CREDIT CORPORATION PNG FULL YEAR RESULTS 31 December 2018 YEARS - - PowerPoint PPT Presentation

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CREDIT CORPORATION PNG FULL YEAR RESULTS 31 December 2018 YEARS - - PowerPoint PPT Presentation

CREDIT CORPORATION PNG FULL YEAR RESULTS 31 December 2018 YEARS Working together DISCLAIMER This presentation has been prepared and issued by Credit Corporation (PNG) Limited (the Company), and may not be reproduced in whole or in part,


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CREDIT CORPORATION PNG FULL YEAR RESULTS

31 December 2018

YEARS

Working together

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Full year FY18 results 1 This presentation has been prepared and issued by Credit Corporation (PNG) Limited (the “Company”), and may not be reproduced in whole or in part, nor may any of its contents be disclosed to any other person without the prior written consent of the Company. This presentation is provided by the Company for general information purposes only, without taking into account any recipient’s personal objectives, fjnancial situation or needs. It should not form the basis of or be relied

  • n by the recipient in considering the merits of any particular transaction and does not purport to contain all of the information that an interested party may desire. It is not an ofger to buy or sell, or a solicitation to invest

in or refrain from investing in, any securities or other investment product. This presentation has not been fjled, lodged, registered, reviewed or approved by any regulatory authority in any jurisdiction and recipients of this presentation should keep themselves informed of, and comply with and observe, all applicable legal and regulatory requirements. The distribution of this presentation in certain jurisdictions may be restricted by law and, accordingly, recipients of this presentation represent that they are able to receive this presentation without contravention of any unfulfjlled registration requirements or other legal restrictions in the jurisdiction in which they reside or conduct business. Nothing in this presentation constitutes investment, legal, tax, accounting or other advice. The recipient should consider its own fjnancial situation, objectives and needs, and conduct its own independent investigation and assessments of the contents of this presentation, including obtaining investment, legal, tax, accounting and other advice as it considers necessary or appropriate. Any costs incurred by recipients in making such investigations and assessments, etc. are not the responsibility of the Company or any of its advisers, directors, employees or agents. Provision of this presentation is not a representation to any recipient or any other person that the shares or business of the Company or any of its subsidiaries will be sold. The Company may at any time negotiate with one or more interested parties and enter into a defjnitive agreement without prior notice to any or all interested parties. The Company also reserves the right to terminate, at any time, further participation in the investigation and proposed process by any party, to modify any of the rules or procedures set forth herein or any other procedures without prior notice or assigning any reason therefore or to terminate the process contemplated hereby. The Company reserves the right to take any action, whether in or out of the ordinary course of business, which the Company in its sole discretion deems necessary or prudent in the conduct of its business or the process contemplated by this presentation. This presentation has been prepared on the basis of publicly available information and/or selected information and does not purport to be all-inclusive or to contain all of the information that may be relevant to the

  • presentation. Neither the delivery or supply of this presentation (or any part thereof) nor the provision of information referred to herein or provided in connection with the evaluation of the Company by interested

parties shall, under any circumstances, (a) constitute a representation or give rise to any implication, that there has been no change in the afgairs, business or fjnancial position of the Company or any of its subsidiaries, associated companies or affjliates or in the information herein since the date hereof or the date on which this presentation has been provided or delivered or (b) provide a basis of any credit or other evaluations and should not be considered as a recommendation by the Company that any recipient of the presentation or such other document or information contemplated herein should proceed with a further investigation of the Company or enter into any transaction with the Company or any person in relation to the Company. Neither the Company nor any other person are under any obligation to update or correct this presentation. The Company and its related bodies corporate and other affjliates, and their respective offjcers, employees, advisors, representatives, consultants and agents (“Relevant Parties”) make no representation or warranty, expressed or implied, as to, and no reliance should be placed on, the fairness, accuracy, completeness, timeliness or reliability of the contents of this presentation or any other written or oral communication transmitted

  • r made available to any interested party, whether as to the past or future. To the maximum extent permitted by law, none of the Relevant Parties accept any liability (including, without limitation, any liability arising from

fault of negligence on the part of any of them) for any loss whatsoever arising from the use of this presentation or its contents or otherwise arising in connection with it or as a result of any omission, inadequacy or inaccuracy herein. Only those representations and warranties that are provided in a defjnitive agreement when, and if, it is executed, and subject to such limitations as may be provided in such agreement shall have any legal efgect. This presentation may contain forward-looking statements, forecasts, estimates and projections (“Forward Statements”). No independent third party has reviewed the reasonableness of any such statements

  • r assumptions. None of the Relevant Parties represents or warrants that such Forward Statements will be achieved or will prove to be correct. Actual future results and operations are subject to signifjcant business,

economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company, and could vary materially from the Forward Statements. Similarly, no representation or warranty is made that the assumptions on which the Forward Statements are based may be reasonable. No audit, review or verifjcation has been undertaken by an independent third party of the assumptions, data, historical results, calculations and forecasts presented. In receiving this presentation, each recipient acknowledges that it shall not deal or cause or procure any person to purchase, acquire, dispose of or deal in any securities

  • f the Company in breach of any laws and regulations relating to insider dealing, market abuse or securities in general of Papua New Guinea and elsewhere.

The recipient acknowledges that no person is intended to act or be responsible as a fjduciary to the recipient, its management, stockholders, creditors or any other person. By accepting and providing this presentation, the recipient expressly disclaims any fjduciary relationship with any person and agrees that the recipient is responsible for making its own independent judgements with respect to any transaction and any other matters regarding this presentation.

DISCLAIMER

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Full year FY18 results 2

SOLID RESULTS WITH CONTINUED GROWTH ACROSS OUR THREE CORE BUSINESS UNITS – FINANCE, PROPERTY AND INVESTMENT.

Statutory net profjt after tax

33%

Increase to K98m Underlying core profjt

14%

Increase to K86m Group ROE

10.4%

Group ROA

6%

Earnings per share

33%

Up 33% to 32 toea per share Net asset backing

5%

Up 5% to K2.79 per share Net interest margin

12.20%

RESULTS HIGHLIGHT

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SLIDE 4

KEY DRIVERS

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Full year FY18 results 4

BUSINESS DRIVERS

  • Net interest income increased 28% to K72m
  • Loans grew by 21% to K581.9m
  • Deposits grew by 6.4% to K483.4m
  • Loan book growth in respective regions included: CC PNG (+12%),

CC Fiji (+19%), CCVL (+38%), while the loan book in CCSI decreased (-26%)

  • 32% increase in property occupancy rates to 76%
  • Property rental income increased by 45% to K33m
  • Dividend income increased by 9% to K46m.
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SLIDE 6

Full year FY18 results 5

  • Cost to income ratio reduced 7% to 38%
  • Total operating expenses increased by 33% — largely attributed to increased

loan impairment costs

  • Personnel expenses were lower as a result of timing difgerences between

changes in key management

  • Other operating expenses were lower due to various costs disciplines put in

place to manage operating costs across the Group

  • Depreciation expense also increased by 49% attributed to adoption of IFRS 16.

COST MANAGEMENT

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GOVERNANCE & RISK

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Full year FY18 results 7

  • NIM 12.20%
  • Implemented new accounting standards including IFRS9 for the fjrst time
  • Appointed new Head of Credit
  • Group loan provisions expense increased by K18.6m to K25.3m
  • Increase due to adoption of IFRS 9, legacy loan provisioning for and general

increase due to loan book growth

  • Full impairment charge in relation to its legacy portfolio
  • Focus on proactive recovery measures in FY19
  • Adopted a K2.99m impairment charge on interest in Capital Insurance Group

due to time lag in Reporting Requirements.

RISK MANAGEMENT

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Full year FY18 results 8

  • Appointment of new Board members

— Syd Yates, Richard Sinamoi, James Kruse and Michael Varapik

  • Appointed key executives CEO Peter Aitsi and CFO Jefg Undah
  • Governance, risk and compliance remain key priorities
  • Recruiting for Chief Risk Offjcer and General Manager Property.

GOVERNANCE FOCUS

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Full year FY18 results 9

Key actions

The Board has also progressed a number of key focus areas since its appointment. These have included:

  • Changing the way we are reporting giving more transparency to the operating

divisions of the Group

  • Setting performance benchmarks linked to our strategy and budget
  • Enhancing shareholder engagement through a more structured engagement program
  • Enhancing employee engagement through regular internal communication and

monthly newsletter.

GOVERNANCE, RISK AND COMPLIANCE

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STRATEGIC DIRECTION

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Full year FY18 results 11

  • Set a new strategic direction for the next fjve years:
  • Key pillars of Strategic Plan include:

» We will be a high performing fjnance company » We recognise our property and investment assets are capital generating segments for the Group » We will invest in capability, digital competency, distribution maturity and a prudent funding strategy » We will focus on improving fjnancial performance, generating customer value, embedding core systems & processes and developing our people.

NEW STRATEGIC DIRECTION

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FINANCIAL PERFORMANCE

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Full year FY18 results 13

EPS Net operating income

SOLID GROWTH

2H18 1H18 2H17 1H17 2H16 1H16

89,453 91,737 39,983 65,763 106,495 75,253 0.21 0.11 0.20 0.04 0.32 0.23

2H18 1H18 2H17 1H17 2H16 1H16

NPAT

69,661 28,262 64,612 34,325 61,795 11,843

2H18 1H18 2H17 1H17 2H16 1H16 2H18 1H18 2H17 1H17 2H16 1H16

0.04 0.04 0.10 0.11 0.06 —

DPS

*

*Board expected to declare a fjnal dividend after it meets in June 2019

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Full year FY18 results 14

2H18 1H18 2H17 1H17 2H16 1H16

33,759 38,230 24,295 32,082 24,601

11.44% 11.55% 13.67% 12.94% 12.20% 12.35%

26,982

2H18 1H18 2H17 1H17 2H16 1H16

7.20% 6.02% 6.2% 5.55% 6.6% 5.3%

EFFICIENCY MEASURES

Cost to income

2H18 1H18 2H17 1H17 2H16 1H16

34.90% 42.60% 39.32% 44.30% 35.13% 37.65%

NIM Return on asset ROE

2H18 1H18 2H17 1H17 2H16 1H16

8.42% 4.36% 1.46% 7.51% 8.26% 10.38%

Calculated before any fair value changes of investment and movement in bad debts provisions. Core operating profjt divided by Equity. Core operating profjt divided by total asset.

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Full year FY18 results 15

7.8%

  • 1.8%

6.3% 18.3%

  • 0.5%

6.4%

2H18 1H18 2H17 1H17 2H16 1H16

Deposit growth

BALANCE SHEET REMAINS SOUND

Net loan growth

2H18 1H18 2H17 1H17 2H16 1H16

2.32%

  • 4.96%

6.0% 14.70% 13% 7.7%

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Full year FY18 results 16

FUNDING MIX

10.88% 24 months 0.11% On Call 5.37% 1 month 7.28% 2 months 28.51% 6 months 15.58% 3 months 32.27% 12 months 24 months On Call 1 month 2 months 6 months 3 months 12 months 24 months On Call 1 month 2 months 6 months 3 months 12 months

December 2018

24 months On Call 1 month 2 months 6 months 3 months 12 months 8.78% 24 months 0.03% On Call 11.39% 1 month 14.63% 2 months 17.62% 6 months 15.84% 3 months 31.72% 12 months 24 months On Call 1 month 2 months 6 months 3 months 12 months

June 2018

24 months On Call 1 month 2 months 6 months 3 months 12 months 24 months On Call 1 month 2 months 6 months 3 months 12 months 9.26% 24 months 0.01% On Call 7.85% 1 month 13.08% 2 months 21.19% 6 months 11.17% 3 months 37.44% 12 months

December 2017

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Full year FY18 results 17

2H18 1H18 2H17 1H17 2H16 1H16

34% 29% 25% 25% 34% 18%

Leverage ratio Total risk weighted capital

2H18 1H18 2H17 1H17 2H16 1H16

183,635 189,641 201,404 183,185 188,068 198,580

CAPITAL ADEQUACY

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Full year FY18 results 18

ASSET QUALITY

Impaired assets % of gross loans

2H18 1H18 2H17 1H17 2H16 1H16

4,036 9,446 12,408 6,812

  • 109

12,860

Group impairment % gross loans

2H18 1H18 2H17 1H17 2H16 1H16

5.80% 5.40% 4.60% 5.80% 4.60% 17%

2H18 1H18 2H17 1H17 2H16 1H16

0.70% 2.60% 2.10% 1.20% 1.30% 3.9%

Loan impairment expense

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PROPERTY DIVISION

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Full year FY18 results 20

Rental income Occupancy

2H18 1H18 2H17 1H17 2H16 1H16

12,616 11,832 14,263 11,211 11,551 18,788

2H18 1H18 2H17 1H17 2H16 1H16

55% 44% 74% 44% 52% 76%

IMPROVED PROPERTY PERFORMANCE

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Full year FY18 results 21

Era Dorina

67%

Occupancy increased to 67% (56% in FY17) Era Matana

69%

Occupancy increased to 69% (17% in FY17) Credit House

92%

Occupancy increased to 92% (59% in FY17) Continued focus on refurbishments to enhance rental yields. Roll out CRM system to

  • ur property business

to assist in improving tenant services. Improved occupancy rates for all properties. Core profjts

22%

Increase in FY18

PROPERTY — KEY POINTS

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REGIONAL UPDATE

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Full year FY18 results 23

Mount Hagen, PNG Lae, PNG Kokopo, PNG Honiara, Solomon Islands Suva and Nakasi, Fiji Nadi and Lautoka, Fiji Port Vila, Vanuatu Port Moresby, PNG Dili, Timor-Leste

Our markets and operating environment

REGIONAL UPDATE

Country FY18* FY19* Papua New Guinea 0.5% 3.0% Fiji 3.2% 3.9% Solomon Islands 3.2% 3.0% Vanuatu 3.4% 3.2% Timor-Leste 0.6% 4.0%

*Source: Asian Development Bank
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Full year FY18 results 24

REGIONAL SUMMARY

PNG

  • PNG’s economy is

forecast to grow by up to 3% in 2019

  • Liquidity is expected to

tighten signifjcantly in 2019 applying pressure

  • n interest rates and

weakening demand

  • Major new projects

announced during APEC

  • Successful issue of

PNG’s fjrst sovereign bond (US$500m).

Fiji

  • Fiji’s economy is

forecast to increase by 3.9% in 2019

  • 2018 ninth consecutive

years of positive GDP growth

  • Current year may

see liquidity tightening and greater competition for deposits putting pressure on interest rates.

Vanuatu

  • Vanuatu’s GDP is set

to increase by 3.2% in 2019

  • Challenges in 2018

related to a slowdown in tourism revenues

  • Vanuatu government

and number of major tourism and travel stakeholders launched new tourism initiative Shared Vision 2030

  • New strategy commits

to a major tourism expansion strategy.

Solomon Islands

  • GDP set to increase

by 3.4% in 2019

  • First general election

since the departure of the Regional Assistance Mission to Solomon Islands will be held in April 2019

  • Continues to face a

challenging business environment.

Timor-Leste

  • GDP grew by an

estimated 0.6% in 2018 and is set to increase by 4% in 2019

  • First early election
  • n May 2018

demonstrating growing maturity as a democracy

  • President has

approved use of the country’s petroleum fund to buy Shell and ConocoPhillips stakes in the Greater Sunrise project.

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Full year FY18 results 25

REGIONAL MARKET SHARE

PNG

PNG market share for lease and assets fjnance is estimated at 33%.

Fiji

Of the 4 licensed fjnance companies in Fiji CCF — No.1 in market share holding an estimated 29.45% share.

Vanuatu

In asset fjnancing CCP Vanuatu has an estimated 90% share.

Solomon Islands

Finance business (lease fjnance, chattel mortgage) CCF has an estimated 90% share.

Timor-Leste

Market share estimated at approximately 1%.

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PRIORITIES

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Full year FY18 results 27

OUR VISION: Credit Corporation will be the best performing fjnancier in every market in which we operate for customer experience and profjtability.

  • Stabilised organisation and set

foundation to maximise opportunities

  • Continued focus on shareholder

value creation

  • Implement business plans based on
  • utcomes of 2018 Strategic Review
  • Upgrading computer network and

back offjce systems — strengthening customer focus

  • Governance, compliance and risk

remain key areas of focus

  • Cost discipline and arrears

management remain a key focus

  • Ongoing commitment to enhanced

shareholder engagement.

PRIORITIES

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