Cog Financial Services Limited · ASX:COG
Cog Financial Services — Consolidated Operations Group — FY2017 Earnings Presentation
34 slides from Cog Financial Services's earnings presentation, Aug 29, 2017
Slide 1: Investor Presentation FY17 Results
Investor Presentation For personal use only FY17 Results August 2017 Presenters Cameron McCullagh, MD Raylee Carruthers, Group COO Nathan Thomas, Group CFO
Slide 2: Positioned for Strong Growth
Positioned for Strong Growth For personal use only We are well positioned for strong growth in 2018: ˃ Surplus Assets of $52 million; supporting acquisitions ˃ Commercial equipment leases; delayed accounting for value from strong growth in lease origination ˃ Representing $3.2 billion of NAF, we are
Slide 3: Objective
Objective For personal use only To grow the EPS of COG’s complementary businesses that specialises in: ˃ Finance broking focussed on motor vehicle & equipment finance ˃ Commercial equipment leases for essential business assets ˃ Aggregation of the asset finance broking industry in Australia 3
Slide 4: Overview
Overview For personal use only ˃ Group Overview ˃ Pro Forma Result ˃ TL Rentals ˃ Significant ‘baked-in’ profits for the next four years as a result of consistent increases in origination ˃ Asset Finance Broking and Aggregation ˃ Recovery to maintain purchased EBITDA ˃ Financial Information ˃ Future
Slide 5: Financial Performance: Group Overview - Performance
Financial Performance Group Overview - Performance For personal use only ˃ TL Rentals has continued to perform well, increasing origination by 27% in FY17, FY16 48% increase and 49% in FY15. the two prior years. We expect to continue this expansion for the foreseeable future. ˃ The first consolidate
Slide 6: Change in accounting from Investment to Consolidated
Change in accounting from Investment to Consolidated For personal use only COG previously reported as an Investment 1 November 2016, COG moved to Entity. Under the accounting standards, consolidated accounting. investments were measured at fair value rather than consolidated. Investment entity accou
Slide 7: Pro Forma Segment Performance
Pro Forma Segment Performance For personal use only The information has been prepared in accordance with the operating segment disclosures made in the interim results for 30 June 2017 Commercial Finance Broking Equipment All Other / 12 months ended 30 June 2017 & Aggregation Leasing Intersegment Tot
Slide 8: Pro Forma Segment Performance
Pro Forma Segment Performance For personal use only Contribution $m Finance broking and aggregation 8.54 Commercial equipment leasing 7.32 Other including COG corporate overheads *(1.86) . 14.00 Due diligence costs (0.84) Executive long term incentive **(0.38) Hal Group (excluding TL Rentals) ***(0.
Slide 9: Pro Forma Segment Performance
Pro Forma Segment Performance For personal use only Contribution $m $m $m 1 Half Year 2 Half Year Full year Finance broking and aggregation 3.71 4.83 8.54 Commercial . equipment leasing 3.32 4.00 7.32 COG corporate overheads (1.11) (0.75) (1.86) 5.92 8.08 14.00 Due diligence costs (0.53) (0.31) (0.8
Slide 10: Solid Growth in TL Rentals
Solid Growth in TL Rentals For personal use only Solid growth in lease origination $m of Leases Written 60 55.0 ˃ As at 30 June 2017 the TL Rentals was $101 50 million at Original Equipment Cost (OEC) 42.5 40 ˃ A niche finance provider on small to mid sized 33.4 transactions which require fast turna
Slide 11: Value Creation on Lease Origination
Group Financial Indicative Performance Value Creation on Lease Origination For personal use only 2017 2018 Forecast $m $m Lease Volume at Original Equipment Cost (OEC) 42 55 Upfront net income 4.25% 1.79 2.34 End of term earnings (received approx. 3.5 years from 21% 8.82 11.55 lease inception) Write
Slide 12: Alignment within a controlled structure
Alignment within a controlled structure For personal use only Consolidated Operations Group Limited (ASX – COG) Platform Consolidated QLD Pacific Linx Finance Hal Group Pty Consolidated Finance Group Pty Finance Group Pty Australia Pty Limited Group Pty Limited Limited Limited Limited 100% owned 62%
Slide 13: Asset Finance Broking
Group Asset Financial Finance Performance Broking For personal use only The Asset Finance industry is $45 billion p.a. of NAF, of which approx. 67% is intermediated. The 2017 focus has been on creating a base to deliver growth. The positive contributions were: ˃ A strong growth in CFG membership and
Slide 14: Asset Finance Broking: Acquisitions
Group Financial Asset Finance Performance Broking For personal use only ˃ Acquisitions in last six months: A B (A x B) EBITDA Entity EBITDA % Multiple Date Fleet Network (80% by $1.9m *50 1.52 4.0 1 April 2017 Platform) DLV (50% by QPF) $0.7m **25 0.35 4.5 1 July 2017 *80% x 62% **50% x 50% ˃ Fleet
Slide 15: Platform Membership Group
Group PlatformFinancial Performance Membership Group For personal use only Net Asset Finance 2016 2017 % increase Platform $1,012m $1,088m 7.5% CFG $1,736m $2,039m 17.5% Total $2,740m $3,128m 14.2% The negative contributions to Platform were: ˃ The departure of a large mortgage aggregation group; ˃
Slide 16: CFG Membership Group: Growth and New Members - Volumes
CFG Membership Group For personal use only Growth and New Members - Volumes $2.039b $178m $69m -$55m $1.736b $171m -$55m $240m $1.270b Despite the overall volumes increasing, there were some large shifts in volume between funders on the panel: $134 million was redirected to one financier, increasi
Slide 17: CFG Membership Group: Number of New Members
CFG Membership Group For personal use only Number of New Members Notes Members have increased by 15% in 2017 Members have increased by 200% since 2013 Industry dynamics and IT are encouraging increased membership. 2013 2014 2015 2016 2017 2018 17
Slide 18: COG Network
COG Network For personal use only Broker Network offices Fleet Network QPF DLV QPF QPF QPF QPF (Allied Finance) Fleet Network COG Head Office Linx Platform Finance Mildura Finance Fleet Avenue TL Rentals Linx Platform CFG Melbourne Finance 18
Slide 19: Membership offering
Membership offering For personal use only We offer our Members - ˃ Best commission and Volume Based Incentives ˃ Workflow and CRM software ˃ Compliance ˃ Conferences ˃ Succession planning ˃ Revenue synergies 19
Slide 20: Financial Information
For personal use only Financial Information Financial Information 20
Slide 21: Excess Assets
Excess Assets For personal use only Self funded leases 30 June 2017 $15.9m Cash balances* 30 June 2017 $36.4m ˃ We plan to sell the self-funded leases to a new funder in October ˃ We expect to have two new ongoing funders commencing the calendar year ˃ Strong positive cashflow from operations *Exclu
Slide 22: Statement of Financial Position
Statement of Financial Position For personal use only 30 June 2017 30 June 2016 $m $m Cash and cash equivalents 39.84 0.01 Trade and other receivables 13.02 0.51 Financial assets – lease receivables 12.17 - Inventories 0.51 - Other assets 3.72 4.07 Total current assets 69.24 4.59 Trade and other rec
Slide 23: Cash Flows
Cash Flows For personal use only 30 June 2017 $m Cash flows from operating activities 6.69 Investing activities Payments for investments in subsidiaries (32.67) Payments for equipment - finance leases (17.14) Payments for plant & equipment (0.88) Proceeds from sale of plant & equipment 0.27 Receipts
Slide 24: Strategy and outlook
For personal use only Financial Information Strategy and outlook 24
Slide 25: Business Strategy
Business Strategy For personal use only Clear strategy to grow Revenue Synergies ˃ Organic growth in commercial equipment leasing Volume bonus incentives ˃ Consideration of additional product ˃ Consumer finance Lead generation ˃ Warehouse facility or syndication of commercial lending Car purchasing
Slide 26: Evolved: Our new IT platform
Evolved For personal use only Our new IT platform: ˃ Funded through increased volume ˃ Will increase sales and based incentives (VBI’s) processing efficiency and management of the sales ˃ Built on Salesforce process ˃ Will be rolled out in stages – ˃ Designed to interface with commencing September 2
Slide 27: FY Dividend
FY 18 Dividend For personal use only ˃ The Company’s directors will consider a dividend strategy following the completion of the existing proposed acquisition and the planned sales of the self funded leases ˃ The policy being considered is a payout of up to 60% of NPAT commencing May 2018 with a dis
Slide 28: Priorities and Growth Initiatives
Priorities and Growth Initiatives For personal use only ˃ Aggregation membership growth and improved service offering ˃ Organic growth of brokers ˃ Organic growth of TL Rentals ˃ Equipment finance broker acquisitions ˃ Over mid-term expand in-house funding offering to CFG and Platform members 28
Slide 29: Disclaimer
Disclaimer For personal use only Consolidated Operations Group Limited (Consolidated Operations Group or Company) has not considered the financial position or needs of the recipient in providing this presentation (Presentation). Persons needing advice should consult their stockbroker, bank manager,
Slide 30: Appendix
For personal use only Financial Information Appendix 30
Slide 31: Delayed accounting recognition of lease value created
Groupaccounting Delayed Financialrecognition Performance of lease value created For personal use only ˃ If a lease is funded via a ‘sale of receivables’ arrangement, there is an upfront recognition of: ˃ the sale proceeds (the difference between the present value of the lease payments discounted at
Slide 32: Demonstration of Delayed Profit Recognition on Leases
Group Financial Demonstration Performance of Delayed Profit Recognition on Leases For personal use only Assumptions (the model) - ˃ Costs in TL Rentals increase each year at 2.5% from FY17 to FY21 ˃ Bad debts are at or below 2% ˃ End of term earnings are at 21% ˃ Average lease term is 4 years ˃ Aver
Slide 33: Demonstration of Delayed Profit Recognition on Leases
Group Financial Demonstration Performance of Delayed Profit Recognition on Leases For personal use only Combined OEC 2016 2017 2018 2019 2020 2021 Total Year $m $m $m $m $m $m $m 2014 15 0.5 0.3 2015 22 0.9 0.9 0.5 2016 33 1.5 1.5 1.5 0.8 2017 42 1.1 2.1 2.1 2.1 1.0 2018 55 1.6 2.9 2.9 2.9 2019 55 1
Slide 34: Demonstration of Delayed Profit Recognition on Leases
Group Financial Demonstration Performance of Delayed Profit Recognition on Leases For personal use only Combined OEC 2016 2017 2018 2019 2020 2021 Total Year $m $m $m $m $m $m $m 2014 15 0.5 0.3 2015 22 0.9 0.9 0.5 2016 33 1.5 1.5 1.5 0.8 2017 42 1.1 2.1 2.1 2.1 1.0 2018 55 1.6 2.9 2.9 2.9 2019 65 1
Consolidated Operations Group — FY2017 Earnings Presentation on 6ix