SVR solvar limited

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Ann: Solvar FY23 Results and Investor Briefing, page-6

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Tarvold

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15/08/23

16:57

Post #: 69352330
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Originally posted by jinx83: ↑

This is pretty much a good summary of what was said and asked during the briefing.

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Originally posted by tamz: ↑

I did try and listen but was looking after grandchildren, so dipping in and out. There were a lot of questions asked

- most of the book wasn’t hedged
- previously they had used equity for funding, now predominantly borrowings, so that makes them more vulnerable to rapid increases
- NZ is an issue, with bad debts escalating there, although generally confident of containing bad debts, because they have been improving quality
- generally NZ won’t be contributing to growth but they feel they will continue growth in Australia by taking market share from competitors
- they haven’t provided at all for any ASIC fines as yet
- while there will be some ongoing costs for the Cyber security etc work they are doing in subsequent FYs , the majority of the cost is in FY24
- strong employment means people are still managing their debts without too much of an issue

They have promised more info about FY24 at the AGM when they have more months of trading to allow them to project more accurately. They have suggested emailing them with questions that if you need more insight.

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Originally posted by JoeGambler: ↑

That question on why they got it wrong at the interim wasnt specifically asked, but there was one on hedging etc.

Basically, they dont hedge M3 book because its high margin and increases in cost can be passed on off setting back book reduction in margin.

I have to assume it is the speed at which rates have risen that caught them. Only time to reprice the book will fix this.

the concerns were acknowledged and that they could have done better with the funding stack. However, pointed to reduction in margin they paid over BBSW over last few years and the big headroom giving them edge of competitors. CEO confident business will increase market share as most competitors would be in a worse position.

again reiterated FY25 bounce back and rebuilding to an ROE of 15%. CEO confident that can be achieved regardless in FY26, and if rates move in their favour that could occur earlier in FY25.

ASIC issue has not progressed yet, still early stages and no provision.

Moving up credit quality curve to reduce bad debts, increase leverage and drive efficiciency more than offsetting reduction in yield. Slower to play out due to troubles in NZ which they believe will resolve by FY25 and obviously massive rise in rates.

Board actively considering buybacks or acquisition with the 80m in free cash.

Cyber and compliance investment mostly a one off with much lower costs ongoing after build out of better capabilities.

CEO confident of bad debt outlook remaining in stated target range due to low unemployment. Most customers only have one loan with SVR and their biggest commitment. The car essential to their lives. Some customers getting slower to pay, but intention is there and as long as job is retained no problem.

(predictions of unemployment rising in AUS/NZ obviously will challenge this rosy outlook a bit.)

more detail at AGM with more refined guidance.

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Thanks guys.

SVR Price at posting: $1.21 Sentiment: Hold Disclosure: Held
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Ann: Solvar FY23 Results and Investor Briefing, page-6

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