Slovar Limited — AGM Information 2018

Nov 26, 2018

money3

AGM Presentation

27 November 2018

Scott Baldwin

Managing Director and CEO

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Disclaimer

The content of this presentation has been prepared by Money3 Corporation Limited (the Company) for general information purposes only.

Any recommendations given are general and do not take into account your personal circumstances and therefore are not to be taken as a recommendation or advice to you.

You should decide whether to contact your financial adviser so a full and complete analysis can be made in respect to your personal situation.

Whilst all care has been taken compiling this presentation neither the Company nor any of its related parties, employees or directors give any warranty with respect to the information provided or accept any liability to any person who relies on it.

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Introduction

Money3 is a leading provider of pre-owned automotive finance to 4-5 million Australians either not serviced by or excluded by traditional lenders

Over 18 years in business Money3 has settled over 800,000 loans worth over $1 billion in value

With $84m¹ available in deployable capital, Money3 will grow its loan book and market share

Broker and direct business channels are growing strongly delivering 5 year compound annual growth rate (CAGR) in EPS of over 25%.

500,000 UNIQUE CUSTOMERS

¹ As at 31 October 2018

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Governance

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Board & Corporate Governance

Experienced and balanced board

Stuart Robertson
Non-Executive Chairman (Independent)
Broad experience in business advisory, investment banking, funds management and consumer finance sector. Board member of Ellerston Global Investments, Ellerston Asian Investments and Praemium.

Scott Baldwin
Managing Director and CEO
Joined Money3 in 2008, with wealth of experience in sales, marketing and technology.

Symon Brewis-Weston
Non-Executive Director, Chair of Remuneration Committee (Independent)
Commences 27 November 2018
Former CEO of FlexiGroup (FXL:ASX)

Leath Nicholson
Non-Executive Director
Highly experienced commercial and legal expert, specifically in the area of mergers & acquisitions and corporate governance. Co-founder of legal firm Nicholson Ryan.

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FY18 Results

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FY18 Highlights

| 12.8%

31.4%

11.2%

11.9%

10.1% | 12.8% increase in Gross Loans
Receivable to $308.1 million

31.4% increase in Broker Lending
Revenue to $73.6 million

11.2% increase in Group
Revenue to $121.9 million

11.9% increase in Group
EBITDA to $56.6 million

10.1% increase in Group
NPAT to $32.0 million | Final FY18 dividend of
5.00 cents fully
franked, taking full
year dividend to 9.50
cents fully franked

Bad debts within
target range of 5-6% of gross loans
receivable |
| --- | --- | --- |

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FY18 financial results

| Group financial information
(Audited) | FY18 | FY17 | Mvt % |
| --- | --- | --- | --- |
| Amounts in $m unless otherwise stated | | | |
| Revenue | 121.9 | 109.6 | 11.2% |
| Expenses | (65.3) | (59.0) | |
| EBITDA | 56.6 | 50.6 | 11.9% |
| EBITDA as % of revenue | 46.4% | 46.2% | |
| NPAT | 32.0 | 29.1 | 10.1% |
| NPAT as % of revenue | 26.3% | 26.5% | |
| EPS (Basic)
cents per share | 19.91 | 18.81 | 5.8% |

Note: FY17 results were not restated for early adoption of the new accounting standards (AASB9 and AASB15) and is not comparable with FY18 results. On a normalised basis, FY18 EBITDA increased by 20%.

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Loan book continues to grow strongly

12.8% increase in Gross Loans Receivable to $308.1 million.
Gross Loans Receivable is the key leading indicator of future revenue.

Prudent responsible lending sees less than 1 in 3 secured automotive applications approved

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Strong long-term growth

Loan Book ($m)

Revenue ($m)

EBITDA ($m)

NPAT ($m)

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Market opportunity

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Automotive market opportunity

Australian automotive market

Huge Market

• $80bn+$¹ of annual vehicle sales
• $35.7bn$^{2}$ of vehicles financed annually
• $20bn$^{2}$ annual market for consumer vehicle financing, of which used vehicle financing is $6bn

Growing

• Over 1.2m new vehicles and 2.1m used vehicle sales³ annually
• ~2.1%³ increase number of cars on Australian roads in 2017 (or over 400,000 vehicles)

Servicing Gap

• 4-5 million Australians are either not serviced or excluded by traditional lenders
• Requires highly experienced customer care function to serve appropriately

Money3 opportunity

Money3 market share

• 1 out of 600 registered vehicles in Australia is financed by Money3
• Money3 currently accounts for 2% of its target market and is on track to increase to 3% market share by CY19

Market opportunity

• ~$84m of deployable funds providing significant headroom for loan book growth
• Significant investment into software integration across broker and dealers enabling significant volume growth

¹ Roy Morgan: Report - State of the Nation 27: Australian Automotive Industry accelerates towards 'Decade of Upheaval'
² Royal commission into misconduct in the banking, superannuation and financial services industry: Report - Some Features of Car Financing in Australia
³ Australian Bureau of Statistics: Report - 9309.0 - Motor Vehicle Census, Australia, 31 Jan 2018

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Money3 – think Holden Commodore

Tremendous focus on great service for customers who traditional credit providers often exclude

Car loans up to $35,000 over periods of up to 60 months

Cash loans up to $8,000 for repairs and/or maintenance to vehicles under finance with us

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Customer care

Money3's core competitive advantages are: understanding customers, identifying a profitable relationship on a product basis, and the collection of outstanding loans from these customers

Money3's customers typically have a below prime consumer record. We believe that these consumers are deserving of and should have access to credit. Money3 fills this critical market role.

Money3 has customer centricity at the heart of its approval and collections process and the company has a strong understanding of consumer repayment ability and probability.

Money3 has flexibility at the centre of its corporate mindset and, by extension, in its products.

Money3's highly experienced customer care team collect a material amount of cash from customers to service its lending obligations throughout the course of a financial year.

At its core Money3 engages and helps customers to meet their repayments, with demonstrated customer satisfaction, with 1 in 4 customers returning to borrow again.

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FY19 Outlook

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FY19 Q1 financial results

Group Financial information (unaudited)	Q1 FY19	Q1 FY18	Mvt %
Amounts in $m unless otherwise stated
Revenue	32.9	30.7	7.2%
Expenses	(16.8)	(15.6)	7.7%
EBITDA	16.1	15.1	6.6%
EBITDA as % of revenue	48.9%	49.2%
NPAT	9.1	8.6	5.8%
NPAT as % of revenue	27.7%	28.0%

FY19 NPAT FORECAST OF $35-$36m

13.9%
Increase in broker segment revenue on Q1 pcp

9.7%
decrease in SACC revenue on Q1 pcp

EBITDA margins maintained

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FY19 Q1 operating cash flows

Group Operating Cashflows (unaudited)	Q1 FY19	Q1 FY18	Mvt %
Amounts in $m unless otherwise stated
Receipts from customers	34.0	30.8	10.4%
Payments to suppliers and employees	(11.2)	(9.7)	15.5%
Net finance costs paid	(2.4)	(2.0)	20.0%
Income tax paid	(6.0)	(6.8)	(11.8%)
Net cashflows (excluding loans advanced)	14.4	12.3	17.1%
Loan advanced, net of principal repayments	(20.3)	(12.7)	59.8%
Net cash flows from operating activities	(5.9)	(0.4)	1,375%

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Q1 FY19 cash conversion metrics

| Cash conversion metrics
Amounts in $m unless otherwise stated | Q1
FY19 | Q1
FY18 |
| --- | --- | --- |
| Income statement | | |
| NPAT | 9.1 | 8.6 |
| Add: Impairment expense | 5.4 | 4.3 |
| Cash NPAT | 14.5 | 12.9 |
| Cash flow statement | | |
| Net cash flows from operating activities (excluding loans advanced) | 14.4 | 12.3 |
| Net operating cash flow | 14.4 | 12.3 |
| Cash conversion | 99.3% | 95.3% |

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Strong long-term growth in loan book

Secured auto loans are the fastest growing product

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Money3 has a strong presence with key channels, with a significant market opportunity to continue to grow

In FY19 Money3 anticipates funding ~$170m of car purchases, out of $6bn in used vehicle financing opportunity

1 out of 600 registered vehicles in Australia is financed by Money3

Money3 already has a strong foothold in the used vehicle finance market through brokers and direct channels with significant runway for growth

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Money3 has the ability to monetise existing database

On average, Australians change cars every 7 years¹

With more than 500,000 past and current customers, Money3 is presented with more than ~70,000 of its own customers in search of a new vehicle every year

We are exceptionally well placed to mine our own database in search of repeat customers, at lower risk and capable of driving further efficiencies within the business

¹ Roy Morgan: Report - State of the Nation 27: Australian Automotive Industry accelerates towards 'Decade of Upheaval'

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Summary

With Mr Robertson as Chairman and Mr Brewis-Weston joining the board, Money3 has a balanced board with three non-executive directors.

Money3 continues to focus on increasing its market share in the secured loans sector through high-tech, low-touch broker integrations as well as enhancing its own direct sales channels to new, existing and paid-up customers.

The successful expenditure review program launched in FY17 has been extended into FY19 with a particular focus on automation technology and an ongoing review of consolidation across the branch network.

Money3 is actively pursuing M&A opportunities with a view to expanding into complimentary product sets and strengthening particular geographic areas.

Money3 continues to manage a strategic transition away from SACC lending, with a strong focus on secured automotive loans and unsecured longer-term loans. This was demonstrated in Q1 with diminishing revenue contribution, cash advanced and cash collected.

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Appendix – Corporate Information

Capital structure	Percentage
Shares on issue	179.67m
Share Price as at 20/11/18	$1.655
Market capitalisation	$297.35m
Cash as at 31 October-2018	$34m
Financing facility available	$50.0m
Debt	$98.1m
Dividend per share (FY18)	9.50 cents

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Scott Baldwin
Managing Director
s.baldwin@money3.com.au

Siva Subramani
Chief Financial Officer
s.subramani@money3.com.au