In FY21, Group volumes grew 4.3% despite challenging business conditions due to COVID-19 related lockdowns, travel restrictions and shaky consumer confidence. Customer reimbursements remained at high levels consistent with FY2020, which contributed to a 2.6% reduction in gross receivables from FY2020. Despite the impacts of the Omicron variant in 4Q21, receivables stabilized in 2H21, down 1.9% in the half, in contrast to the 14.6% reduction in gross receivables in FY20 compared to FY19.
Cash NPAT of $232.2 million increased by 3.7%, with the following main factors:
- Total operating income decreased by $107.6 million or 11.5% to $826.6 million. This reduction is explained by the 7.9% reduction in average gross receivables compared to fiscal 2020, combined with a contraction of 53 basis points in the return on operating income. The decline in yield is the result of the product mix and strategic pricing changes implemented to attract high-quality customers.
- Net expenses decreased by $78.1 million or 34.3% to $149.5 million. The decrease in charges is the result of the continued improvement in the credit quality of the portfolio through the tightening of underwriting standards in FY20, the improvement in the credit mix of the portfolio at origination and to the increase in reimbursement rates during this period. The above drivers resulted in a net expense ratio reduction of 94 basis points in FY21 compared to FY20.
- Operating Expenses decreased by $15.8 million or 3.9%, from $402.9 million to $387.1 million. Operating expenses continued to benefit from the implementation of a productivity program and investments in simplification and disciplined cost management despite higher levels of marketing spend.
- Provision movement increased $14.5 million or 77.4% to $33.3 million in FY21. The movement in provisions was driven by the improvement in the coverage ratio, reducing by 34 basis points to 4.28% compared to fiscal 2020, in line with improvements in the quality of the underlying assets and measures of difficulties in 2021 (after the initial increase in difficulty levels in 2020). The reduction in gross loans receivable also contributed to the increase in the provision
During the year, the Group maintained a strong funding position, remaining active in the funding markets with the refinancing of warehouses, forward ABS transactions and the setting up of a new corporate facility. The Group consistently manages its maturity profile within the target range of no more than 50% of funding maturities in any given year and no more than 40% of funding maturities in the next 12 months. Further information on funding and liquidity measures is contained in section 13.
The Group’s return on equity (ROE) of 16.6% remains strong alongside the 31% increase in tangible equity in FY21. Tangible equity to net receivables (TER) increased by 217 basis points to 8.7% in 2021, compared to 6.5% in FY20, partly due to the issuance of 150 million dollars of capital notes in FY21. ROE and TER measurements demonstrate the strength and resilience of the Group and its ability to sustain a dividend payout ratio of 60-70% of Cash NPAT.
The group acquired Symple Loans in October 2021, which will provide enhanced digital capabilities for our lending business, followed by the acquisition of Octifi, a Singapore-based remittance business, both of these acquisitions expand our lending footprint and payments worldwide. The Group announced on February 18, 2022 that it had entered into a binding transaction to acquire the consumer business of Humm Group Limited, incorporating its BNPL, Deposits and Cards operations.
The directors declared a final dividend of 7.85 cents per share, fully franked, bringing the dividend payout for the full year to 15.7 cents per share.