credit corporation png full year results · this presentation has been prepared on the basis of...

CREDIT CORPORATION PNG FULL YEAR RESULTS 31 December 2018

YEARSWorking together

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, financial situation or needs. It should not form the basis of or be relied on 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 offer 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 filed, 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 unfulfilled 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 financial 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 definitive 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 affairs, business or financial position of the Company or any of its subsidiaries, associated companies or affiliates 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 affiliates, and their respective officers, 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 or 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 definitive agreement when, and if, it is executed, and subject to such limitations as may be provided in such agreement shall have any legal effect. 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 or 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 significant 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 verification 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 of 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 fiduciary to the recipient, its management, stockholders, creditors or any other person.

By accepting and providing this presentation, the recipient expressly disclaims any fiduciary 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


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

Statutory net profit after tax

33%Increase to K98m

Underlying core profit

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

KEY DRIVERS


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.


• 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 differences 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

GOVERNANCE & RISK


• NIM 12.20%

• Implemented new accounting standards including IFRS9 for the first 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


• Appointment of new Board members — Syd Yates, Richard Sinamoi, James Kruse and Michael Varapik

• Appointed key executives CEO Peter Aitsi and CFO Jeff Undah

• Governance, risk and compliance remain key priorities

• Recruiting for Chief Risk Officer and General Manager Property.

GOVERNANCE FOCUS


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

STRATEGIC DIRECTION


• Set a new strategic direction for the next five years:

• Key pillars of Strategic Plan include:

» We will be a high performing finance 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 financial performance, generating customer value, embedding core systems & processes and developing our people.

NEW STRATEGIC DIRECTION

FINANCIAL PERFORMANCE


EPSNet operating income

SOLID GROWTH

2H181H182H171H172H161H16

0.21

0.11

0.20

0.04

0.32

0.23

Net operating income EPS DPS

2H181H182H171H172H161H16 2H181H182H171H172H161H16

89,453 91,737

39,983

65,763

106,495

75,253

0.04 0.04

0.100.11

0.06

—

69,661

28,262

64,612

34,325

61,795

11,843

NPAT Line Chart

2H181H182H171H172H161H16 2H181H182H171H172H161H16

0.21

0.11

0.20

0.04

0.32

0.23


2H181H182H171H172H161H16 2H181H182H171H172H161H16

89,453 91,737

39,983

65,763

106,495

75,253

0.04 0.04

0.100.11

0.06

—

69,661

28,262

64,612

34,325

61,795

11,843

NPAT Line Chart

2H181H182H171H172H161H16

NPAT

2H181H182H171H172H161H16

0.21

0.11

0.20

0.04

0.32

0.23


2H181H182H171H172H161H16 2H181H182H171H172H161H16

89,453 91,737

39,983

65,763

106,495

75,253

0.04 0.04

0.100.11

0.06

—

69,661

28,262

64,612

34,325

61,795

11,843

NPAT Line Chart

2H181H182H171H172H161H16 2H181H182H171H172H161H16

0.21

0.11

0.20

0.04

0.32

0.23


2H181H182H171H172H161H16 2H181H182H171H172H161H16

89,453 91,737

39,983

65,763

106,495

75,253

0.04 0.04

0.100.11

0.06

—

69,661

28,262

64,612

34,325

61,795

11,843

NPAT Line Chart

2H181H182H171H172H161H16

DPS

*

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


2H181H182H171H172H161H162H181H182H171H172H161H16 2H181H182H171H172H161H162H181H182H171H172H161H16

33,759 38,230

24,295

32,082

24,601

11.44% 11.55%

13.67%12.94%

12.20%12.35%

26,982 7.20%6.02%6.2%

5.55%6.6%

5.3%

34.90%

42.60%

39.32%

44.30%

35.13%

37.65%

8.42%

4.36%1.46%

7.51%8.26%

10.38%


33,759 38,230

24,295

32,082

24,601

11.44% 11.55%

13.67%12.94%

12.20%12.35%

26,982 7.20%6.02%6.2%

5.55%6.6%

5.3%

34.90%

42.60%

39.32%

44.30%

35.13%

37.65%

8.42%

4.36%1.46%

7.51%8.26%

10.38%

EFFICIENCY MEASURES

Cost to income


33,759 38,230

24,295

32,082

24,601

11.44% 11.55%

13.67%12.94%

12.20%12.35%

26,982 7.20%6.02%6.2%

5.55%6.6%

5.3%

34.90%

42.60%

39.32%

44.30%

35.13%

37.65%

8.42%

4.36%1.46%

7.51%8.26%

10.38%

NIM Return on asset

ROE


33,759 38,230

24,295

32,082

24,601

11.44% 11.55%

13.67%12.94%

12.20%12.35%

26,982 7.20%6.02%6.2%

5.55%6.6%

5.3%

34.90%

42.60%

39.32%

44.30%

35.13%

37.65%

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 profit divided by Equity.

Core operating profit divided by total asset.


2H181H182H171H172H161H16

2.32%-4.96%

6.0%

14.70%13%

7.7%

7.8%

-1.8%

6.3%

18.3%

-0.5%

6.4%

2H181H182H171H172H161H16

Deposit growth

BALANCE SHEET REMAINS SOUND

Net loan growth

2H181H182H171H172H161H16

2.32%-4.96%

6.0%

14.70%13%

7.7%

7.8%

-1.8%

6.3%

18.3%

-0.5%

6.4%

2H181H182H171H172H161H16


FUNDING MIX

10.88%24 months

0.11%On Call 5.37%

1 month7.28%2 months

28.51%6 months

15.58%3 months

32.27%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

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 2018

10.88%24 months

0.11%On Call 5.37%


28.51%6 months

15.58%3 months

32.27%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

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

June 2018

10.88%24 months

0.11%On Call 5.37%


28.51%6 months

15.58%3 months

32.27%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

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


2H181H182H171H172H161H16

183,635 189,641 201,404183,185 188,068198,580

2H181H182H171H172H161H16

34%29%

25% 25%

34%

18%

Leverage ratioTotal risk weighted capital

2H181H182H171H172H161H16

183,635 189,641 201,404183,185 188,068198,580

2H181H182H171H172H161H16

34%29%

25% 25%

34%

18%

CAPITAL ADEQUACY


ASSET QUALITY

Impaired assets % of gross loans

2H181H182H171H172H161H16

4,036

9,446

12,408

6,812

-109

12,860

Group impairment % gross loans

2H181H182H171H172H161H16

5.80% 5.40% 4.60% 5.80%

4.60%

17%

2H181H182H171H172H161H16

0.70%

2.60%2.10%

1.20% 1.30%

3.9%

Loan impairment expense

PROPERTY DIVISION


Rental income Occupancy

2H181H182H171H172H161H16

12,616 11,832 14,263

11,211 11,551

18,788

2H181H182H171H172H161H16

55%44%

74%

44%52%

76%

IMPROVED PROPERTY PERFORMANCE


Era Dorina

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

Era Matana


Credit House


Continued focus on refurbishments to enhance rental yields.

Roll out CRM system to our property business to assist in improving tenant services.

Improved occupancy rates for all properties.

Core profits

22%Increase in FY18

PROPERTY — KEY POINTS

REGIONAL UPDATE


!"#$%&#'()*$&+,$-.(#&)/+0$(+1/#-+%(+)$/+$2345

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


REGIONAL SUMMARY

PNG• PNG’s economy is

forecast to grow by up to 3% in 2019

• Liquidity is expected to tighten significantly in 2019 applying pressure on interest rates and weakening demand

• Major new projects announced during APEC

• Successful issue of PNG’s first 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 on 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.


REGIONAL MARKET SHARE

PNGPNG market share for lease and assets finance is estimated at 33%.

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

VanuatuIn asset financing CCP Vanuatu has an estimated 90% share.

Solomon IslandsFinance business (lease finance, chattel mortgage) CCF has an estimated 90% share.

Timor-LesteMarket share estimated at approximately 1%.

PRIORITIES


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

• Stabilised organisation and set foundation to maximise opportunities

• Continued focus on shareholder value creation

• Implement business plans based on outcomes of 2018 Strategic Review

• Upgrading computer network and back office 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

www.creditcorporation.com.pg

credit corporation png full year results · this presentation has been prepared on the basis of...

Documents