Annual General MeetingFY19 Performance Update
Thomas Beregi, CEOMichael Eadie, CFO
Leadership in the credit impaired consumer segment…
• Long-term growth
• ROE 16% - 18%
• Low gearing
• Largest database• History of pricing accuracy
• Leverage knowledge of consumer• Up-front loss provisioning• Analytical monitoring
• Adapted knowledge to US environment
• Large market opportunity
• Highest asset turnover 1
• Lowest cost to collect 2
• Automated decisioning• Collection strength• Unmatched efficiency
• Productivity up by 30% over 2 years• Emphasis on payment
arrangements and a lower proportion of litigated outcomes
• No adverse orders or undertakings• Low complaint rate• $1.3bn in ongoing repayment
arrangements
• APRs below cap applicable to mainstream credit
• Regulatory upside - no ‘payday loans’
• Low regulator complaint rate• Strong client audit outcomes
Australian / NZ debt buying
Australian / NZ lending
USA debt buying
OPERATIONAL EXCELLENCEANALYTICS & DISCIPLINE SUSTAINABILITY & COMPLIANCE
1. FY18 ratio of cash collections from PDLs to average PDL carrying value in Australian / NZ debt buying operation of 1.2x
2. FY18 ratio of cash costs of the Debt Ledger Purchasing segment to collections of 36%Credit Corp Group FY19 Performance Update | 2
…has produced sustained financial performance…
3
4 4 8 20 29 37 40 44 50 58 67
12 24 31
47 58
70 75 83
98
117
135
8%
24%
-
30
60
90
120
150
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
ROE %Centsper share
DPS EPS ROE
EPS CAGR 27%
Earnings Per Share, Dividends Per Share and Return on Equity
Credit Corp Group FY19 Performance Update |
…while positioning CCP to seize opportunity across all segments…
4
Market conditions
Aus/NZ Debt buying
• Continued pricing competition• Compliance is an increasing sensitivity for credit issuers
• Momentum into FY19 provided by strong operational performance
• Leverage compliance credentials• Maintain investment discipline
Aus/NZ Lending
• Accelerated consumer demand for cash loans• Signs of credit rationing likely to create opportunities
• Drive loan book growth
• Expand auto lending pilot
US Debt buying
• Pricing conditions remain favourable• Strong growth in the supply of PDLs
• Operational improvement to achieve competitive superiority
• Growth to capture the market opportunity
Segment Credit Corp’s response
Credit Corp Group FY19 Performance Update |
A strong operational start to FY19…
5
Arrangement book growth
• Total cumulative collections above aggregate pricing expectations
• YTD Oct-18 collections up 7% over the pcp
• YTD Oct-18 Aus/NZ collections in line with the pcp
• YTD Oct-18 productivity up by 5% over the pcp
• Face value of accounts under arrangement maintained at a record level of $1.3bn at Oct-18
• Payments under arrangement represent 78% of collections
• Improved rates of conversion to paying outcomes- Systems enhancements- Ongoing skills development
• Technology improving contact rates in the US
(Refer to Appendix 1 and 2) (Refer to Appendix 3)
(Refer to Appendix 4)
Pricing accuracy and returns on track Efficiency
Arrangement book growth (Aus/NZ) Continuous improvement focus
Credit Corp Group FY19 Performance Update |
- 1.0 2.0 3.0 4.0
Credit Corp Credit Corp
…has combined with industry leading compliance…
6
• Peerless compliance record- No regulatory orders or undertakings despite being the largest and longest established operator- No reportable External Dispute Resolution (EDR) systemic issues
• Superior EDR complaint rate 1
• Clear leader in survey conducted by Financial Counselling Australia 2
- 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Otherdebt buyers
FY18 EDR complaint rate per $1m collected Rating of debt buyers by financial counsellors in 2017
(score out of 10)
1. No. of complaints reported to EDR services divided by total PDL collections expressed in millions of dollars 2. Financial Counselling Australia: National Rank the Banks Survey 2017, March 2018, page 17
https://www.financialcounsellingaustralia.org.au/getattachment/Corporate/Publications/Reports/Rank-the-Banks-2017-Final-1-(1).pdf
Credit Corp Group FY19 Performance Update |
Otherdebt buyers
$ 60m $ 70m
$ 195m
-
$ 50m
$ 100m
$ 150m
$ 200m
FY18 FY19
…to deliver an upgraded purchasing outlook…
7
• More than $100m in FY19 purchasing contracted over the past 3 months
• Further opportunity reflected in revised guidance
FY19 purchasing guide$170 - $190m1
$169m contracted as at October 2018
PDL Investment
Aus/NZ debt buying
US debt buying
Credit Corp Group FY19 Performance Update |
1. This is an increase on the Jul-18 guidance of $150 - $170m
10%
20%
30%
40%
50%
-
$ 100m
$ 200m
$ 300m
Gearing$m
Net borrowings Total facilities Gearing *
…and the balance sheet to seize any opportunities
8
FY16 FY17 FY18 FY19 YTD Oct
Facility headroom and gearing
• Gearing is 41% with $100m of headroom as at Oct-18
• Strong cash flow generation will further increase headroom over the balance of FY19
Credit Corp Group FY19 Performance Update |
* Calculated as net borrowings as a proportion of PDL and net consumer loan book carrying value
Lending growth has exceeded expectations…
9
Customer settlements ($m)
• Total settlements up by 24% over the pcp
• New customer settlements up 17% over the pcp
Credit Corp Group FY19 Performance Update |
-
$ 20m
$ 40m
$ 60m
$ 80m
YTD Oct-17 YTD Oct-18
Pre-existing customers New customers
Customer settlements ($m)
-
$ 50m
$ 100m
$ 150m
$ 200m
FY18 FY19 Projection
Pre-existing customers New customers
$ 19m
-
5%
10%
15%
-
$ 5m
$ 10m
$ 15m
$ 20m
FY16 FY17 FY18 FY19Projection
ROANPAT
…and is translating into strong results
10
• Top end of FY19 guidance implies an 18% increase in consumer lending NPAT
• Target 12% ROA being achieved
Earnings growth
NPAT
NPAT projected
ROA
ROA projected
Credit Corp Group FY19 Performance Update |
US debt buying economics in line with established competitors…
11
• US asset turnover comparable to listed competitors despite limited ‘tail’ of collections
• Cost to collect also similar despite the operation still ramping up and up-front expensing of legal costs
US debt buying economics
Asset turnover 4 Cost to collect
CCP 0.7 44.4% 1
ECPG 0.9 44.2% 2
PRAA 0.8 39.8% 3
1. FY18 CCP US debt buying segment only2. Full year 2017 US debt buying segment only. Encore Capital Group (NASDAQ: ECPG) is a US-listed global debt buyer3. Full year 2017 blended rate (includes US, Europe and Insolvency). Portfolio Recovery Associates Group (NASDAQ: PRAA) is a US-listed global debt buyer 4. Ratio of cash collections from PDLs to average PDL carrying value (CCP: FY18 US debt buying segment only and ECPG / PRAA full year 2017 US debt buying segment only)
Credit Corp Group FY19 Performance Update |
…while we continue to focus on improvement and growth…
12
US collections (A$m)
Credit Corp Group FY19 Performance Update |
-
$ 20m
$ 40m
$ 60m
$ 80m
FY15 FY16 FY17 FY18 FY19Pipeline
as at Oct-18
US purchasing (A$m)
• Operational and technology enhancements driving results
- Step up in legal collections
- Increased rates of customer contact and conversion to paying outcomes
• New facility opened in June to cater for 400+ headcount
• Purchasing set to accelerate - FY19 contracted pipeline 17% up on FY18 investment
-
$ 3m
$ 6m
$ 9m
$ 12m
$ 15m
$ 18m
FY18Q1
FY18Q2
FY18Q3
FY18Q4
4 monthsOct-18
PDL collections Legal collections
1. Pro-rated to a quarterly average
1
($ 4m)
($ 2m)
-
$ 2m
$ 4m
$ 6m
$ 8m
$ 10m
FY16 FY17 FY18 FY19projection
FY20projection
…to capture the opportunity and accelerate profits
13
• US produced an inaugural profit in FY18 and profitability will increase in FY19
• Profitability will accelerate in FY20
• PDL investment opportunity is not a constraint
- Commenced buying from the largest seller during October
- Range of purchasing relationships with major sellers
US NPAT
Credit Corp Group FY19 Performance Update |
Outlook is for a year of solid earnings growth
14
Initial guidance Jul 2018
Upgraded guidance Nov 2018
PDL acquisitions $150 - $170m $170 - $190m
Net lending $45 - $50m $45 - $50m
NPAT $67 - $69m $67 - $69m
EPS (basic) 140 - 144 cents 140 - 144 cents
Credit Corp Group FY19 Performance Update |
15
Appendix | Key operating metrics
Credit Corp Group FY19 Performance Update |
-
$ 400m
$ 800m
$ 1,200m
$ 1,600m
$ 2,000m
$ 2,400m
$ 2,800m
Cumulativecollections
Appendix 1 | Pricing discipline and accuracy
16
Pricing discipline and accuracy
* For all PDLs held at June 2008, initial projections represent the forecast at June 2008
Actual cash collections
Initial projections
Credit Corp Group FY19 Performance Update |
34% 36% 38% 38% 38% 36% 37% 38% 36% 31% 33% 30% 28%
19% 15% 15% 16% 15% 19% 21% 22% 21% 25% 23% 23% 23%
17% 17% 15% 15%
15% 12% 10% 11%
13% 14% 14% 16% 18%
30% 32% 32% 31%
32% 33% 32%
29% 30% 30% 30% 31%
31%
-
$ 15m
$ 30m
$ 45m
$ 60m
$ 75m
$ 90m
$ 105m
Q1Sep-15
Q2Dec-15
Q3Mar-16
Q4Jun-16
Q1Sep-16
Q2Dec-16
Q3Mar-17
Q4Jun-17
Q1Sep-17
Q2Dec-17
Q3Mar-18
Q4Jun-18
4 monthsOct-18
<1 Year 1 - 2 Years 2 - 3 Years >3 Years
Appendix 2 | Collections life cycle
17
PDL collections by vintage
1. 7% growth on pcp (YTD Oct FY19 vs. YTD Oct FY18)2. Pro-rated to a quarterly average Credit Corp Group FY19 Performance Update |
+7% 1
2
$ 100
$ 150
$ 200
$ 250
$ 300
Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
12m to Oct-18
12m to Oct-17
18
PDL collections per hour
Appendix 3 | Productivity
YTD Oct-18 averageFY19: $236FY18: $225
Credit Corp Group FY19 Performance Update |
19
Portfolio summary
Appendix 4 | Payers base
Aus/NZ debt buying only
Credit Corp Group FY19 Performance Update |
Total portfolio Dec 16 Jun 17 Dec 17 Jun 18 Oct 18
Face value $5.7bn $5.8bn $5.9bn $6.0bn $6.1bn
Number of accounts 699,000 716,000 710,000 710,000 710,000
Payment arrangements
Face value $1,235m $1,300m $1,300m $1,300m $1,300m
Number of accounts 151,000 157,000 153,000 157,000 157,000
% of PDL collections 77% 80% 78% 81% 78%