Well, since I'm still at the airport, having moved 4 flights and counting, I thought I'd jump on and recount a few key points from the AGM. Hopefully it's useful for some.
Services segment
To me, it seemed as though Tim and Deborah were well out in front of the legislation about to come into effect, and the Senate inquiry. In regards to the former, Tim described how the legislation essentially breaks up the debtors into three groups. Those with a house, those without a house and can pay back in three years, and those without a house that cannot pay back in 3 years.
The latter group, which is approximately 40% of the customer count, but at a rough guess over 60% of the customers by dollar value.
To cater for this, FSA and particularly Deborah Southon, are working with another group, who are creating guidelines on how to treat informal agreements. Given creditors have no other avenue to get a decent return on what's owed, they're signing up to the idea. I believe fifteen rather large creditors have signed up to date.
The other interesting piece is the level of accreditation required to create these agreements. For the current arrangement, you only need a Cert IV (from memory), and this changes as part of the legislation. I can't remember the new requirements, but finding qualified staff is difficult.
Some outsourcing
They also mentioned a move to outsource operations to Manilla (through a 3rd party) and to India (as a contingency to Manilla). So far, a lot of the low value work has been outsourced, with some variation in what each of the offshore sites does. Management believe this will allow the expensive Australian staff to focus on high value work (like speaking to debtors).
Home Loans
There was some discussion around the book, and the current LVR in the face of house price falls. The presentation mentions a 65% LVR (from memory), but if this were dynamic (that is, if it were adjusted to today's values and loan amounts) it would be adjusted to high 50s. More importantly, less than 10% of the portfolio is at 80%+ LVR.
Some talks of potential to securitize, but only if operations were big enough, and we're a while away from that.
Personal Loans
There's a big focus on growing this book. So much so, that they're sacrificing the dividend to do so. Once this book grows to 100m, they can get decent terms on mezanine financing and use only 10% of FSA equity to grow the book. This grants a much, much higher ROE on any equity invested here.
The thing to note is they're still very, very cautious of maintaining quality in the book. Of the $850k or so impaired value in FY18, less than $300k was actual losses.
Other Interesting Comments
A buyback would be considered if there were sufficient capital, but as it is, they're cutting the dividend to take the opportunity presenting itself in the Personal Loan space.
Also, great to chat with @kearneymaurice and @eternalgrowth
I can't think of much else, but I hope that's useful. If anyone else that attended has anything more to add, please do.
Hopefully I get to fly back to Melbourne some time today... or at the very least get a hotel. It took 15 phone calls to find one anywhere near the airport!
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