Latitude Group Holdings Ltd. · ASX:LFS
Latitude — Investor Presentation (August 2022)
39 slides from Latitude's investor presentation, Aug 19, 2022
Slide 1: Latitude Group Holdings Limited
Latitude Group Holdings Limited ACN 604 747 391
Slide 2: Important notice and disclaimer
Important notice and disclaimer The following important notice and disclaimer applies to this presentation (“Presentation”) and you are therefore advised to read this carefully before reading or making any other use of this Presentation or any information contained in this Presentation. This Present
Slide 3: Information and liability
Information and liability To the maximum extent permitted by law, LFS and its respective affiliates and related bodies corporate and each of their respective directors, officers, partners, employees, agents and advisers (together, the “Beneficiaries”) exclude and expressly disclaim: • all duty and l
Slide 4: Ahmed Fahour, Managing Director & CEO
r te = Ahmed Fahour Managing Director & CEO co, 3 73
Slide 5: Who we are
37 7 Who we are 4 i=
Slide 6: 2.82 million customer accounts
2.82 million Retail & Online Leading AU & NZ Consumer A$6.3b total gross Focused Digital customer accounts* Distribution Platform Finance Business receivables* Product Offering OUR MISSION Enhance financial access and inclusion as a responsible partner in money Grow our value and global addressable
Slide 7: Executive leadership team
Ahmed Fahour Paul Varro Andrew Walduck Bob Belan David Gelbak Managing Director and CEO CFO & EGM, Finance & Risk EGM Group COO EGM Money EGM Pay & Instalments Eva Zileli Bec Supierz Mark Brudenell Group Treasurer GM, People Chief Risk Officer Investor Presentation 1H22 7
Slide 8: Strategic priorities: Lead in Pay, Lead in Money, Expand in Asia
Lead in Pay / Instalments Lead in Money Divest Insurance Expand in Asia • Deliver next gen instore apply experience • Broaden TAM with new features (variable • Announced (8-August-22) • Launched in Singapore and Malaysia (QR code at scale) to offset experience rate), capabilities (redraw) and enhanc
Slide 9: Competitive strengths: history, talent, credit, partnerships
Credit & Risk Merchant Partnership History Talent Competence Relationship / Capability Longstanding deep relationships Profitable heritage business with Significant depth & breadth of Through the cycle credit track with merchant partners including 100-yrs of pedigree in consumer expertise & experien
Slide 10: Product offering and receivables mix
Cards/ Scheme Interest Free Instalments Lending Product Receivables Mix2 Spending Shop small, pay weekly Interest Free Up to $1,000 Instalments – 53% CORE Integrated Shop big, pay monthly Scheme Personal Loans ~85% Retailer Acquiring Up to $3,0003 (Part Broker) PBT1 B2B2C Model GO & Gem Personal Loa
Slide 11: Diverse range of customers across generations
Diverse range of customers across generations1 57% of customer relationships are 5+ years1 9% 5% 10% 20% 18% 18% 57% 16% 24% 24% 18-27 28-37 38-47 48-57 58-67 68+ <=1 year 1-3 years 3-5 years 5+ years 82% of customers are full-time and part-time employees2 52% of customers are homeowners3 3% 5% 4% 7
Slide 12: 1H22 Result Highlights
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Slide 13: Strengths and challenges
Strengths: Challenges: ✓ $93m cash NPAT1 with dividend maintained at 7.85c 100% franked ❖ Elevated repayment rates driving flat ✓ Organic focus with strong competitive / customer positioning receivables • Volume of $3.7bn ❖ Underlying growth in Pay remains subdued ✓ Bulwark balance sheet to navigate
Slide 14: RAI down 56bps HoH due to higher funding
RAI down 56bps HoH due to higher ~$3.7bn of volume funding. Product repricing underway Volume ($m) RAI/AGR (%) 3,640 3,695 3,713 2 12 727 770 790 10.2% 10.0% 9.5% 2913 2924 2910 1H21 2H21 1H22 1H21 2H21 1H22 Pay A&NZ Money A&NZ Other Cash expenses down 9% HoH Net charge offs down 17bps YoY NCO/AGR (
Slide 15: Money volume driven by strong AU personal loans
Money volume driven by strong AU personal loans up 16% HoH, 30% YoY Money volume drivers: Volume ($m) • Money volume up 3% 869 814 727 770 790 HoH, up 9% YoY 530 528 • AU Money receivables up 3% HoH, up 9% YoY • Auto pricing criteria 1H19 2H19 1H20 2H20 1H21 2H21 1H22 managed for risk adjusted Pay v
Slide 16: Symple platform need to know, completed and in progress
NEED TO KNOW COMPLETED IN PROGRESS • Core capabilities for the new Latitude (To be completed by 2Q23) Money Platform (AU) have been delivered over a 10-month period Loans Application Portal Marketing Cloud New Zealand Platform enhanced & rebranded integration & launch Q2 Cloud Lending Build since ac
Slide 17: International update
International update: • Now live in both Singapore (Nov 21) and Malaysia (June 22) • 30,000 customers • ~465 merchants signed up including Harvey Norman, Gain City, Osim, Ogawa, Jai Yoga, Switch, M1 and iStudio • Our deep partnership with Harvey Norman is a key platform for growth: E-commerce in Sin
Slide 18: Dividend information
DPS (cents) Dividend information: • Ex dividend date: 23/09/2022 1H22 7.85 100% franked • Record date: 26/09/2022 • Dividend payment date: 26/10/2022 2H21 7.85 100% franked 1H21 7.85 unfranked Dividend reinvestment plan (DRP) to be offered with the 1H22 dividend 10.1% 1H22 dividend yield1 Investor P
Slide 19: Latitude tomorrow
Partnerships International expansion Latitude Digitisation tomorrow Synergies and growth from Symple acquisition Economy normalises Latitude Inorganic / portfolio opportunities present Investor Presentation 1H22 19
Slide 20: Forward outlook
Forward outlook: • Latitude is positioned for growth with high quality customers and impeccable receivables as the end of major government stimulus packages reduces excess cash in the system • Recent growth is at good margins. However, Latitude was an early mover on significant repricing actions whi
Slide 21: Paul Varro, Chief Financial Officer
‘ee Paul Varro 1 Chief Financial Officer Lé “6
Slide 22: Solid Cash NPAT
Strong credit losses & Strong Balance sheet & Solid Cash NPAT 1 Consistent DPS & EPS opex discipline stable returns Cash NPAT ($m) RAI/AGR 2 (%) TER (%) Cash DPS (cents) 105 10.2% 10.0% 9.5% 8.7% 9.2% 95 93 8.2% 7.85 7.85 7.85 1H21 2H21 1H22 1H21 2H21 1H22 1H21 2H21 1H22 1H21 2H21 1H22 NCO 2.54% 2.1
Slide 23: Moderate volumes and elevated repayments impacted receivables growth
Moderate volumes & elevated repayments 2% volume growth led by Money A&NZ have impacted receivables growth Volume ($m) 2 12 (7) 65 3,713 AGR ($m) 3,640 7,372 1H21 Money ANZ Pay ANZ Other FX 1H22 6,526 6,493 vs 2H21 3,695 25 (0) 10 (20) 6,326 6,313 ↓0.2% HoH Repayment rate1 remains consistently eleva
Slide 24: Operating Income down $39m YoY, down $17m HoH
Operating Income down $39m YoY, down $17m HoH Key drivers: Operating Income ($m) Rate impact: $27m • AGR ↓ 2.8% driving $11m Op (11) (28) income reduction (9) 10 409 • Rate: (87)bps of operating income 370 compression: ― (91)bps interest income risk mix 1H21 AGR Interest Income Interest Expense Othe
Slide 25: Quality of new customer originations improved vs 2019
Quality of new customer originations improved vs 2019 Net charge off rates remain (CR1/2 from 64% to 71%) historically low… 27% 26% 29% 32% 32% 32% 33% 3.83% 3.37% 3.28% 37% 37% 38% 2.66% 2.54% 38% 38% 37% 38% 2.37% 2.12% 30% 31% 28% 25% 25% 24% 26% 6% 6% 5% 4% 5% 6% 5% 1H19 2H19 1H20 2H20 1H21 2H21
Slide 26: Risk Adjusted Income down 9% YoY, down 7% HoH
Risk Adjusted Income down 9% YoY, down 7% HoH RAI ($m) Rate impact: $22m (9) Key drivers: (28) (9) 10 5 • Risk based pricing delivering a 327 higher quality book and lower net 296 charge offs • High quality portfolio providing a 1H21 AGR Interest Income Interest Expense Other Op Income Net charge of
Slide 27: Cash opex flat YoY, down 9% HoH
Cash opex flat YoY, down 9% HoH Key drivers: • Disciplined cost control (2) absorbing listed company costs, acquisitions 9 and international • Employee costs down 17% (10) HoH with a simplified 174 operating structure and 174 4 172 continued investment in IT & automation 166 • Marketing was calibrat
Slide 28: Stable Return on AGR at 3.0%
Stable Return on AGR at 3.0% Key drivers: Return on AGR (RoAGR) remains stable at ~3.0% due to focus on: • Risk based pricing & prudent funding 3.3% • Cost discipline 3.0% 3.0% Creating a sizable buffer for any credit cycle 1H21 2H21 1H22 Investor Presentation 1H22 28
Slide 29: Diverse funding platform and prudent capital management
Cost 50+ Prudent capital management Diverse Funding Platform 48% Investors Effective Investors Offshore to A&NZ approach • Programmatic issuance and diverse investor base • 1H22 – 4 transactions completed delivering flexibility Warehouse • Capital strength provides a buffer and an and certainty to t
Slide 30: Appendix
1 3! Appendix 4 i
Slide 31: 1H22, 2H21, 1H21 key metrics
1H22 2H21 1H21 HoH YoY Volume ($m) 3,713 3,695 3,640 0% 2% AGR ($m) 6,313 6,326 6,493 (0%) (3%) Gross receivables ($m) 6,257 6,349 6,474 (1%) (3%) Statutory NPAT ($m) 31 71 89 (57%) (66%) Cash NPAT ($m) 93 95 105 (2%) (11%) Cash EPS (cents) 8.95 9.47 10.47 (5%) (15%) Dividend per share (cents) 7.85
Slide 32: Cash NPAT to statutory NPAT reconciliation
Jun-22 Cash NPAT Amortisation Amortisation Symple Restructuring Acquisition Fixed Assets Discontinued Stat NPAT ($m) of acquisition of legacy Integration Costs & Related Impairment Facilities intangibles transaction International Expenditure costs Investment Net interest income 352.7 (2.4) (0.2) 350
Slide 33: Stress scenario analysis
• Several scenarios run as part of a well established annual scenario (formerly Fed requirement) Base Severe downside • Severe scenario using unemployment at 0 1 2 3 10/10/8pc over 3 yrs GDP growth % 3.4% (11.0%) (2.0%) 7.5% Unemployment % 3.5% 10.0% 10.0% 8.0% • Under stress scenarios: Real cash in
Slide 34: Group cash rate sensitivity analysis
Group cash rate sensitivity analysis • +100bps rates = -ve $40m interest expense (pre-tax, annualised) • 1H22 ave cash rate = 24bps/ 2H22 to date ave = 135bps • Ave HoH rate delta is already 111bps (cash)/ 76bps (3-yr swap) • This analysis shows the impact of shifts in interest rates on the Group’s
Slide 35: Investor Presentation 1H22 (industry data)
Source: Company data, APRA Investor Presentation 1H22 35
Slide 36: Investor Presentation 1H22 (industry data)
Source: Company data, RBA, ABS Investor Presentation 1H22 36
Slide 37: Delinquencies by product
Delinquencies (30+ days past due) by product, Australia Delinquencies (30+ days past due) by product, New Zealand % Accounts 30+ days past due % Accounts 30+ days past due 9% 9% 8% 8% 7% 7% 6% 6% 5% 5% 4% 4% 3% 3% 2% 2% 1% 1% 0% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 202
Slide 38: Community and sustainability
Supporting employees • Diversity Since Aug 2017 financial wellbeing Objectives we have collectively donated through online courses • Modern Slavery and tools $865,099 • Statement update Code of Conduct to our nine charity update partners via empowering our communities and workplace children through
Slide 39: Thank you
[C3 LATITUDE Thank you Investor Relations Matthew Wilson +61 401 454 621 Media Mark Gardy +6] 412 376 817
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