Solvar Limited (SVR) Earnings Call Transcript

[Presentation] Good morning, ladies and gentlemen. I hereby declare the meeting open. My name is Stuart Robertson, and I'm the Chairman of Money3 Corporation Limited and an independent Nonexecutive Director. I also sit on the Remuneration and Nomination Committee and the Audit, Risk and Compliance Committee. With me today is Scott Baldwin, our Managing Director; Symon Brewis-Weston, who is an Independent Nonexecutive Director. Symon is also the Chair of the Remuneration and Nomination Committee and a member of the Audit, Risk and Compliance Committee. And finally, Kate Robb, who is also an Independent Nonexecutive Director. Kate is the Chair of the Audit, Risk and Compliance Committee and a member of the Remuneration and Nomination Committee. Also in the room, we have our Company Secretary, Terri Bakos; and Chief Financial Officer, Siva Subramani. And from our auditors, BDO, James Mooney. On behalf of the directors, I welcome our shareholders, staff and associated stakeholders to our Virtual 2020 Annual General Meeting of Money3 Corporation Limited. Financial year '20 was a year that saw unprecedented challenges, both locally and globally. The bushfire season over summer was ferocious, leaving a trail of destruction, decimating communities and with the tragic loss of lives. Australia recorded its first COVID-19 case in late January, and New Zealand followed in February. The world quickly became a very different place, and the way we did business changed as businesses went into shutdown and we moved having all of our staff working remotely. I'd like to thank our staff who have worked tirelessly, often remotely, throughout the year to ensure our customers continue to receive the high level of service that they have become used to. FY '20 was an important year for the company in terms of consolidating our strategy of moving away from a physical branch network to being a leading provider of automotive finance through our digital platform and maintaining our well-recognized human touch. Throughout FY '20, the company continued to expand its product reach and launched products targeting the large near-prime market. We believe that not only is the company extremely well-placed to service this market, it also significantly increases the addressable market in which the company operates. FY '20 was also the first full year of operating in New Zealand through Go Car Finance, and I'm delighted with how well the businesses have integrated. Our announcement on Monday of the $250 million securitized warehouse facility was another important milestone for the company. This now means Money3 is a well-established, dedicated auto loan specialist with a very strong lending DNA, robust distribution channels, excellent customer service and a range of suitable products for borrowers. I'm pleased to report that in financial year to 30 June 2020, Money3 produced very solid results despite the headwinds referred to above. The transformation into a specialized automotive and personal finance company in Australia and New Zealand has seen strong growth. Full year revenue from continuing operations increased 35.3% to $124 million, while incoming cash flows grew 36.3% to $277.2 million, and gross receivables grew 16.4% to $433.8 million. FY '20 normalized net profit after tax from continuing operations was $30.3 million, which was an increase of 30.1% on the prior corresponding period when adjusting for the one-off noncash economic outlook provision because of COVID-19. Statutory NPAT was $24.2 million. We have continued our strong growth trajectory since the last annual general meeting, demonstrated by the following metrics: loan book growth increased 16.4% to $433.8 million, including Go Car Finance; revenue growth was up 35.3% to $124 million from continuing operations; normalized EBITDA growth was up 31.1% to $60.7 million from continuing operations; and normalized NPAT growth was up 30.1% to $30.3 million from continuing operations. With have continued growth to continue to be strong -- sorry, we anticipate growth to continue to be strong in the coming year through a number of initiatives. Our Managing Director, Scott Baldwin, will cover this more fully in his presentation. We're committed to ensuring our customers receive efficient and innovative solutions. The company continues to invest in technology that allows customers to digitally apply for finance whilst ensuring compliance with our responsible lending obligations. By investing in further technology enhancements, customers will receive quicker decisions on their applications whilst the company continues to improve its productivity. Despite the challenges discussed above and with many companies canceling dividends, our strong financial performance supported the payment of an interim dividend of $0.05 per share in May and a final dividend of $0.03 per share in October, taking the total dividend for the year to $0.08 fully franked. Finally, in what has been a very unique period, on behalf of the directors, we wish to thank our entire team for their commitment, contribution and customer focus during another exciting year for Money3. We look forward to the future, and I want to thank our customers and investors for their ongoing support. Given this is quite a unique forum, I'll just go through today's process. I'm advised by the company secretary that the notices of meeting have been properly dispatched and that a quorum of members is present. I call the meeting to order. Whilst this online format may be familiar for some shareholders, I acknowledge them like [ new ] for others. However, I assure that you have the same opportunity to participate today as you would have at a physical meeting. This includes being able to ask questions through the online platform and vote using the electronic voting card. If you're having any difficulties in navigating the portal, I encourage you to download the guide from the bottom right-hand of your -- right-hand side of your screen. If you experience technical issues that impact the meeting, I'll assess the circumstances and communicate further with you. If this is impossible, you'll be e-mailed instructions on how and when to rejoin the meeting. [Operator Instructions] If the question is a general shareholder question, it will be addressed after the formal business of the meeting is completed. If we're unable to get through all of your questions today, or if there are specific questions that would be better addressed on an individual basis, we'll respond to them after the meeting. If we received multiple questions in a similar, we'll try to amalgamate them into one or choose an answer with the broadest question, which we'll cover off the others. I will now hand over to Scott to conduct the presentation.

Thank you, Stuart. I am assuming that shareholders can see the presentation that has been provided, and I am starting from Slide 4. Welcome to the 2020 AGM of Money3 Corporation. Firstly, I would like to thank you for your continued support for the group on our journey towards our mid-term aspiration of having 100,000 customers achieve their goal of a new car in both Australia and New Zealand, and supporting our growth towards $1 billion of loan book. Financial '20 has been another transformative year for the group, which saw the team expend considerable effort, accumulating in Monday's announcement of a $250 million cornerstone funding facility for the business. This facility provides significant support towards our aspiration of $101 billion of receivables and improving our cost of funding by $10 million per year when the facility is fully drawn. I would like to recognize the efforts of Siva Subramani, our CFO; and Craig Harris, our General Manager; and their teams, too numerous to mention on today's call, for their effort and dedication to transform the business and the processes within the business to meet the standards required for the support from a global A plus-rated bank. This now sets the foundation for strong growth into the future as we take advantage of mainstream banking retreating from the nonbank lending sector. Money3 is now well-funded, well-resourced with leaders with significant experience in the sector in both Australia and New Zealand, committed to providing credible product and service to our customers looking to buy a vehicle. As we move to the next slide, our financial results on Slide 5. Money3 has delivered a normalized $30.3 million NPAT from continuing operations in financial year '20, so a solid result for the year considering much uncertainty. During the year, we took a noncash impairment provision of $10 million based on modeling of our customer segment's potential to have increased unemployment rates. Now almost 5 months on from that point in time, we have seen customers' ability to pay far beyond our expectations, and that overall loan book quality has actually continued to improve over time. As we consider the outlook for the economy, Money3 is taking a prudent approach on any release of this provision, which will be done in the second half of financial year '21 after government stimulus is [ brought ] back. Moving to the next slide. In terms of highlights, the standout for the first quarter of this year has very much been our cash collections. This surpassed all of our expectations and is very much driven from government stimulus, particularly the superannuation release. And the government stimulus, I should add, has been in both countries, not just Australia but also New Zealand, and it very much has underpinned our solid performance in Q1. Moving to next slide. We are seeing a very strong cash performance continue into Q2. However, we are not seeing the same number of customers paying out their loans in full that we experienced in the first quarter of this year. This will lead to greater loan book growth in our business in the second quarter and beyond. Specific comments in regard to our New Zealand business. Go Car Finance has been -- it's been a terrific acquisition for the group. It's posted very solid returns and has contributed to our profitability. We are excited about the ongoing growth of the business, surpassed a milestone that we set in -- just this month, November, of doubling the loan book. We have achieved this in the first 20 months of the business, and I expect we'll achieve it again in the next 24 months. Moving to the next slide, the business impact as a result of COVID. We're very pleased to see the momentum in new loan originations building up to where -- in the past few weeks. We're now getting very close to pre-COVID levels of daily originations of new loans. And as you can see, we have experienced a V-shaped recovery, as you'll see in the chart there on Slide 9. Just moving to this final slide for myself is our outlook. The group remains confident in our strong full year performance. We're providing guidance of $30 million -- $34 million NPAT for this financial year. And we have stated some assumptions, which are there on the slide, as to getting there. Our decision is not to vary the $10 million economic outlook provision in that $34 million assumption, and we will make -- I think it's prudent to wait until full year performance and adjust that in the last quarter of this year. I'd like to thank you all for listening and to shareholders. I'll now hand over to the Chairman, Mr. Stuart Robertson, to conduct the formal part of the AGM. Thank you, shareholders, and thank you, Stuart.

Thank you, Scott. We'll now proceed with the formal aspects of the meeting. But before doing so, I would remind you all that only shareholders or their appointed proxies and corporate representatives are entitled to vote or speak at this meeting. As each of the resolutions before us today will be decided by poll, I hereby appoint Mr. Jim Kompogiorgas of Link Market Services as the Returning Officer for the meeting. Votes will be counted after the end of the meeting and results published on the ASX and the company's website. Shareholders can cast their vote using the electronic voting card that they've received after validating their online registration today. [Operator Instructions] [Technical Difficulty]

All right. We're going to start from Slide 12. Guys, are you there?

We'll now proceed with the formal aspects...

One sec, she's going to introduce...

Let's go to the next slide.

Welcome back. We'll now proceed with the formal aspects of the meeting. But before doing so, I'll remind you all that only shareholders or their approved proxies, appointed proxies, and corporate representatives are entitled to vote or speak at this meeting. As each of the resolutions before us today will be decided by poll, I hereby appoint Mr. Jim Kompogiorgas of Link Market Services as a Returning Officer for the meeting. Votes will be counted after the end of the meeting and results published on the ASX and the company's website. Shareholders can cast their vote using the electronic voting card that they received after validating their online registration today. [Operator Instructions] If you are entitled to vote, you'll be able to finalize and submit votes up until 5 minutes after the meeting ends. I will remind you at the end of the meeting. Proxy votes that have been submitted prior to today's meeting will be set out on the slides shown for each resolution. For some context, the current number of Money3 shares on issue is approximately 185 million. Shareholders have appointed the Chair of today's meeting, myself, as proxy for approximately 100 million shares to vote either for, against or with discretion for all resolutions. As indicated on the proxy form and in the notice of meeting, my intention as Chair is to vote all discretionary or undirected proxy, if I may, in favor of each resolution. With member's permission, I'd like to take the notice of meeting, including explanatory memorandum, as having been read. Now to the formal business and resolutions. 2020 annual report, to receive the financial statements for Money3 Corporation Limited for the year ending 30 June 2020, together with the director's report and the auditor's report, as set out in the annual report. As advised, we have James Mooney, Board Partner from BDO with us today. We have received no questions prior to the meeting on the accounts or conduct of the audit. Are there any questions now in relation to these accounts and the conduct of the audit for the company's auditor? As there are no further questions, I hereby table the accounts, and we shall move on to the formal resolutions. Resolution 1, remuneration report. This resolution is to consider and adopt the remuneration report for the year ended 30 June 2020. On screen now are details of the valid proxies received prior to the meeting. Are there any questions in relation to this resolution? I will now put the resolution to a vote. Please cast your vote if you wish to vote. [Voting]

Let's now move to the next resolution. Resolution 2, re-election of Symon Brewis-Weston as a Director. This resolution is to consider the reelection of Mr. Symon Brewis-Weston as a Director of the company. Details of Mr. Brewis-Weston's qualifications, background and experience are contained in the explanatory memorandum attached to the notice of meeting. On screen now are details of the valid proxies received prior to the meeting. Are there any questions in relation to this resolution? I now put the resolution to a vote. Please cast your vote if you wish to vote. [Voting]

Let's move to the next resolution. Resolution 3, issue of performance rights to Mr. Scott Baldwin under the Employee Equity Plan. This resolution is to consider the issue of performance rights to Scott Baldwin. Details of the issue to Scott are contained in the explanatory memorandum attached to the notice of meeting. On screen now are details of the valid proxies received prior to meeting. Are there any questions in relation to this resolution? I now put the resolution to a vote. Please cast your vote if you wish to vote. [Voting]