Credit Corp Group Limited · ASX:CCP
Credit — Investor Presentation (April 2019)
40 slides from Credit's investor presentation, Apr 1, 2019
Slide 1: Market update and equity raising
Market update and equity raising 1 April 2019 Thomas Beregi, CEO Michael Eadie, CFO 1
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Credit Corp Group Limited ABN 33 092 697 151 (Credit Corp or the Company) and is dated 1 April 2019. Summary information: This Presentation contains summary information about the Company's activities current as at the date of this Presentation in con
Slide 3: Agenda
Agenda Executive summary Market update Equity raising Key risks Foreign selling restrictions Key operational metrics Market update and equity raising | 1 April 2019 | 3
Slide 4: Executive summary
Executive summary • Increased investment in FY19 in the US and consumer lending segments as Credit Corp (“Credit Corp”, the “Group”, or the “Company”) builds capacity for further growth: - Operational capacity will grow substantially in the US over the balance of the year and in early FY20 - Increas
Slide 5: Market update
Market update Market update and equity raising | 1 April 2019 | 5
Slide 6: Leadership in the credit-impaired consumer segment
Leadership in the credit-impaired consumer segment… • Long-term growth ANALYTICS & DISCIPLINE OPERATIONAL EXCELLENCE SUSTAINABILITY & COMPLIANCE • ROE 16% - 18% • Low gearing Australian / NZ debt buying • Largest database • Highest asset turnover 1 • No adverse orders or undertakings • History of pr
Slide 7: ...has positioned Credit Corp for strong growth in FY19 and beyond
…has positioned Credit Corp for strong growth in FY19 and beyond … Segment Strategic position • Purchasing volume holding up despite not being price leader - Heavily differentiated compliance position Aus/NZ debt buying - Strongest balance sheet and cashflow • Elevated pricing is increasing competit
Slide 8: ...with total investment starting to increase...
…with total investment starting to increase… • Investment levels increasing in FY19 - Volume maintained in Australia - Growth in net lending and US debt buying with greater opportunity - All investment will achieve target return PDL investment and net lending $ 350m $ 300m +8% Net lending $ 250m $ 2
Slide 9: ...and financial capacity to seize opportunities as they arise
…and financial capacity to seize opportunities as they arise Facility headroom and gearing • Banking facilities expanded and extended - Limits increased to $350m, maturing in 2022 and 50% 2023 $ 350m - Projected headroom ~$140m at year-end FY19 40% $ 280m • Proceeds from the institutional placement
Slide 10: Continued strong operational performance from core Aus/NZ debt buying operation
Continued strong operational performance from core Aus/NZ debt buying operation… • Outcomes sustained despite reduced purchasing since H1 of FY17 - Collections in Aus/NZ continuing to track close to record FY18 realisations (FY19 on track for just 3% below prior year) - Record payment arrangement bo
Slide 11: ...and sustained compliance differentiation
…and sustained compliance differentiation • Industry-leading complaint rate in FY18 and on-track for an improved result in FY19 • Highest rating from key consumer movement stakeholders • No regulatory action or enforceable undertakings • No reportable systemic issues from EDR provider (presently AFC
Slide 12: Consumer lending book has continued to grow
Consumer lending book has continued to grow… Consumer lending book and revenue $ 203m $ 208m $ 183m $ 172m $ 156m $ 161m $ 135m $ 121m $ 100m $ 97m Yield maintained $ 72m $ 63m Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Mar-19 Gross loan book (excl. provisions) Annualised
Slide 13: ...due to strong rates of customer acquisition and retention...
…due to strong rates of customer acquisition and retention… • Total settlements up by 18% as at March YTD • New customer settlements up by 19% as at March YTD Customer settlements ($m) Customer settlements ($m) $ 60m $ 40m $ 20m - FY18 FY19 FY18 FY19 FY18 FY19 Q1 Q2 Q3 New customers Returning custom
Slide 14: ...as a consequence of our superior consumer proposition
…as a consequence of our superior consumer proposition • Most sustainable product in the segment - Priced below mainstream pricing cap - Substantially cheaper than commercially-provided competitor offerings - Cheaper than a charitably-funded alternative from the not-for-profit provider Credit Corp P
Slide 15: An improved lending segment growth outlook for FY20
An improved lending segment growth outlook for FY20 • FY19 higher book starting point will produce an improved earnings outlook for FY20 • FY19 NPAT guidance maintained despite writing higher volumes so far in H2 Earnings growth NPAT ROA $ 20m $ 20m 15% $ 15m 10% NPAT $ 10m NPAT projected 5% ROA $ 5
Slide 16: US market conditions remain favourable
US market conditions remain favourable… • Supply conditions remain favourable - No signs of pricing pressure despite competitors growing purchasing 1 - Charge-off rates still growing as unsecured credit growth slows • Credit Corp remains a very small part of a large and growing market • Existing rel
Slide 17: ...and we are growing our operational capacity to address the opportunity
…and we are growing our operational capacity to address the opportunity… • Growth in productive capacity being accelerated - Headcount now 285 in the existing site and we are on-track to fill the site by end of FY20 Q1 - Second site selection process underway and is planned to open during FY20 Q2 •
Slide 18: ...producing a strong outlook for the US business
…producing a strong outlook for the US business… • US profit growth expected to increase in FY20 • Investment in FY20, assisted by additional balance sheet capacity, will position US segment for stronger profit growth beyond FY20 US NPAT (A$m) $ 10m $ 5m - ($ 5m) FY16 FY17 FY18 FY19 FY20 Projection
Slide 19: Increased investment guidance
Increased investment guidance Issued guidance Upgraded guidance Jan 2019 Apr 2019 PDL acquisitions $200 - $210m $210 - $215m Net lending $50 - $55m $55 - $60m NPAT $69 - $70m $69 - $70m EPS (basic) 144 - 146 cents 144 - 146 cents Note: Guidance does not reflect the impact of the Offer Market update
Slide 20: Equity Raising
Equity Raising Market update and equity raising | 1 April 2019 | 20
Slide 21: Strategic imperative
Strategic imperative Proceeds from the equity raising will enhance the strategic position of the company and provide a platform for strong earnings growth in the medium term: • Maximise opportunity to participate in any re-balancing of the Aus/NZ debt buying market • Market conditions likely to be m
Slide 22: Details of equity raising
Details of equity raising Transaction overview and rationale • Credit Corp is undertaking a $100 million fully underwritten Placement and also intends to offer a non-underwritten SPP which aims to raise approximately $10 million1 • The Placement issue price of $20.45 (“Issue Price”) represents a 7.8
Slide 23: Equity raising (cont'd)
Equity raising (cont’d) • Fully underwritten institutional Placement to raise approximately $100 million Structure • Non-underwritten SPP1 to eligible investors in Australia and New Zealand which aims to raise approximately $10 million • Fixed issue price of $20.45 per share represents: Pricing - 7.
Slide 24: Equity raising (cont'd) – Indicative Offering Timetable
Equity raising (cont’d) – Indicative Offering Timetable Event Date 1 Record date for SPP 7pm, Friday, 29 March Trading halt and announcement of the Placement Monday, 1 April Placement executed Monday, 1 April Announcement of the outcome of the Placement Tuesday, 2 April Trading halt lifted and tradi
Slide 25: Key risks
Key risks Market update and equity raising | 1 April 2019 | 25
Slide 26: Overview of key risks
Overview of key risks • There are a number of factors, specific to Credit Corp and of a general nature, which may affect the future operating and financial performance of Credit Corp and the industry in which it operates. This section discusses some of the key risks associated with an investment in
Slide 27: Key risks (1/3)
Key risks (1/3) The prevailing unemployment rate is the key macroeconomic risk in the segments in which Credit Corp operates. In debt buying, increased unemployment will impact returns from the existing payment arrangement book as it typically results in higher rates of default. The extent of the im
Slide 28: Key risks (2/3)
Key risks (2/3) A significant decrease in the volume of portfolios available for purchase from any significant vendor on acceptable terms would force Credit Corp to seek alternative sources of portfolios to purchase. In addition to the factors that impact the supply of portfolios generally, vendors
Slide 29: Key risks (3/3)
Key risks (3/3) The Company forecasts its expected returns on books of charged-off debts it bids on in order to determine whether it will be able to achieve its hurdle returns in the event that it acquires those debts. Inaccurate forecasting will either mean forecast returns aren’t achieved through
Slide 30: General risks (1/2)
General risks (1/2) There are general risks associated with investments in equity capital. The trading price of shares in Credit Corp may fluctuate with movements in equity capital markets in Australia and internationally. This may result in the market price for the new Shares being less or more tha
Slide 31: General risks (2/2)
General risks (2/2) The payment of dividends by Credit Corp is determined by the Board from time to time at its discretion, dependent on the profitability and cash flow of Credit Corp's Risk of dividends not business and Credit Corp’s strategic priorities. Circumstances may arise where Credit Corp d
Slide 32: Foreign selling restrictions
Foreign selling restrictions Market update and equity raising | 1 April 2019 | 32
Slide 33: Foreign selling restrictions (1/3)
Foreign selling restrictions (1/3) This document does not constitute an offer of new ordinary shares ("New Shares") of the Company in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares may not be offered or sold, in a
Slide 34: Foreign selling restrictions (2/3)
Foreign selling restrictions (2/3) This document and any other materials relating to the New Shares have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore. Accordingly, this document and any other document or materials in connection
Slide 35: Foreign selling restrictions (3/3)
Foreign selling restrictions (3/3) Neither this document nor any other document relating to the offer has been delivered for approval to the Financial Conduct Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as amende
Slide 36: Key operational metrics
Key operational metrics Market update and equity raising | 1 April 2019 | 36
Slide 37: Appendix | Pricing discipline and accuracy
Appendix 1 | Pricing discipline and accuracy Pricing discipline and accuracy Cumulative collections $ 3,000m $ 2,500m Actual cash collections $ 2,000m $ 1,500m Initial projections $ 1,000m $ 500m - * For all PDLs held at June 2008, initial projections represent the forecast at June 2008 Market updat
Slide 38: Appendix | Collections life cycle
Appendix 2 | Collections life cycle PDL collections by vintage +5% 1 $ 105m $ 90m 32% 30% 30% 31% 34% 30% 33% $ 75m 32% 29% 33% 32% 31% 30% 32% 32% 13% 14% 16% $ 60m 11% 14% 16% 15% 10% 18% 18% 12% 17% 15% 17% 15% 21% $ 45m 22% 23% 15% 19% 21% 25% 23% 23% 16% 19% 20% 19% 15% 15% $ 30m 38% 38% 36% 37
Slide 39: Appendix | Productivity
Appendix 3 | Productivity PDL collections per hour $ 300 YTD average FY19: $238 FY18: $223 $ 250 12m to Mar 18 $ 200 12m to Mar-19 $ 150 $ 100 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Market update and equity raising | 1 April 2019 | 39
Slide 40: Appendix | Payers base
Appendix 4 | Payers base Portfolio summary Total portfolio Jun-17 Dec-17 Jun-18 Dec-18 Mar-19 Face value $5.8b $5.9b $6.0b $6.2b $6.3b Number of accounts 716,000 710,000 710,000 753,000 766,000 Payment arrangements Face value $1,300m $1,300m $1,300m $1,300m $1,300m Number of accounts 157,000 153,000
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