Credit Corp Group Limited · ASX:CCP
Credit — H1 FY2019 Earnings Presentation
23 slides from Credit's earnings presentation, Jan 29, 2019
Slide 1: FY19 H1 Results Presentation
FY19 H1 Results Presentation C— 29vanuary-2019 Credit Corp Group Thomas Beregi, CEO Michael Eadie;CFO
Slide 2: Leadership in the credit-impaired consumer segment...
Leadership in the credit-impaired consumer segment... Cc Credit Corp Group ANALYTICS & DISCIPLINE OPERATIONAL EXCELLENCE Australian / NZ debt buying «Long-term growth +*ROE 16% - 18% + Low gearing SUSTAINABILITY & COMPLIANCE + Largest database + Highest asset turnover * + History of pricing accuracy
Slide 3: ...has delivered outperformance to revenue and earnings expectations...
Cc ...has delivered outperformance to revenue and earnings expectations... Credit Corp Group FY19 H1 Financial results FY19 H1 FY18 H1 % change Aus/NZ debt buying * $97.4m $99.8m ($2.4m) (2%) Aus/NZ lending $44.4m $37.6m + $6.8m + 18% US debt buying $17.4m $10.2m + $7.2m +71% Revenue total $159.2m $
Slide 4: ...and increased investment to sustain growth into the future...
Cc ...and increased investment to sustain growth into the future... Credit Corp Group + Investment discipline maintained - Allinvested capital expected to achieve corporate hurdle return - Increased allocation to consumer lending and US debt buying PDL investment and net lending $ 150m _ +5% $ 120m
Slide 5: ...while we maintain discipline in Aus/NZ debt buying...
Cc ..-while we maintain discipline in Aus/NZ debt buying... Credit Corp Group + Domestic purchasing remains competitive with tight supply - We have won share in some instances and lost share in others - Unsecured credit in run-off * - Charge-off rates remain low 2 + Aus/NZ purchasing likely to be in
Slide 6: ...and position ourselves for investment opportunities across all segments...
...and position ourselves for investment opportunities across all segments... Cc Credit Corp Group + Headroom of ~$100m enables us to seize opportunities across all segments * Facility headroom and gearing $ 350m 50% 2801 $ 280m 40% $ 210m 30% $ 140m 20% $ 70m - 10% FY16 FY17 FY18 FY19H1 = FY19H2 Pr
Slide 7: ...while leveraging our uniquely resilient collection model...
…while leveraging our uniquely resilient collection model… • Aus/NZ collections maintained despite sustained purchasing at reduced levels - Collections in core business still tracking to the record prior year result (2.8% lower in FY19 H1 vs. FY18 H1) - Payment arrangement book maintained Aus/NZ PDL
Slide 8: ...and our commitment to continuous operational improvement
…and our commitment to continuous operational improvement Pricing accuracy and returns on track Efficiency • Total cumulative collections above aggregate pricing expectations • Productivity up by 7% over the pcp • Total H1 collections up 5% over the pcp • H1 Aus/NZ collections tracking the record le
Slide 9: Consumer lending book growth has almost doubled...
Consumer lending book growth has almost doubled... Cc Credit Corp Group $ 63m $ 72m a Consumer lending book and revenue $ 100m $ 121m $ 135m 411% ae en 203m 47% ($14, eum) + $ 183m 470m $156m $161m | - li _ Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 mmm Gross loan book (excl. provisions) Dec-16 Jun-17 Dec-1
Slide 10: ...driven by new customer acquisition and strong retention of existing customers...
Cc ...driven by new customer acquisition and strong retention of existing customers... Credit Corp Group + Total settlements up 21% over the pcp + New customer settlements up by 20% over the pcp despite relative maturity of book Customer settlements $ 120m $ 100m $80m $60m $40m $20m : FY17 H2 FY18 H
Slide 11: ...increasing the segment earnings outlook
Cc ...increasing the segment earnings outlook Credit Corp Group + Strong book growth will produce increased revenue - FY19 outlook improved - Will flow through to FY20 Earnings growth NPAT ROA $ 20m 15% Vat $ 15m ° 10% NPAT projected ROA $ 10m ws ROA projected 5% $ 5m FY16 FY17 FY18 FY19 Projection
Slide 12: Wallet Wizard is the superior consumer proposition
Wallet Wizard is the superior consumer proposition • Cheapest and most sustainable offering in the segment • Substantially cheaper than any commercially-provided offering • Cheaper than a charitably-funded alternative from the not-for-profit provider Credit Corp Price 1 cheaper by Credit Corp Wallet
Slide 13: US market conditions remain favourable...
US market conditions remain favourable… • Supply conditions continue to be favourable - Charge-off rates still below long-term average - Continued unsecured credit growth US revolving credit market 7 6 Percent 5 4 3 2 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 1
Slide 14: ...allowing increased investment at favourable returns, improving the profit outlook
…allowing increased investment at favourable returns, improving the profit outlook • US FY19 contracted purchasing pipeline now A$74m, up 23% on FY18 investment - Has improved profit outlook for FY19 - Will underpin substantial profit growth in FY20 • Headcount growth in H1 below expectations but wi
Slide 15: Operating metrics remain strong and on track
Operating metrics remain strong and on track • Operating metrics continue to benchmark strongly against publicly-traded debt buyers US debt buying operating metrics Asset turnover 4 Cost to collect CCP 0.7 39.0% 1 ECPG 0.9 41.7% 2 PRAA 0.7 41.4% 3 1. FY19 H1 CCP US debt buying segment only 2. 2018 Q
Slide 16: Improved full year outlook
Improved full year outlook Upgraded guidance Upgraded guidance Nov 2018 Jan 2019 PDL acquisitions $170 - $190m $200 - $210m Net lending $45 - $50m $50 - $55m NPAT $67 - $69m $69 - $70m EPS (basic) 140 - 144 cents 144 - 146 cents Credit Corp Group FY19 H1 Results presentation | 16
Slide 17: Appendix | Key operating metrics
2, Credit Corp Group Appendix | Key operating metrics Credit Corp Group FY19 H1 Results presentation |
Slide 18: Appendix | Operating cash flows and gearing
Appendix 1 | Operating cash flows and gearing Operating cash flows and gearing Dec-18 Jun-18 Dec-17 Jun-17 Pre-tax operating cash flow $163.4.m $155.0m $150.0m $139.6m Tax payments ($12.1m) ($16.8m) ($15.8m) ($9.3m) PDL acquisitions, net lending and capex ($144.1m) ($114.1m) ($135.8m) ($122.0m) Net
Slide 19: Appendix | Pricing discipline and accuracy
—v Appendix 2 | Pricing discipline and accuracy —. Pricing discipline and accuracy Cumulative collections $ 3,000m $ 2,500m $ 2,000m $ 1,500m $ 1,000m $ 500m F F F FE LF SL SF SX KM KK SS SoS noe & Se SS SKF SF SX A * For all PDLs held at June 2008, initial projections represent the forecast at June
Slide 20: Appendix | Collections life cycle
Appendix 3 | Collections life cycle — Credit Corp Group PDL collections by vintage al Q2 Sep-15 Dec-15 Mar-16 Jun-16 Q3 <1 Year 31% 32% ai 33% 32% Q2 Q3 29% Q4 Sep-16 Dec-16 Mar-17 Jun-1 m1-2 Years 30% ai Q2 7 Sep-17 Dec-17 m2-3 Years 30% Q3 Mar-18 +5% ' 32% 31% Q4 ai Jun-18 Sep-18 Dec-18 >3 Years 3
Slide 21: Appendix | Productivity
Appendix 4 | Productivity Cc Credit Corp Group PDL collections per hour $ 300 $ 250 $ 200 $ 150 H1 average FY19: $237 FY18: $222 —s— 12m to Dec-17 sees 12m to Dec-18 $100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Credit Corp Group FY19 H1 Results presentation | 24
Slide 22: Appendix | Payers base
Appendix 5 | Payers base Portfolio summary Total portfolio Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Face value $5.7b $5.8b $5.9b $6.0b $6.2b Number of accounts 699,000 716,000 710,000 710,000 753,000 Payment arrangements Face value $1,235m $1,300m $1,300m $1,300m $1,300m Number of accounts 151,000 157,000
Slide 23: Appendix | Operational and total headcount
Appendix 6 | Operational and total headcount Cc Credit Corp Group Period end headcount (FTE) Period end headcount (FTE) 1,600 Jun-16 9 Jun-17 Jun-18 Dec-18 1,400 Debt buying operations 1,096 1,198 1,208 1,202 1,200 . , Agency 13 81 77 90 1,000 Lending 108 95 110 119 800 Support 96 101 102 103 Total