Do you intend to allocate
Slide 48: Q&As (continued)
therefore expect that we can make a full recovery next year if we can keep increasing the balances at the current pace. We will also continue working on cost control. Sales promotion expense was noticeably high in the first half of the fiscal year; however, we could reduce it to a reasonable level b
Slide 49: Q&As (continued)
2024 because the share transfer will take place in March, (2) Is it correct to consider that you will provide an update on the medium-term business plan at the end of the term? Could the disclosure of KPIs be postponed due to a review of the business portfolio? (Tomoyuki Mitsufuji, Director, Managin
Slide 50: Q&As (continued)
(Tomoyuki Mitsufuji, Director, Managing Executive Officer, and General Manager of the Finance and Accounting Division) We are hoping to talk about ROE and PBR based on capital cost. We want to clarify how we allocate our capital while raising our capital adequacy ratio. (2) It appears that you have
Slide 51: Q&As (continued)
consolidated operating profit has swung downward? (Tomoyuki Mitsufuji, Director, Managing Executive Officer, and General Manager of the Finance and Accounting Division) It is difficult to achieve the 100-billion yen target by the fiscal year 2025. We are considering reviewing this target, together w
Slide 52: Q&As (continued) and end of document
say about capital now. We have a majority stake in our companies listed overseas and are controlling them well. End of Document 52
AEON Financial Service — Q3 FY2023 Earnings Presentation on 6ix