FY16 H1 Results Presentation 28 January 2016 Thomas Beregi , CEO - - PowerPoint PPT Presentation

FY16 H1 Results Presentation

Thomas Beregi, CEO Michael Eadie, CFO

28 January 2016

Competitive leadership in the credit-impaired consumer segment

• PDL acquisitions and lending

growth

• Returns achieved
• Improved operating metrics
• Strong outlook
• Compliance leadership
• Sustainability delivers strengthened

stakeholder relationships

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Record levels of investment driving earnings growth

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Nov 15 Expectation Jan 16 Update

• PDL acquisitions $125 - $145m
• Record half of purchasing $98.5m
• Now on track for $185 - $195m
• Includes significant increase in US purchases
• Net lending volume of $30 - $40m
• 1H volumes - net lending $32m
• Volumes likely to moderate in 2H
• NPAT $42 - $44m
• Investment driving strong earnings growth
• NPAT on track for $44 - $45m

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Strong core business growth

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1H15 1H16 $ Change % Change Debt Purchasing $78.2m $86.1m +$7.9m + 10% Lending $15.5m $26.1m +$10.6m + 68% Total Revenue $93.7m $112.2m +$18.5m + 20% Debt Purchasing $26.0m $28.4m +$2.4m + 9% Lending $2.9m $2.1m ($0.8m) (28%) NPBT Total $28.9m $30.5m +$1.6m + 6% NPAT $20.1m $21.2m +$1.1m + 6% EPS (basic) 43.6cps 45.7cps +2.1cps + 5% Dividend 22.0cps 23.0cps +1.0cps + 5% H1 FY16 Financial Results

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Asset growth drives operating cash flows

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$ million Jun 14 Dec 14 Jun 15 Dec 15 Pre-tax operating cash flow 98.9 103.6 112.0 118.7 Tax payments (5.5) (13.1) (13.4) (1.8) PDL acquisitions, lending and capex (91.7) (72.6) (118.7) (134.6) Net operating free cash flow 1.7 17.9 (20.1) (17.7) PDL and consumer loan carrying value 203.7 201.4 244.3 289.6 Net bank debt 35.7 28.1 58.5 84.7 Net debt / carrying value (%) 17.5% 14.0% 23.9% 29.2%

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Operational metrics maintained - pricing discipline and accuracy

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• 200

400 600 800 1,000 1,200 1,400 1,600 1,800 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Note: For all PDLs held at June 2008, initial projections represent the forecast at June 2008

Cumulative Collections $m

Actual cash collections Initial projections

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PDL collections by date of purchase

$m

Operational metrics maintained - collection life-cycle

(1) 11% growth based on p.c.p. (1H FY16 vs. 1H FY15)

On track for record collections (1)

+11% 46% 48% 48% 48% 44% 44% 38% 33% 32% 31% 34% 36% 18% 16% 16% 17% 19% 20% 22% 25% 23% 22% 19% 15% 13% 13% 13% 11% 12% 10% 12% 13% 14% 15% 17% 17% 23% 23% 23% 24% 25% 26% 28% 29% 31% 32% 30% 32%

5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 Q3 Mar 13 Q4 Jun 13 Q1 Sep 13 Q2 Dec 13 Q3 Mar 14 Q4 Jun 14 Q1 Sep 14 Q2 Dec 14 Q3 Mar 15 Q4 Jun 15 Q1 Sep 15 Q2 Dec 15

> 3 years 2-3 years 1-2 years < 1 year

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Operational metrics maintained - productivity

Debt purchase productivity (direct collection staff only)

PDL collections per hour

YTD avg. 1HFY16 $208 FY15 $200

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$100 $150 $200 $250 $300 $350

Total Productivity

1HFY16 FY15

Operational metrics maintained - payers base

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Total Portfolio Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Face value $4.5bn $4.7bn $4.8bn $4.9bn $5.1bn Number of accounts 759,000 744,000 698,000 703,000 687,000 Payment arrangements Face value $791m $909m $963m $1,044m $1,099m Number of accounts 111,000 120,000 125,000 133,000 139,000 % of PDL collections 71% 73% 73% 75% 76%

Operational headcount to support asset growth

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Period end headcount (FTE)

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Function Jun 13 Jun 14 Jun 15 Dec 15 Debt Purchase Ops 831 919 1,004 1,038 Mercantile 13 12 11 12 Financial Services 43 109 104 123 Support 77 82 88 97 Total 964 1,122 1,207 1,270 Support % 8% 7% 7% 8%

400 500 600 700 800 900 1,000 1,100 1,200 1,300 Jun 13 Jun 14 Jun 15 Dec 15 Support Financial Services Mercantile Debt Purchase Ops

(1): Includes US purchases

On track for record PDL acquisitions

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– Compelling debt purchase client proposition – Operational improvements and scale reflected in strong prices – Industry-leading compliance record preserves brand / reputation – Most existing forward flows renewed and some additional volume secured – Pricing of purchases ensure hurdle return will be achieved – Significant increase in US purchasing

Purchases $m

FY16 Purchasing Guide: $185 - $195m Contracted as at January 2016 (1) FY13 Actual FY14 Actual FY15 Actual FY16 Guidance Domestic US $195m $181m $137m $145m $143m

Consumer lending book has grown strongly in H1

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Gross loan book excluding provisions $m Annualised Interest revenue $m

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$2m $6m $11m $19m $35m $63m $72m $100m $121m $51m Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15

Gross loan book excluding provisions Annualised revenue

Consumer lending book growth expected to moderate in H2

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– More modest book growth in H2

• Seasonality
• Impact of SACC exit and transition from March 2016
• On track to achieve net lending market guidance

– Segment NPAT likely to be significantly higher in H2

• Lower marketing costs
• Lower life-of-loan loss provision expense

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A strong platform for ongoing lending growth

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– Significant customer acquisition in 1H provides platform for ongoing growth

• Longer duration products provide a pathway to mainstream financial inclusion
• Launched reloadable debit card to enhance customer retention

– SACC review panel due to issue final recommendations in Feb-16

• Credit Corp has been an active participant irrespective of its decision to exit
• Potential impact on competitive dynamics of credit impaired lending sector

– Sustainable positioning facilitates ‘second look’ lending opportunities

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Improved outlook for US despite unchanged conditions

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– Supply conditions remain constrained

• Recent consent orders (enforceable undertakings) by major issuers (Chase) and debt buyers

(Encore and PRA) provide a regulatory template

• Proposed rules still unlikely to be released prior to the June 2016 quarter

– Competitors demonstrate a pathway to returns in current market

(1) Based on PRA Group (Nasdaq: PRAA) Form 10-K and Form 10-Q reports

– Substantially improved operating model for recent purchases

• Collection efficiency on track for 35% improvement
• Legal performance on track to achieve internal target

FY14 FY15 (to 3rd qtr) Purchase price multiple on current year purchases (1) 2.04x 2.03x Cost to collect 37% 39% Nominal net return 14% 12%

Enhanced operating model drives increased purchasing

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– Current forward flow now delivering a positive contribution – Recent decision to increase purchasing

• Enhanced operating model provides a path to breakeven
• Achievement of target returns still requires improved market conditions

Jun-15 Sep-15 Dec-15 Mar-16 Jun-16

$ US Revenue contribution per hour on current purchasing Variable cost per hour Marginal contribution

Updated FY16 Guidance

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Updated Nov 15 Updated Jan 16 PDL acquisitions $125 - $145m $185 - $195m Net lending $30 - $40m $30 - $40m NPAT $42 - $44m $44 - $45m EPS (basic) 91 - 95 cents 95 - 97 cents

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Questions

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