Credit Corp Group Limited · ASX:CCP
Credit — H1 FY2014 Earnings Presentation
22 slides from Credit's earnings presentation, Jan 30, 2014
Slide 1: Interim Results H1 of FY2014
For personal use only Interim Results H1 of FY2014 30 January 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 For personal use only Core Australian debt buying business US debt buying • Much larger than the Australian market • Apply our strengths as the US market transitions Leverage strengths to expand into high opportunity Strengths markets
Slide 3: Growth momentum in core business and lending
Growth momentum in core business and lending For personal use only • Group NPAT up by 18% to $17.2m (1) • Record half-year PDL outlay of $86.5m drives core earnings • Loan book up by 84% over the half year to $35m (2) • Lending business on track for profit in FY2015 • Increased full year guidance (1
Slide 4: Strong first-half growth
Strong first-half growth For personal use only H1 of FY14 Financial Results H1 of FY13 (1) H1 of FY14 % Change Underlying Revenue $84.1m $67.5m 25% NPAT $17.2m $14.6m 18% EPS (basic) 37.4 cps 31.9 cps 17% DPS (interim) 20.0 cps 20.0 cps (2) - (1) H1 of FY13 results are underlying and exclude a one-o
Slide 5: Revenue growth reflects expansion
Revenue growth reflects expansion For personal use only • Core business revenue driven by record purchasing in FY13 and H1 of FY14 • Lending generated 30% of total revenue growth Revenue movement vs. pcp $1m $84m $5m $11m $67m H1 FY13 1H13 Total Core Business Lending US H1 FY14 1H14 Total Revenue Re
Slide 6: Investment for growth
Investment for growth For personal use only $ million Dec-13 Jun-13 Dec-12 Operating cash flow 90.9 84.2 78.5 PDL acquisitions, lending and capex (105.6) (75.5) (77.5) Net operating (free) cash flow (14.7) 8.7 1.0 PDL carrying value 160.6 147.2 142.1 Net bank debt 28.3 4.9 3.5 Net debt / carrying va
Slide 7: Pricing discipline and accuracy
Pricing discipline and accuracy For personal use only 1,200 Cumulative Actual cash Collections 1,000 collections $m 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 Note: For all PDLs held at June 2008, initial projections repr
Slide 8: Continued management of collection life-cycle
Continued management of collection life-cycle For personal use only PDL collections by date of purchase 75.0 $m 70.0 65.0 24% 60.0 24% 55.0 24% 25% 23% 50.0 25% 13% 28% 27% 12% > 3 years 27% 27% 45.0 31% 34% 14% 2-3 years 32% 13% 40.0 34% 13% 9% 12% 13% 16% 1-2 years 10% 12% 17% 35.0 8% 16% < 1 year
Slide 9: Collection efficiency maintained
Collection efficiency maintained For personal use only Debt purchase productivity (direct collection staff only) PDL PDL collections Domestic Productivity collections Total Productivity per hour per hour $400 $300 $350 $250 $300 $200 $250 12 mth avg. $279 12 mth $150 avg. $199 $200 $150 $100 H1 FY20
Slide 10: Payers base growth
Payers base growth For personal use only $900 77% 72% 71% % of 72% 71% collections $800 from payers $700 Face value of accounts on $600 payment arrangements$500 $400 $791m $666m $742m $639m $300 $200 $100 $0 27% Jun-12 Dec-12 Jun-13 Dec-13 H1 FY2014 Results 10
Slide 11: Increased productive capacity
Increased productive capacity For personal use only Headcount (FTE) 1,100 1,000 900 800 Financial Services 700 Support 600 500 Mercantile 400 Debt Purchase Operations 300 200 100 0 FY10 FY11 FY12 FY13 H1 14 Function FY10 FY11 FY12 FY13 H1 FY14 Debt Purchase Ops 516 615 770 831 974 Mercantile 4 4 4 1
Slide 12: Collection returns maintained as market multiples compress
Collection returns maintained as market multiples compress For personal use only • PDL collection multiples have compressed as prices have increased • Returns have been maintained by faster PDL liquidation Implicit multiple from PDL amortisation PDL turnover ratio (Collections / amortisation) (Colle
Slide 13: Strong purchasing driven by unexpected one-off sales
Strong purchasing driven by unexpected one-off sales For personal use only • Declining share of major forward flows • Unexpected one-off sales have filled the gap • Second half purchasing likely to be weaker 160 140 $137m $135m FY14 Purchasing Guide: $125 - $135m 120 Purchases $m 100 $93m $92m 80 $6
Slide 14: US operational performance positive but pricing is unfavourable
US operational performance positive but pricing is unfavourable For personal use only • Operational performance has continued to improve - Pro-forma returns on purchases being achieved - Legal collections will deliver back-end returns • Purchasing environment is challenging - Prices continue to incr
Slide 15: US purchasing environment is challenging
US purchasing environment is challenging For personal use only • Regulatory change has reduced supply resulting in higher prices - Major buyers have reported significant reductions in forward flows(1) - Prices expected to remain high for an extended period(2) • Market is transitioning - Smaller buye
Slide 16: US strategy adjusted for current conditions
US strategy adjusted for current conditions For personal use only • Until prices moderate we will: - Continue to buy debts at compromised returns - Contain costs by consolidating operations into one site in Salt Lake City, UT - Seek entry to further issuer panels H1 FY2014 Results 16
Slide 17: Accelerated growth in the consumer lending book
Accelerated growth in the consumer lending book For personal use only Gross loan book excluding provisions $35m $19m $11m $6m $2m 1H12 2H12 1H13 2H13 1H14 H1 FY2014 Results 17
Slide 18: Additional products are contributing to growth
Additional products are contributing to growth For personal use only Credit-impaired consumer lending products % of loan Pro-forma book economics Secured Term: 3 - 4 Years Principal: Up to $16K 15% (avg. $11K) Term: 1 - 3 Years Principal: Up to $5K 80% (avg. $3K) Unsecured Other products In pilot 5%
Slide 19: Lending business on track for profitability in FY15
Lending business on track for profitability in FY15 For personal use only • MoneyStart interest revenue now exceeds the up-front provision on new loans written MoneyStart monthly revenue and up-front provisioning $m 1 Interest revenue Loss provision expense 0.5 0 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 D
Slide 20: Second half priorities
Second half priorities For personal use only • Continue optimisation of core business • Contain US costs and gain entry to further issuer panels • Accelerate lending, including roll-out of additional products H1 FY2014 Results 20
Slide 21: Increased full year guidance
Increased full year guidance For personal use only Updated Jan-14 Issued Nov-13 PDL Acquisitions $125 - $135m $110 - $120m NPAT $33 - $35m $31 - $33m EPS (basic) 71 - 76 cps 67 - 71 cps H1 FY2014 Results 21
Slide 22: Questions
For personal use only Questions Thomas Beregi Chief Executive Officer Michael Eadie Chief Financial Officer