Latitude Financial : LFS Appendix 4E

For personal use only

Results for Announcement to the Market

Appendix 4E

	Name of entity	Latitude Group Holdings Limited
	ACN	604 747 391
	Reporting period	1 January to 31 December 2021
	Previous corresponding period	1 January to 31 December 2020
	Extracts from the income statements ($ millions)
					31 December 2021
			$		Up/down	% change
	Revenue from ordinary activities		987.9		down	10.4%
	Profit from ordinary activities after tax attributable to	160.9		up	256.0%
	members
	Net profit for the period attributable to members	160.9		up	256.0%
	Dividend information			Amounts per		Franked		Tax rate for
					amount
				ordinary
							franking
				share		per share
				(cents)		(cents)		credits
	Interim 2021 dividend per share (paid 14 October 2021)		7.85		-		-
	Final 2021 dividend per share declared			7.85		3.36		30%
	Final dividend dates
	Ex-dividend date					28 February 2022
	Record date							1 March 2022
	Payment date							22 April 2022

There is no dividend reinvestment plan in relation to the final dividend.

Net tangible assets per security
	31 December 2021	31 December 2020
	$'m	$'m
Net tangible assets ($'m)	517.6	(474.6)
Ordinary shares	1,038.5	650.2
Net Tangible Assets / (Liabilities) per security ($)	0.50	(0.73)

Additional information supporting the Appendix 4E disclosure requirements can be found in the following consolidated financial statements extracted from the Consolidated Financial Report for the year ended 31 December 2021.

This report is based on the Consolidated Financial Report of the Group which has been audited by KPMG.

For personal use only

Results for Announcement to the Market

This report is prepared for the Australian Securities Exchange (ASX) under listing rule 4.3A.

Statements required under items 3-6 are included in the following consolidated financial statements extracted from the Consolidated Financial Report for the year ended 31 December 2021.

Other requirements are indexed as follows:

ASX Appendix E item	Section
Item 7: Dividends	2.4(a) and 2.4(b)
Item 10: Details of entities over which control has been gained	6.1(a), 6.1(b), 6.10 and 6.11
or lost during the period
Item 11: Details of associates and joint venture entities	The Group has none
Item 12: Any other significant information	Consolidated financial statements
	and notes

P a g e | 2

For personal use only

Results for Announcement to the Market

Summary of Group Performance

Statutory profit after tax attributable to members from continuing operations increased by $115.7 million to $160.9 million in 2021 from $45.2 million in 2020.

Cash NPAT1 increased by $8.3 million or 3.7% to $232.2 million in 2021 from $223.9 million in 2020.

Summary financial results

				Pro forma	Change %
($'m)	2021		2020	2021 vs 2020
Interest income		932.4	1,058.1	(11.9)%
Interest expense		(160.3)	(178.0)	(9.9)%
Net interest income		772.1	880.1	(12.3)%
Other operating income		54.6	54.1	0.8%
Total Operating Income		826.6	934.2	(11.5)%
Net Charge Offs		(149.5)	(227.6)	(34.3)%
Risk Adjusted Income		677.1	706.7	(4.2)%
Management Operating Expenses		(387.1)	(402.9)	(3.9)%
Pre-provision Profit		290.0	303.8	(4.5)%
Provision movement		33.3	18.8	77.4%
Profit before Tax & Significant Items		323.3	322.6	0.2%
Income tax expense		(91.1)	(98.7)	(7.7)%
Cash NPAT		232.2	223.9	3.7%
Amortisation of Acquisition Intangibles		(48.3)	(48.3)	(0.0)%
Amortisation of Legacy Transaction Costs		(9.4)	(24.8)	(62.2)%
Significant Items		(43.0)	(62.7)	(31.5)%
Tax effect of adjustments		28.8	40.1	(28.2)%
Pro forma NPAT		160.3	128.1	25.1%
Changes in Capital Structure		-	(80.3)	100.0%
Transaction and historical IPO costs		-	(19.8)	100.0%
Discontinued operations (pre-tax)		-	(3.0)	100.0%
Tax effect of adjustments		-	18.7	100.0%
Statutory Profit / (Loss) after tax from continuing operations		160.3	46.7	243.1%
Discontinued operations		-	(1.5)	100.0%
Statutory Profit / (Loss) after tax		160.3	45.2	254.5%
Profit/ (Loss) from non-controlling interest		(0.6)	-	100.0%
Statutory Profit / (Loss) attributable to members		160.9	45.2	256.0%

1 Pre-provision profit, Risk Adjusted Income, Significant items and Cash NPAT are non-IFRS metrics used for management reporting. The Group believes Cash NPAT reflects what it considers to be the underlying performance of the business.

P a g e | 3

For personal use only

Results for Announcement to the Market

Statutory Profit after tax & Proforma NPAT

The Group has included both Statutory Profit after tax as well as Proforma NPAT in the table above. Proforma NPAT directly ties into the 2020 financials disclosed in Section 4 of Latitude's IPO Prospectus dated 30 March 2021. Whilst Statutory Profit after tax would be the conventional basis for comparability under accounting standards, the 2020 statutory profit after tax and the corresponding financial statements contain items associated with the historical structure as well as the restructure arrangements entered into prior to the listing of Latitude Group Holdings Limited on the Australian Securities Exchange ('ASX') on 20 April 2021 as set out in Sections 9.3 and 9.4 of the IPO Prospectus. Furthermore, the Group Statutory Profit after tax is different to that disclosed in the IPO Prospectus (described as "Combined") as some elements of the restructure are permitted to be restated under the accounting standards whilst other elements of the restructure are not. This means that further adjustments are required to enable direct comparison to those disclosures in the Prospectus.

It is the Group's belief that the Proforma information provided in the IPO Prospectus dated 30 March 2021 provides a more useful and representative basis of the Group's underlying performance for 2020 than the Comparative Statutory results for those historical periods. As a result, the comparative information within this review of Group Performance has been presented to align to the IPO prospectus pro forma information that was previously released rather than the statutory comparatives.

Summary financial analysis

During 2021 group volumes increased 4.3% despite challenging trading conditions due to COVID-19 related lockdowns, travel restrictions and inconsistent consumer confidence. Customer repayments remained at elevated levels consistent with 2020, which contributed to a reduction in Gross receivables of 2.6% compared to 2020. Despite the impacts of the Omicron variant in 4Q21, receivables stabilised in 2H21, reducing by 1.9% in the half, in contrast to the 14.6% reduction in gross receivables in 2020 compared to 2019.

Cash NPAT of $232.2m increased by 3.7%, with key drivers as follows:

• Total Operating Income decreased by $107.6 million or 11.5% to $826.6 million. The reduction was driven by the 7.9% reduction in Average Gross Receivables compared to 2020 combined with a 53bps contraction in Operating Income yield. The yield decrease was a result of product mix and strategic pricing changes implemented to attract high quality customers.
• Net Charge offs decreased by $78.1 million or 34.3% to $149.5 million. The decrease in charge offs was as a result of the ongoing improvement in the credit quality of the portfolio driven by tightening of underwriting standards during 2020, improved portfolio credit mix at origination, and elevated repayment rates during this period. The above drivers resulted in a reduction in the Net charge off rate of 94bps in 2021 compared to 2020.
• Operating expenses decreased by $15.8 million or 3.9% to $387.1 million from $402.9 million. Operating expenses continued to benefit from the implementation of a productivity agenda and investments in simplification and disciplined cost management despite higher levels of marketing expenses.
• Provision movement increased by $14.5 million or 77.4% to $33.3 million in 2021. The provision movement was driven by the Coverage ratio improvement, reducing 34bps to 4.28% from 2020 in line with the improvements in underlying asset quality and hardship metrics in 2021 (after the initial surge in hardship levels during 2020). The reduction in Gross Loan Receivables also contributed to the increased provision movement.

P a g e | 4

For personal use only

Results for Announcement to the Market

During the year, the Group maintained a robust funding position and has remained active in the funding markets in 2021, refinancing and managing limits to maintain our cost effective and diverse funding program. The Group systematically 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 within the next 12 months.

The following graph sets out the Group's debt maturity profile as at 31 December 2021.

50.00%			37.13%
40.00%		31.63%
30.30%
30.00%
20.00%
10.00%				0.93%
0.00%
2022	2023	2024	2025

Across both our Warehouse and ABS facilities we have drawn borrowings of $5.9 billion with available head room of $2.3 billion to support future growth.

The Group's Return on Equity (ROE) of 16.6% remains strong alongside the 31% increase in tangible equity during 2021. The Tangible Equity to Net Receivables (TER) increased by 217bps to 8.7% in 2021 from 6.5% in 2020, in part due to the issuance of $150 million of Capital Notes during 2021. The ROE and TER metrics demonstrate the strength and resilience of the Group and its ability to support a dividend payout ratio of 60-70% of Cash NPAT.

The Group acquired Symple Loans in October 2021 which will deliver enhanced digital capabilities for our Lending business, followed by the acquisition of Octifi, a Singapore based Instalments business, both of these acquisitions expand our footprint for both Lending and Instalments globally. The Group announced on 18 February 2022, it had executed a binding transaction to acquire the consumer business of Humm Group Limited, incorporating its BNPL, Instalments and Cards operations.

The Directors have declared a final dividend of 7.85 cents per share, fully franked, taking the full year dividend distribution to 15.7 cents per share.

P a g e | 5