Credit Corp Group Limited · ASX:CCP
Credit — H1 FY2023 Earnings Presentation
21 slides from Credit's earnings presentation, Feb 1, 2023
Slide 1: H1 FY2023 Results
| February 2023 HI FY2023 RESULTS Thomas Beregi Michael Eadie CE CFO c= Credit Corp Group
Slide 2: Leadership of the credit impaired financial services segment
Leadership of the credit impaired financial services segment … ANALYTICS & DISCIPLINE OPERATIONAL EXCELLENCE SUSTAINABILITY & COMPLIANCE Australian / NZ debt buying Large database High asset turnover 1 Low dispute rate History of pricing accuracy Low cost to collect 2 $1.4b in ongoing re
Slide 3: …has produced record half-year investment…
…has produced record half-year investment… Accelerated growth in Wallet Wizard lending Increased purchasing from existing US forward flows $ 450m $ 400m $ 350m $ 300m Lending volume (gross) $ 250m US debt buying $ 200m $ 150m AU/NZ secondary: Baycorp/Collection House/Radio Rentals $ 100m $ 50m A
Slide 4: …but has suppressed H1 earnings
…but has suppressed H1 earnings Increased US resourcing yet to convert to collections Up-front loan loss provisioning and marketing affecting lending segment earnings Continued run-off in AU/NZ debt purchasing H1 FY2022 H1 FY2023 Var % AU/NZ debt buying $118.8m $108.2m (9%) US debt buying $42.
Slide 5: Earnings expected to recover during H2
Earnings expected to recover during H2 US collections on track to improve new teams gaining traction payment arrangement growth enlarged legal pipeline Lending NPAT set to grow from $4.3 million in H1 to $25 - $30 million in H2 increased revenue from enlarged starting book moderation i
Slide 6: While US PDL supply is increasing…
While US PDL supply is increasing… Unsecured credit growth and increasing charge-off rates are producing increased supply US REVOLVING CREDIT MARKET $ 1,000bn 5% 4% $ 900bn 3% $ 800bn 2% $ 700bn 1% $ 600bn - 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021 2022 2022 2022 2022 Q1 Q2 Q3 Q
Slide 7: …Credit Corp's US purchasing will decrease in H2…
…Credit Corp’s US purchasing will decrease in H2… Unexpectedly high volumes received under forward flows during H1 Purchasing will reduce in H2 as commitments expire US PURCHASING (A$m) $250m $200m $150m $55m H2 FY2023 purchasing $100m pipeline of $183m contracted as at $128m H1 February 2023 $5
Slide 8: …with the focus on converting US resource growth into collections
…with the focus on converting US resource growth into collections Rapid resource growth has created a short term challenge Payers growth points to improved productivity US DEBT BUYING H1 FY2023 ∆ H1 FY2022 1 US OPERATIONAL HEADCOUNT Collections $88m -% 700 Productivity $256 per hour (30%) 600 57
Slide 9: Lending is a key driver of growth
Lending is a key driver of growth Current book now producing $146 million in annualised revenue Cash loan demand significantly above pre-COVID peaks Arrears and losses remain within pro-forma Auto limited to just $47 million of the loan book CONSUMER LENDING BOOK AND ANNUALISED REVENUE LENDI
Slide 10: AU/NZ operational performance remains sound
AU/NZ operational performance remains sound Some loss of operational leverage as collections have decreased in line with reduced investment AU/NZ DEBT BUYING H1 FY2023 ∆ H1 FY2022 Collections $163m (15%) Productivity $310 per hour (3%) Operations headcount 1 824 (10%) Payers book 1 $1,379m (11%) 1
Slide 11: Investment will moderate in H2…
Investment will moderate in H2… INVESTMENT $350m $300m $250m AU/NZ secondary: Baycorp/Collection House/Radio Rentals/Other $200m US debt buying $150m AU/NZ debt buying $100m Net lending $50m $0m H1 FY2023 H2 FY2023 projected 11
Slide 12: …building financial capacity
…building financial capacity Available lines increased to $372 million Reduced US investment will result in de-leveraging over the balance of FY2023 GEARING AND CASH FACILITIES FREE CASH FLOW (HALF-YEAR ENDING) $100m $396m 30% $ 400m $372m $72m $350m $50-$60m $ 350m $50m $ 300m $267m 20% $ 250m
Slide 13: Revised investment guidance
Revised investment guidance FY2023 GUIDANCE ISSUED FY2023 REVISED GUIDANCE OCT-22 FEB-23 Ledger investment $240 - $260 million $290 - $295 million Net lending $50 - $60 million $140 - $150 million NPAT $90 - $97 million $90 - $97 million EPS (basic) 133 - 143 cents 133 - 143 cents 13
Slide 14: Appendices - Key Operating Metrics
Appendices - Key Operating Metrics Appendix 1: Operating cash flow and gearing Appendix 2: Pricing discipline and accuracy Appendix 3: Collections life cycle Appendix 4: Productivity Appendix 5: Payers base Appendix 6: Operational and total headcount 14
Slide 15: Operating cash flow and gearing
APPENDIX 1 Operating cash flow and gearing Operating cash flows and gearing Jun-21 Dec-21 Jun-22 Dec-22 Collections $243.8m $272.8m $264.3m $257.2m Other income $55.0m $60.4m $69.6m $80.7m Interest expense/income ($2.1m) ($2.1m) ($2.6m) ($6.0m) Operating expenses including taxation ($101.9m) ($126.1
Slide 16: Pricing discipline and accuracy
APPENDIX 2 Pricing discipline and accuracy PRICING DISCIPLINE AND ACCURACY Cumulative collections $ 5,000m $ 4,000m Actual cash collections $ 3,000m $ 2,000m Initial $ 1,000m projections 1 - 1. For all PDLs held at June 2008, initial projections represent the forecast at June 2008 16
Slide 17: Collections life cycle
APPENDIX 3 Collections life cycle PDL COLLECTIONS BY VINTAGE $ 160m (10%) 1 $ 140m $ 120m 33% 34% 30% 30% $ 100m 33% 32% 32% 34% 33% 33% 35% 33% 38% 32% 34% 12% 12% 41% $ 80m 30% 30% 31% 34% 34% 19% 13% 14% 18% 15% 15% 15% 13% 19% 19% 16% 16% 18% 14% $ 60m 14% 14% 16% 18% 17% 25% 15% 14% 18% 18% 18%
Slide 18: Productivity
APPENDIX 4 Productivity $ 400 $ 350 $ 300 YTD Dec-22 average 12m to Dec-22 FY2023: $299 $ 250 12m to Dec-21¹ FY2022: $322 1 $ 200 $ 150 $ 100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1. Constant currency basis 18
Slide 19: Payers base
APPENDIX 5 Payers base PORTFOLIO SUMMARY: AU/NZ DEBT BUYING ONLY Total portfolio Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Face value $7.7b $8.6b $8.5b $7.9b $7.6b $7.9b Number of accounts 1,193,000 1,392,000 1,326,000 1,252,000 1,236,000 1,259,000 Payment arrangements Face value $1,350m $1,550m $1,
Slide 20: Operational and total headcount
APPENDIX 6 Operational and total headcount PERIOD END HEADCOUNT (FTE) Dec-21 Jun-22 Dec-22 2,600 2,400 Debt buying operations 1,285 1,296 1,401 2,200 2,000 Agency 223 229 558 1,800 1,600 Lending 129 162 243 1,400 1,200 Support 147 153 217 1 1,000 800 Total 1,783 1,840 2,419 600 400 Support % 8% 8% 9
Slide 21: For more information, please contact:
For more information, please contact: Thomas Beregi Michael Eadie Chief Executive officer Chief Financial Officer Tel: +61 2 8651 5777 Tel: +61 2 8651 5542 tberegi@creditcorp.com.au meadie@creditcorp.com.au 21