Ladies and gentlemen, good morning. Welcome to the 2026 Annual General Meeting of shareholders of Credit Corp Group Limited, and thank you for joining us today. I would also like to welcome those shareholders watching the meeting online via webcast. I am Greg Cooper, Chair of the Board of Directors of Credit Corp Group Limited, and in accordance with the company's constitution, I am Chair of this meeting. I am very pleased to be here today for what will be my first AGM with Credit Corp. I would like to acknowledge and pay my respects to the Gadigal people of the Eora Nation, the traditional custodians of the land on which I am speaking to you from today, and I also acknowledge the traditional custodians of the lands on which each of you are working from today. I would like to pay my respect to elders past and present.
As we have a quorum present, I declare the meeting officially open. I will now ask the Company Secretary, Mr. Thomas Beregi, to advise whether we have any apologies.
Yes, one apology. Former Chairman, Don McLay, sends his apologies. Thank you.
Thanks, Thomas. I would like to introduce you company's directors, who are all here with me today. Firstly, Mr. Thomas Beregi, our Managing Director and CEO. Mr. James Millar, Non-Executive Director and Chair of the Audit and Risk Committee. Ms. Trudy Vonhoff, Non-Executive Director and member of the Remuneration, HR, and Nomination Committees. Mr. Phil Aris, Non-Executive Director, Chair of the Remuneration HR Committee, and a member of the Nomination Committee. Ms. Lyn McGrath, Non-Executive Director and a member of the Audit and Risk and Nomination Committees. Mr. Brad Cooper, Non-Executive Director and a member of the Audit, Risk, and the Remuneration and HR Committees. And Ms. Sarah Brennan, Non-Executive Director and a member of the Audit and Risk and Remuneration and HR Committees. Other members of Thomas' executive team are also here today.
Can I please ask those present to stand and make themselves known to the meeting as I introduce you? Mr. Michael Eadie, our Chief Financial Officer and Company Secretary. Mr. Mitch Symes. Where's Mitch? There he is. Chief Operating Officer for Australia and New Zealand. Mr. Martin Wu, who's our Chief Analytics Officer. Ms. Carrie Luzar, our Chief People Officer. Mr. Tim Cullen, our Chief Information Officer. Ms. Alana Hampton, Head of Risk. Ms. Niki Brown, Head of Marketing. And Mr. Matt Angell, our President of Credit Corp USA. As well as being available for me to call on to assist in answering any questions during the meeting, the executive team, as well as myself and the rest of the board, would welcome the opportunity to speak informally with any meeting attendees at the end of the meeting.
Also joining us today is the company's legal advisor, Mr. Guy Sanderson from Hamilton Locke, and Mr. Drew Townsend from Hall Chadwick, the company's auditor. No written questions were received in advance from shareholders for Hall Chadwick with respect to the conduct of the audit and the auditor's report, as per the process set out for this in the notice of annual general meeting. I will call upon Guy and Drew to answer any relevant questions as required during the meeting. I am going to commence the Chair's address, which will be followed by the CEO's quarterly update presentation. We will then move to the ordinary business of the meeting, which will include the opportunity to ask questions on each item of ordinary business.
Following that, we will open the meeting up to questions covering any aspect of the meeting, including my address, the CEO's quarterly update presentation, or any other relevant matter a shareholder wishes to raise. I will now run through some instructions for asking questions and voting for those in the room today. Please note that only those who are registered as shareholders or proxy holders for absent shareholders are entitled to ask questions today. That is people who have a yellow or a blue voting card. To ask a question, please raise your voting card. When the microphone is brought to you, stand and give your name, the name of the shareholder you represent, if you are a company representative or proxy, and then ask your question. Where appropriate, I will call on specific directors, management, the auditor, or other advisors to answer and respond to those shareholder questions.
However, I do ask that all questions are addressed to me as the Chair. If shareholders wish to ask multiple questions, please note that we will take them one question at a time, and then return for further questions. Votes on each resolution that are subject of this meeting will be taken by way of a poll, and the poll will be taken on all resolutions at the end of the meeting. I will briefly explain prior to voting how the polling process will be conducted.
I will now commence my address. Good morning, everyone, and thank you for joining us for Credit Corp's 2026 annual general meeting. In July this year, I had the privilege of being appointed to the board of Credit Corp, and in August, I officially assumed the role of Chair of the board following the retirement of our longstanding Chair and board member, Eric Dodd.
On behalf of the company, I would like to thank Eric for his outstanding leadership, contribution, and commitment to Credit Corp over the past 17 years. Since joining, I have worked closely with my fellow board members and the management team to ensure we maintain our strong momentum and capture the exciting opportunities ahead. I have also had an early opportunity to meet many of our larger shareholders. It is clear from those engagements that it is important that we continue to expand our footprint across different business lines and selected geographies to diversify and grow the business, but with a discipline around maintaining our expected return on equity. There is a high degree of respect for the operational capabilities and the financial discipline of our management team.
To this end, along with my fellow board members, we have also spent some time in the U.S. looking at our important U.S. operations and the growth opportunities there. As a testament to the diligent work of your board and our management team over many years, Credit Corp in FY 2026 has produced another strong year of earnings growth, together with record profits and an enhanced platform for continued growth into the future. Those efforts have built a resilient and capable organization, one that can confidently navigate changing external conditions to deliver for all of our stakeholders. Looking forward, Credit Corp is well-positioned for sustained growth and diversification, driven by leading businesses and an exciting agenda of innovation and expansion. The company has long recognized the challenge of sustaining growth while being reliant on one or two closely correlated businesses.
Strategic initiatives in consumer lending and U.S. debt buying, developed organically over the past 14 years, have transformed Credit Corp into the diversified financial services group that it is today, with these businesses producing over three-quarters of the company's earnings in 2026. While these established businesses will continue to drive growth, in 2026, important steps were taken to build a platform for future expansion. This included achieving key business improvements and entering a new geographic market in the U.K., expanding Credit Corp's footprint as a global operator. The Australian and New Zealand debt buying segment produced a solid result. The effect of the contraction in total market PDL sale volumes over several years had largely run its course by the start of the year. We are also seeing signs that this market segment has returned to growth.
Aggregate unsecured personal credit continued to increase, and a number of credit providers took active steps towards increasing sales volumes. Credit Corp was able to apply its competitive operating platform to secure larger buying opportunities, achieving our highest level of segment investment in four years. In the U.S., significant progress was made towards the goal of establishing Credit Corp as operating one of the most competitive debt purchasing platforms in that market. Thanks to strong collections over the final quarter, our U.S. business produced a quarterly asset turnover approaching that of the market leaders. While adherence to investment discipline suppressed purchasing in the face of increased prices, improved operating performance should continue to drive near-term earnings growth and grow purchasing share over the long term. Turning to consumer lending, refreshed marketing produced lending growth of 15% and propelled the loan book past the AUD 500 million milestone.
This expanded book provides a sound platform for another strong result in FY 2027, even after funding expansion initiatives to sustain growth over the longer term. The management team, with the support of the board, continue to look for organic and inorganic opportunities that will generate further long-term earnings growth into the future. While we didn't proceed with the hum acquisition, it demonstrates a willingness to look for bolt-on opportunities, but tempered with a strong discipline around the price we're willing to pay for those opportunities. Behind this solid headline business performance, there was disciplined execution of a program of improvement and expansion to sustain competitiveness and growth into the future. The company devoted considerable resources to the development of enhanced digital and artificial intelligence capabilities.
The improved application of tools and resources increased the number of collection outcomes produced by digital interactions alone by more than 20% over the prior year. While the category-leading Wallet Wizard cash loan product continued to drive much of Credit Corp's success in consumer lending, significant milestones were achieved in the development of other products to ensure growth into the longer term. The Wizit digital credit card, paired with PowerUp line of credit, was rolled out at the start of the year and accounted for more than 17% of all new customers acquired during the year. Credit Corp also commenced operations in the U.K. lending market. The U.K. credit-impaired consumer segment is considerably larger than Australia's, and it is presently underserved. Credit Corp has adopted the same responsible positioning as it has established in Australia by providing one of the most affordable offerings in its segment of the market.
Strong business and capabilities are built by people and a positive culture. The values of transparency, accountability, and discipline define the culture at Credit Corp. It is the day-to-day application of these values by Credit Corp's people that will underpin its success into the future. It's a great privilege to step into the role of chair at a time when these values are so deeply embedded, and I look forward to working closely with my fellow directors and the management team to steward Credit Corp through its next phase of growth and transformation. In closing, I would like to thank my fellow directors, our CEO, Thomas Beregi, and his management team for their warm welcome and for continuing to lead with such a clear, values-driven focus.
On behalf of the board and our shareholders, I also thank all employees across our global operations for their ongoing commitment, hard work, and dedication to Credit Corp. As I begin my tenure as chair, I do so with immense sense of excitement for our future. Credit Corp is supported by a strong and highly experienced management team that is actively responding to the needs and expectations of all stakeholders, and I'm confident the company is well-positioned to continue creating long-term value. Thank you. Thomas will now provide an update on the company's performance to date and an assessment of the outlook for the balance of the year. I'm pleased to hand over to our CEO, Thomas
Thank you, Greg, and great to see so many of you here today and hopefully even more tuning into the webcast online. Our objective is to lead the credit-impaired consumer segment. We work with the consumers who have had trouble with credit, most having defaulted on a previous obligation. To succeed, we aim to stay ahead in three key areas. We operate at the risky end of the consumer credit spectrum, so that requires well-developed analytics, and we need the discipline to apply the analysis objectively. Our customers require specialized approaches, which creates complexity and demands strong operations. We are more likely to encounter people in some form of financial hardship or suffering from a vulnerability. So we have to be very responsible and compliant to deliver on our promise to our debt sale clients, other stakeholders, and the community.
Applying these three competencies, we target to deliver strong earnings growth into the future while producing acceptable returns, which we define as a return on equity of 16% with a very conservative financial structure. We have great metrics and approaches for each of these competencies across our three businesses. So our leadership and focus has us on track for another record result. Strong lending volume will be supplemented with the purchase of the HSBC runoff credit card book in Australia to produce a record level of annual investment. That credit card book is probably the largest single debt sale transaction direct from issuer in the history of the Australian debt purchase market. So those two things will, as I said, produce a record level of investment and they will help drive earnings growth of around 10% at the midpoint of our guidance range.
Moving to the U.S., the situation there is a little bit different. In this market, our focus is on growing earnings through operational improvement, and we are off to a strong start. Legal collections are an area where we have been behind our competitors historically, but we are catching up, and as you can see, legal collections are up by 50% over the prior year. We are also producing better outcomes from our digital collection activity, which is driving our total collections, which you can also see on that chart. But high prices in the U.S. mean we will not purchase as much as we did last year. That is the natural outcome of being a disciplined investor. Notwithstanding that, we are on track to have one of the most competitive operating platforms in the market by the time we conclude the current financial year.
Our asset turnover, which Greg mentioned, measures the rate at which we convert our purchase outlays into cash collections. What the chart shows is that is within range of our competitors, and as you can see, it is continuing to improve. It is a hard metric to make move. It takes years of effort, but it is moving in the right direction, and so if we end the year with that continuing to improve at the trajectory you can see, it means we should be able to lift our investment and increase our share of the market as prices ease. Consumer lending is also off to a strong start. Total lending volume is up by 19% over the prior year, and that is on top of 15% growth in that prior year. So an acceleration and very strong growth for a product that has been around for some years.
While the flagship Wallet Wizard product accounts for most of our growth, newer products are set to sustain that momentum into the long term. The Wizit digital credit card volume for that product is up 35% on the prior year, and it is on track to transition to profitability over the latter stages of the current year. As Greg mentioned, we have also commenced lending in the U.K. We are taking it slowly at this point, with only about 120 loans issued to date. But we have already seen enough to prove the potential of the market to accommodate a lending business larger than Credit Corp's Australian operation. We can already see the demand is there and the ability to acquire customers affordably is there for us to grow to become a very sizable operator in that market.
Subject to a bit more review and refinement, which will take place over the next few months, we will look to increase volume to really put our controls, our credit scorecards, and other things to the test in advance of a more significant acceleration in the 2028 year. Performance in our Australia and New Zealand debt buying business will be supported by that one-off HSBC transaction. Beyond that, the market for purchased debt ledgers in Australia is increasingly competitive. But the good news is we are holding our share, and even after putting that large transaction to one side, we will have a very solid purchasing year in Australia. Just to summarize our financial outlook, we are on track for a third successive year of strong earnings growth with net profit after tax likely to be in the range of AUD 112 million-AUD 120 million.
That represents earnings growth of between 6% and 14%. The key underpinning that sustains these strong results and will ensure that they are sustained into the future is our position as the most responsible operator across all the markets in which we operate. To that end, 2026 marks a decade of leadership in compliance and conduct. I want to draw your attention to the bottom section of the chart on the screen. It shows ratings ascribed by Australian Independent Not-for-Profit Financial Counselors.
These are groups of people who are often on the other side of the table, and often have an agenda that is very different to ours. They are not-for-profit financial counselors. They rate us once again, Credit Corp not only leads by a significant margin over its debt buying competitors, as you can see, but we also rank equal first among all credit providers, including the major banks.
It is this sort of industry leadership which is at the core of everything we do and will underpin our growth in the years ahead. Thanks for your attention, and I will hand back to Greg.
Thank you, Thomas. We will now move to the formal business of the meeting, including questions in respect of each of the items of business, and then open up the meeting to general questions after the formal resolutions have been put. The only item of business to come before the meeting today will be those specified in the notice of meeting. We have five items of ordinary business that you have had the opportunity to review and consider through the circulated notice of meeting. I will take the notice of meeting as read. Votes on each resolution that are subject to this meeting will be taken by way of a poll at the end of the meeting. Rushad Bachana of Boardroom Proprietary Limited, our share registry, will act as returning officer in relation to the poll.
I will briefly explain how the polling process will be conducted prior to voting at the end of the meeting. There have been proxies given in respect of today's resolutions, which I intend to disclose when each resolution is considered. As mentioned in the notice of meeting, it is intended that any undirected proxies given to the Chair will be voted in favor of the relevant resolution. Item 1 on the agenda is to receive and consider the financial report, the Director's report, and the auditor's report of Credit Corp for the year ended June 30, 2026. There will not be a formal vote on this item. I now invite questions in respect of this item.
As a reminder, if you would like to ask a question, please raise your voting card, and when the microphone is brought to you, stand up and give your name, the name of the shareholder you represent, if you are a company representative or proxy, and then ask your question. Are there any questions on this item?
Thank you, [Rodney Pryor]. Do we have the auditor in the room?
Yes, we do.
I wanted to ask a question about the consumer lending division and the upfront provisioning, and I guess the impact on the profit and loss as it relates to matching revenue and expenses. It seems by taking upfront provisioning, we take substantial expenses on the provisions when there is limited time in the current six-month period of loans for revenue to be recognized. I just want to understand that a little bit better from a financial reporting perspective. I understand it is conservative, but it almost seems like it is too conservative.
It is probably worth noting that the—
Maybe Drew, I will just get a microphone. Thanks, yeah.
It's probably worth noting that the longevity of these particular consumer loans is a little bit over—
Please speak up.
All right. Sorry. The longevity of the particular consumer—
Drew, just hold the microphone closer.
The longevity of the particular consumer debt is a little bit over 12 months, so it is not a very long period. To take it upfront, albeit that it is conservative, is perfectly acceptable within the standards, and particularly noting the fact that there is not a very long tail in these particular debts.
Sorry?
Can I have a follow-up?
Yeah, a follow-up, and then I will move to him.
If we just work that through a little bit, if we go back to December is the half that more lending is done than the June half. We have not fully finished this period, but if we just look at the historic period, December last year around about AUD 225 million of consumer lending loans were done. Of that skewed to the December quarter, so around about AUD 120 million. If we take the 16.5% provision, we are provisioning AUD 20 million of expenditure. We have had those loans outstanding for, on average, six, seven weeks to earn income against that. There is a massive loss in that particular period.
It is obviously caught up as the loans continue on for the next nine months. While the loan book is growing, it is a drag of AUD 10 million +, depending. It just does not seem to match revenue and expenditure.
I might ask Drew, if you like, I might just get Michael to respond and then I will come back to you if you want to add any follow-ups.
Yeah, look, your observations are correct in terms of the impact in the short term of the upfront life of loan loss provisioning. There is also acquisition costs, marketing costs associated with the customer acquisition that are also taken upfront. You are right. Loans we write in the first half, we do get the opportunity to more than offset those costs through interest income, but it is dragged into the second half. The primary impact of taking the life of loan loss upfront is the fact that the profits tend to skew to the second half. There are lower profits in the first half that are suppressed by the fact that, as you observed, that we write more loans in the first half and so have more of that drag from the upfront life of loan loss provision and the marketing costs. That gets reversed effectively.
We earn interest income on those loans we have written in the first half in the second half. We generally have higher earnings in the second half, and that has been the case for many years. I think that is reasonably well understood, and certainly in the slides that Thomas just went through, we did highlight that in a footnote on the guidance that first half profits are likely to be AUD 45 million - AUD 50 million of NPAT compared to our full-year guidance of AUD 112 million -AUD 120 million. Again, that reasonably pronounced skew. I think as well, the other thing that is worth noting is that whilst we are slightly conservative in our approach, the accounting standards do mandate that we provide for the first 12 months of losses anyway.
As Drew said, the fact that these are relatively short duration loans, the average duration is somewhere around 18 - 20 months. It means that the approach we are taking is not excessively conservative given that we would need to provide for the first 12 months of losses in any event in order to conform with accounting standards.
I also had—
Drew, sorry, yeah.
Where there is a problem consumer loan, it tends to happen, it is more skewed towards the earlier period of the loan also. So the conservative treatment is not quite as conservative as it may appear if you averaged it over the whole duration of the loan.
Thank you. We had another question over here.
Thank you, Chairman. Peter Richardson, representing Peter and Michelle Richardson Superannuation Fund. Question really is for Philip as the Chair of the Remuneration Committee. You are changing your LTI structure this year from an ROE NPAT construct to an EPS construct. You laid out some pretty compelling reasons in the annual report why you should have the ROE and NPAT structure and not use EPS, and then the following page, you have said we are going to change to EPS. I just wondered if you would like to expand on the thoughts behind the change, yeah, and explain that to us.
If you do not mind, we might hold that question till we get to the remuneration report section and I will raise, because this is about the auditor's report. So we will take that on notice, and I will get Philip to respond to that when we get to that section. So were there any more questions in respect of this particular item? No? Okay. Thank you. I will now move to item 2 on the agenda, being the appointment of Deloitte Touche Tohmatsu as the company's auditor effective from today. I confirm ASIC's consent to Hall Chadwick's resignation was received in advance of today's meeting, and I will now invite any questions in respect of this item. Are there any questions, sir? Yep.
Can you just give the reasoning behind the change in auditor, please, and what was the thought process involved in that?
Yep. So the current auditor had been in place for quite some time, and Drew, as the audit partner, was due to roll off that particular audit, and so the company felt that it was prudent to conduct a tender and search for a new auditing firm. So hence the reason, as a result of that tender process, Deloitte was selected as the best choice for the company going forward. So we did review a number of Big Four accounting firms and a number of others, and selected Deloitte as part of that process.
Are there any other questions in respect of this item? No? Okay. I will now move on to item 3 on the agenda, being the re-election of directors. Item 3A concerns the re-election of Mr. Brad Cooper as a director of the company, and I would like to invite Brad up to say a few words.
Thank you, Greg, and good morning, everybody. I have the privilege of having my re-election as a Non-Executive Director put before you this morning. I have served on the board and as a member of both the Audit and Risk Committee and the HR and Remuneration Committees for the last three years. When I joined our board, I mentioned I was attracted to Credit Corp because of its aspiration for growth through diversification of new product areas and geographies, and that has not changed. I am very proud of the team's continued growth in consumer lending in Australia and the launch in the United Kingdom, and I am looking forward to the further expansion of those platforms. I came to Credit Corp after an extensive 40-year executive career in financial services spanning consumer finance, insurance, investments, and banking.
I started my career in consumer finance as a customer service representative, taking and approving loan applications and collecting the loans that we had made. Moving through various roles, eventually being appointed as CEO and Managing Director of GE Consumer Finance. I worked periodically in the U.S. and ran complex businesses in Australia, the United Kingdom, and New Zealand. If confirmed by you today, I intend to continue to work with my fellow directors and the management team of Credit Corp to realize the growth strategies of the group. I thank you for your time, and again, I thank you for your support. Thank you.
Thank you, Brad. The resolution reads, "Mr. Cooper retires and, being eligible, offers himself for re-election in accordance with clauses 20.1 and 20.7 of the company's constitution." Proxy votes received in respect of this resolution are shown on the slide. As already noted, voting is by way of a poll, which will be conducted prior to the end of the meeting. I will now invite any questions in respect of this resolution. No? Oh, yes.
I guess it is appropriate to ask it now, but at the last AGM, your previous Chairman made some fairly pointed remarks about the board. I will moderate them, and he suggested that the board should look at the tenure and the structure of the board and consider whether it was appropriate. I guess in light of the re-elections, can the board, you probably won't hear, but can the board tell us if that was considered and how those discussions went?
The board has been through an initial process of renewal. With Eric stepping off and me stepping on, the average board tenure has come down quite considerably, and it is absolutely something that is considered as part of the normal nominations and reappointment cycle. I know, Trudy, as you were Chair of the nominations committee during that point, did you want to offer anything else?
That is exactly on point. We have been going through a process of renewal for some time. Out of interest, I guess I am the next longest serving director, so all things being equal, we would undertake normal succession as my term expires. My term is only at seven years at the moment.
Thanks, Trudy. Any other questions in respect of this item? I might just add, in case there is any confusion, Brad and I are not related. We do get confused often, but we are not related. All right. Item 3B concerns the re-election of Ms. Lyn McGrath as a director of the company, and I will invite Lyn up to say a few words.
Good morning, everyone. I am pleased to stand for re-election for the Credit Corp board. Credit Corp works where finance regulation and customer wellbeing comes together. Many of our customers are going through financial difficulty, so the board needs to balance good commercial judgment with a real commitment to treating people fairly. That is the balance I bring. Throughout my career, both as an executive and on boards, I have focused on three things that matter a great deal to Credit Corp: risk, customer experience, and digital transformation. I have worked across the regulated financial services and digital health sectors here and overseas. I chair Heartland Bank Australia, sit on the board of CIMB Group in Malaysia, and recently chaired the Australian Digital Health Agency. That experience fits well with where Credit Corp is heading. Strong risk and compliance, responsible lending, and collections that puts customers first.
Good governance as we grow across Australia, New Zealand, U.K., and United States, and using technology, including AI, safely and well. I am also passionate about building strong and diverse organizations. I bring an independent view grounded in hands-on operational experience and strong strategic thinking. That combination is where I add the most value to a board. I also bring plenty of curiosity and a willingness to ask the hard questions, always with shareholders' and customers' long-term interests in mind. I want to assure you that I have the capacity to fully meet my obligations as a director of Credit Corp, and I would welcome the opportunity to continue contributing to the board, and I thank you for your support.
Thank you, Lyn. The resolution reads, "Ms. McGrath retires and, being eligible, offers herself for re-election in accordance with clauses 20.1 and 20.7 of the company's constitution." Proxy votes received in respect of this resolution are shown on the slide, and I will now invite any questions in respect of this resolution. No? All right. If there are no further questions, then I will move to the next item of business, and I will ask James to assume the chair for this point.
Thanks. Thanks, Greg. Good morning, everyone. Item 3C concerns the re-election of Mr. Greg Cooper as a director of the company. I would like to invite Greg to come up again and say a few words.
The joy of doing all the talking today. Thank you, James. Having joined the board in July, I am standing for election today, and I would like to just briefly tell you a little bit about myself.
My executive career spans actuarial consulting and asset management across superannuation and investments, and I have considerable global experience having worked in Hong Kong, Singapore, London, and Australia over the last 35 years. I am also a highly experienced board director and currently Chair ASX-listed Perpetual, along with Calvary Health Care Australia, the trustee of the Colonial First State Superannuation Funds, and I am an independent director on Australian Payments Plus and the Australian Indigenous Education Foundation. These roles have given me a deep experience in governance, regulated financial services risk, and the responsibilities that come with serving customers who may be in vulnerable circumstances. I believe that experience suits Credit Corp business and the conduct standards our regulators and communities rightly expect. As noted in my Chair speech, I am joining at a time of real opportunity.
We are growing in the U.S., building consumer lending, entering the U.K., and investing in digital and AI capability. My priorities as Chair will be to keep the board focused on disciplined capital allocation, on strong risk and compliance oversight as we enter new markets, and on protecting the culture of transparency, accountability, and discipline that has served this company so well. I am genuinely excited about the prospects for Credit Corp. Thank you, and I welcome your support.
The resolution before us reads that Greg Cooper retires, and being eligible, offers himself for re-election in accordance with Clause 19.5 of the company's constitution. Proxy votes received in respect of this resolution are shown on the slide. I will now invite questions in relation to this resolution. Are there any questions? Got to ask the big question. I do not know why we get the tough ones at time. Okay, if there are no questions, the Chair will now revert to Greg for the remainder of the meeting. Thank you.
Thanks, James. I will now move on to item four on the agenda, being the adoption of the remuneration report for the year ended June 30 , 2026. The text of the resolution is on the slide now, and the resolution is to adopt the remuneration report. It is a non-binding resolution, and there is a voting restriction which applies to it. The company will disregard any votes cast in any capacity on this resolution by, or on behalf of, any key management personnel who are all the directors and members of management whose remuneration is detailed in the annual report, and their closely related parties such as families. However, those persons can vote as proxies of other eligible shareholders where they have been directed how to vote, and the Chairman can vote undirected proxies on behalf of eligible shareholders.
Under the Corporations Act, the resolution of shareholders that the remuneration report be adopted or any failure to pass that resolution is advisory only and does not bind the company or its directors. Proxy votes received in respect of this resolution are shown on the slide displayed. I will now invite any questions in respect of this resolution, and I will pick up maybe your question now, Philip, if you want to.
Can you hear me, Greg? T o answer your question, we did a review this year. We had an independent company, Ernst & Young, help us with that review to see whether the structure was fit for purpose going forward. Part of that process was to look at the long-term plan and the ROE. We saw that by moving to an EPS, there was no longer a need to have a ROE because we are then aligned with shareholders in terms of dilution. Secondly, we also, through the EY review, saw that very few in the market use an ROE gateway. I think the percentage was very low, 2% or 3%, so it did not meet market norms. Of course, also, if you look at the LTI, we have not paid that out for four years, so we are probably not going to pay it out again next year.
There was a concern from the board whether this was the right structure for us going forward. Also, it was very important for us to make sure that the discipline around the ROE is still there. So all our investment and capital decisions are still around the ROE at a pro forma 40% gearing, so conservative gearing as well. We believe it aligns much better with shareholders being an EPS now as opposed to net profit after tax, and also, the discipline and the market norm moving more in tune with the market. That was our construct, and we approved that on July this year.
I do not disagree with it. Just in the process.
Yeah.
Thank you. Is there any other?
Just in relation to that point, I think that was, moving from net profit to EPS was something raised by a large number of shareholders over the years. I appreciate the board acted on that feedback. I do not see the sense in removing an ROE hurdle or gateway. That was not anything that was requested by shareholders in general, as far as I am aware of. It leads to misalignment because you can still technically increase your earnings per share while your ROE is going backwards. That can be done by raising capital, decreasing the dividend payout ratio, various mechanisms, and the fact that it also does not align the boards looking at it for investment decisions because it is so important, but then you are not remunerating your executives based on it.
To me, it just looks like, oh, it was a hard hurdle that because they could not meet it, let us make an easier hurdle so they can meet. As Buffett pointed out, hastily pointing the target where the arrow lands kind of thing. If you actually look at the cost of equity capital of the company, that is somewhat subjective, hard to estimate, but maybe around 12%-14% is probably a good ballpark guess. We are somewhere around just breaking even currently on that cost of equity capital. So, excessive rewards when you are not generating that above hurdle return, does not really make sense and it does not really lead to alignment.
No, thank you very much for your question. Look, we put a lot of time and effort into this. We did feel strongly that the move to EPS was the right move, but it further aligns us with shareholders and particularly around dilution. We still have that discipline, as I mentioned, around our investment and purchasing decisions, that we are still around that 60% ROE at a low gearing rate. Most of our competitors out there are much highly geared and higher risk than we are. Also, the board has a lot of control and oversight on things such as manipulating the system, so to speak. We ensure that does not happen. So we keep regular control in that regard, that those sort of behaviors do not occur.
We think the structure where it is today, after putting a lot of thought into it, is the right way to go. As I mentioned before, we got Ernst & Young to take a look at what's happening around there in the market, and the fact that virtually no company out there is providing a ROE gateway is a complete disalignment to what's happening in the market. It's very difficult for a company to operate in a scenario where it's not market norm, and part of that process was to make sure that we could see what was happening out there, what was best practice to make sure that it was fit for purpose for what we wanted to do as a company.
I think overall, I think we've got the control to make sure management does the right thing, and I think we've got the right measure to ensure that it aligns strongly with shareholder value creation.
I might just add, too, as a new member to the board from July 1st , my observation coming in was that that type of structure was quite non-standard in the market. I think given that the levers that the board has at its disposal around capital allocation and those setting of those ROE targets and the approval of purchasing decisions and the like, we feel quite comfortable that those hurdles remain in place. Therefore, it was appropriate to move to something that was more standardized. Any further questions on the remuneration report?
No.
Yeah, sure.
The other thing I would point out is just in relation to the EPS hurdle. I think the fact that there's no high watermark or inflation adjustment, I would flag that as a concern. If you look at it, for example, FY 2019, the peak before COVID, earnings per share were AUD 1.41. If you adjust that for consumer price index, for FY 2028, that would be approximately AUD 1.80. Basically, we've gone sideways or slightly backwards over seven years, but in terms of purchasing power of earnings per share, which is what actually matters to shareholders, and also the fact that there's no high watermark. If you go into a bad year and then next year you increase the earnings off a low base, I feel that's not really a good system.
If you look at the performance over the last two years, we've had 16% the previous year NPAT growth, and then again this year, 12%, so a compounded 14%. Going forward, if you look at our guidance, it looks like potentially double digit again based on guidance. What we're seeing is a significant turnaround in the fortunes of the company and the compounded profit, sustainable profit for shareholders. I think that's the important thing. I can't make too many comments around what happened back in 2019. Haven't done the maths on that, but I appreciate your comments on that. Certainly, we think the structure the way it is at the moment, is fit for purpose, and we believe that it will drive the right performance from our executive team.
Right. Yes. Where's the microphone?
Just to follow up on that question, the metrics for the EPS, are they going to be the same metrics as the NPAT? So 6% sort of entry and 9% maximum?
Correct.
Just going back to a follow-up on that question is if you actually look at it, the 16% ROE target. Historically, the company in a fairly normal year has had somewhere approximating a 50% dividend payout ratio, even though there's no specific stated policy, that's kind of been the norm for the company. If you take that 16% target ROE and you apply a half payout ratio, that's implied earnings per share growth of 8%, assuming no new share issuance. That's kind of like the bare minimum of what your target says you should be doing. You're kind of rewarding yourself for just meeting the bare minimum target.
Actually I might, if I could ask Michael to make some comments around that EPS target. Michael, if you could.
Yeah, sure. Look, the fact that the 6%-9% remains unchanged, obviously that reflects the fact that to maximize the earnings performance hurdle under the LTI, we do have to achieve 9%. It exceeds, I guess, what you've described as the minimum based on achieving our sort of hurdle return on equity. I guess the other point to note is that at different points in the cycle, we will need to invest in our business in order to sustain ongoing growth, and there will be periods, there will be individual business segments where we will be earning under that hurdle. For example, at the moment in the U.S., we're under that hurdle. Parts of our lending business are under the hurdle, even though lending overall is above the hurdle.
The fact that we've got that 6%-9% earnings range provides an incentive, I guess, for management to continue to invest in future growth, rather than simply just focus on achieving a particular level of earnings growth in the short term, which would be the 12 months, even the three years. Management's incentivized with the 6%-9% earnings growth hurdle on EPS. Management's incentivized to invest over the medium to long term, which ought to provide the best alignment for shareholders.
Remember, the dividend policy is at the discretion of the board or the decision of the board, not management.
Yep.
All right. Any further questions on this item? Okay, if there's no further questions, we'll move to the next item of business. This is agenda item 5, and that being the issue of incentive grants to the Managing Director and Chief Executive Officer. Item 5A concerns the grant of restricted Credit Corp shares to Managing Director and CEO Thomas Beregi. The text of the resolution is on the slide now. Again, there are voting restrictions which apply to this resolution. The company will disregard any votes cast in any capacity on this resolution by or on behalf of Mr. Beregi or any of his associates. Similarly, it will disregard any votes cast as proxy on this resolution by any key management personnel who are, or the directors and members of management whose remuneration is detailed in the annual report, and their closely related parties such as families.
However, those persons can vote as proxies of other eligible shareholders where they have been directed how to vote, and the Chairman can vote undirected proxies on behalf of eligible shareholders. Proxy votes received in respect of this resolution are shown on the slide displayed. I'll now invite any questions on this resolution. No? If there's no further questions, that concludes our discussion on this item of business. Item 5B concerns the grant of performance rights to Managing Director and CEO Thomas Beregi, and the text of the resolution is on the slide now. Again, the same voting restrictions apply in regard to this resolution as the previous one, that the company will disregard any votes cast in any capacity by or on behalf of Mr. Beregi or any of his associates in respect of this resolution.
Similarly, it will disregard any votes cast as proxy on this resolution by any key management personnel who are, or the directors and members of management whose remuneration is detailed in the annual report, and their closely related parties such as families. However, those parties can vote as proxies of other eligible shareholders where they've been directed how to vote, and the Chairman can vote undirected proxies on behalf of eligible shareholders. Votes received in respect of this resolution are shown on the slide. I'll now invite any questions on this resolution. Okay. If there's no further questions, that concludes our discussion on this item of business.
There were no questions submitted by shareholders ahead of today's meeting. I would now like to invite any questions from shareholders and proxies here today related to either my address, the CEO's presentation, or any other relevant matter a shareholder or a proxy wishes to raise. Again, all questions should be addressed to myself as Chair, and where appropriate, I will call on specific directors, management, the auditor, or other advisors to respond to shareholder or proxy questions. If shareholders wish to ask multiple questions, again, I would ask that we do that one at a time. I will now invite any further questions from shareholders and proxies in the room. Sir.
Thank you very much. Ray Tollefson, quite a long-term shareholder and a member of Teaminvest, but I am not speaking on behalf of Teaminvest. I noticed the other day on the Wizit website that from June 10, it is no longer accepting new clients. I wonder what the reason for that was. Also, by the way, I did not notice a single business where the card could be used that I have ever heard of. I just wondered, there does not seem to be any major retailers. Why would a client want a card with all of these, I will call them tin pot little companies? The main one is why is it not accepting new clients?
Thanks, Ray. I will pass to Thomas.
Yeah.
I have other questions, but I will come back.
Thanks for your question. We will have to have a closer look at the website because it is clearly an instance of confusion. When Wizit started, it was basically three separate products. The first of which was a buy now, pay later product, so a bit like Afterpay and Zip and those sorts of products that are in the market. We did sign up a number of retailers. There are still a number of consumers that have existing approvals to operate buy now, pay later. But we did make a decision to close that product for new customers. We remain in the market with the Wizit credit card, so it is only that buy now, pay later option which does not exist any further. The Wizit credit card can be used at any retailer who accepts Mastercard. That is a very large, not only local, but global footprint.
There is the option for consumers to also take up the PowerUp line of credit, which allows an individual to expand their access to credit. I hope that clears it up, but obviously, you have been confused by it, so we will have to check and make sure that no other customers are confused by that. That would be a concern for us.
It could well have been seeing as much, but it was right up the top of the screen.
We all have those. Do not worry. Yep, yeah, and they're not —
So just a follow-up on the card. Can you just elaborate that the recent changes to card payment surcharges, how does that actually affect the attractiveness of the Wallet Wizard card and compared to competitors, and also the cost structure for the company running it and that kind of thing?
Yeah, look, in terms of the last part of your question, no significant difference in terms of cost structure. It does actually from a market perspective probably improve the competitiveness of the Wizitcard. You will notice that most mainstream card issuers have reduced their interest-free periods, so that brings them closer to our offering than they were before. And in some instances, to recoup the lost revenue from the reduction in the interchange fees, some have also increased their interest rates, which also brings the yield on their products, the effective yield a consumer is paying closer to ours. So I think from a consumer perspective, it increases the relative competitiveness of our product. Having said that, obviously we are not typically dealing with the same sort of mainstream customers that banks and other major card issuers are dealing with.
All right. Just one question over here.
I just wanted to ask a little bit more. In today's presentation, your first half profit guidance was tightened down to AUD 45 million-AUD 50 million from the AUD 45 million-AUD 55 million that was provided at the August full-year results. Just wanted to understand the driver of that.
Yeah, look, the key driver is that the chart I put up on the loan growth, 19%, that is ahead of expectation. To your earlier question, that is depressing our first half earnings from the position that we thought we would be confronting at the start of the year. Having said that, the good news is we're getting that volume now early in the year, and so that should reverse, which is why over the second half, which is why the full-year earnings guidance remains intact.
I'll throw a curly one in there, and I'm sure I'll get the straight bat answer back, but let's just have it anyway. Do you feel with the nature of the way you take your provisions, that you need to constrain your lending activities, particularly as it relates to the second half of a financial year where you may actually have more consumer demand for your loans, but if you have to take 16.5% provisions upfront and you've got all these people wanting loans in March, April, May, June, when you're really going to have a very limited time period to generate interest revenue that you almost have to choke that to not take such a big impact or P&L hit.
Yeah. Look, I'm not sure what the straight bat answer is to that, but I'll give you—
Probably no.
I'll give you the answer. That is a factor that enters consideration. It's a reasonable point that you raise. It's one of many things that we have to manage to ensure as a business that we produce results in the current year and remain on track to grow in future years, and there is always a balancing act. We will lose lots of money in the U.K. this year. If we just wanted to hit our 16% ROE or knock it out of the park in the current year, we wouldn't do that. We would not start in the U.K. We balance that, and we start, and we set aside an amount we're prepared to invest in our P&L as a loss to make that happen and ensure that the company remains on a strong trajectory to continue to grow into the future.
They are always these sorts of trade-offs and yes, naturally, they are things we have to manage. When we are confronted with these, we are going to look for opportunities to ensure that we get the right outcome across both the short term and the long term. In a situation where we felt we couldn't invest as much in acquiring new customers as perhaps the market opportunity suggested, we might still acquire those customers but advance them lower amounts in the first instance and then seek to trade them up later. That way we're obviously taking advantage of whatever the demand conditions are for consumers, but still preserving our ability to maximize our revenue in the future.
Yeah. Thank you. Can I ask one more just while I have the mic, Sorry everyone?
Yeah, sure.
Just switching back to the full year results presentation, obviously some of the shareholders that aren't institutions don't get to ask questions on the analyst call. It was in relation to the slide on the medium term opportunity for the consumer lending, and I think two to three years you said growing the book from circa AUD 500 million that it is today to 800 million. Firstly, thank you for putting that slide in there. I think it gives our shareholders a greater understanding of what you see as the opportunity going forward, and then what that potentially means for earnings and growth of the business. That was certainly much appreciated. As it relates to the, let's just say three years target, AUD 300 million growth in the consumer lending business.
If we look at the capacity that you have today it's a bit over AUD 100 million of undrawn debt capacity to get back up to your 40% target gearing. 40% gearing on the AUD 300 million you make. It does tend to imply that most of the retained earnings that you will generate in that two to three year period would be channeled towards the consumer lending business. Is that the message that you want our shareholders to take that you see more of the growth in this two to three year period in the consumer lending business, and while it doesn't restrict you from growth in the PDL business certainly more of the, call it available capital will be actually directed towards the consumer lending business. Thank you.
Yeah, look, that's a very good question. Just to start off, yes, we have AUD 100 million of headroom in our existing facilities, but with our relatively low level of gearing, we can certainly expand our facilities significantly. Most of our competitors across debt buying and consumer lending are geared to well in excess of 70%. There is lots of opportunity for us. The other thing I would say is the consumer lending business is probably a bit more programmatic rather than opportunistic like our debt buying business. Our investment in debt buying will be heavily dependent on pricing conditions and in particular competitor demand and whether we judge that the prices in the market are at a level where we can make an adequate return. There is that opportunistic element.
We're going to do very well this year in Australia with the acquisition of that HSBC card runoff book. It's going to be a very strong investment year. That won't happen every year. Similarly, in the U.S. at the same time we are facing higher prices, and so our investment is moderating from where it has been. Our investment levels will fluctuate dramatically and there is foreseeably a scenario where investment in debt buying, particularly in the U.S., increases very dramatically. Particularly if we hit our metrics in terms of operational improvement this year and prices do ease then we could find ourselves investing many AUD 100 million in the U.S. and having a very strongly performing business there.
The lending business we are dealing with myriad customers and it is just up to our own operational and marketing execution to acquire those customers and launch new products and continue to grow. Yes, we are planning on having an AUD 800 million book within that timeframe. Whether that represents the bulk of our investment over that period is going to be subject to what happens in the debt buying markets in which we operate.
Yes, sir.
Hi, David Battam, representing myself. We have a very Australian-centric board at the moment, which historically has made sense. As we move more into the Americas, in particular, taking up a lot more of our revenues, and in the future, the U.K., as part of the board renewal, has there been any consideration for bringing in some board members and expertise from some of these markets we are moving into?
Yeah, look, that is a good question, and it is something that we consider and will continue to consider going forward. Clearly, we have got some quite considerable international experience despite the Australian base of the existing director set. Whether or not you bring on that experience by way of an offshore-based director or an offshore-based advisor to assist the board in that is something that we are very open to in the future. Yeah. Ray. Oh, sorry. Here, then I will go to you, Ray. Yeah.
Mr. Chairman, I wondered if you could use your fresh eyes as Chairman to share with us your observations around board learnings from the problems of the last several years or the mistakes made over the last several years.
Yeah, look, I think if you're referring, I guess, to the U.S. business and the write-off we had back there, certainly my observation, and it's one that the board took on board as well, was that you actually need to have some presence in those markets and a stronger linkage back to the corporate. A big part of Matt Angell's appointment in the U.S. was to bring that Australian expertise and put it in the U.S. so we had a much clearer sight of what was going on in that business.
That, together with the board trip that we just took a month or so ago, the board's going to have or has had a much greater insight into how that business is performing and the challenges within that business, I think are all pretty important facts of whenever you enter a new market, ensuring that you're across the various risks in that market. To me, unless you're referring to something else, that would probably be the major thing that I would take out of the last few years. Ray.
Thank you. Entering into the U.K. market, what advantages does Credit Corp have over existing credit providers? In other words, what history have you got access to that you can use to assess the risk of issuing cards to potential applicants?
Yeah, sure. I might get Thomas to talk a little bit more about that.
Yeah, look, right at the moment, the market there and the segment we are operating in, which is the credit-impaired segment, is suffering from a dearth of supply. There are not a large number of competitors. There is not a lot of capital which is very eager to invest in starting a lending business or even funding loans in the segment. The short answer to your question is that we probably do not need a lot of advantages to be successful. That is a simplistic view. Having said that, I do believe we enjoy lots of advantages. Obviously, we have got a successful business here in Australia. We are very comfortable with non-traditional credit assessment, non-traditional underwriting, using novel data. Typically, consumer lending, and particularly prime consumer lending, is based on credit bureau scores.
When you move into consumers with a checkered history, those credit bureau scores all look bad, and you need to find different ways to discriminate the good from the bad to identify those consumers who actually have an intention to repay you and have the wherewithal to do so. We have now, for in excess of 11 years, developed a very sophisticated approach to the analysis of bank transaction data to identify credit risk. It is that approach which we take to the U.K. We also run one of the most efficient and most technology-driven digital lending platforms in the market here in Australia, and that is a key advantage. Speed is a key advantage. Having a system that is relatively easy for consumers to use and can provide quick decisions and quick disbursement is important. All of that we have exported to our U.K. operation.
We think we will benchmark very well. The last thing, which we are not using at the moment, is our brand, Wallet Wizard, which is surprisingly one of the better recognized financial services brands in Australia, even though it perhaps only appeals to a small proportion of the population. We are deploying that brand in the U.K. as well, and we have lots of marketing assets to apply to that in time. We think that as the segment which we are entering becomes more competitive, we do not believe that the conditions which exist today will be around forever. We will seek to entrench and establish that brand, but we will do so off the back of a profitable business.
And I think maybe just to add to that, we all know Australian corporate landscape's riddled with examples of quality Australian businesses that have moved offshore and haven't had that competitive advantage that they enjoy in local markets. It's something that, and a bit to the previous question, very alive to, what is it that we bring in those markets that we operate in, and how can we ensure that competitive advantage is maintained?
Yeah.
So just as a follow-up to that question, you kind of stated that there seems to be a lack of enthusiasm from companies in the U.K. to compete in that market. Do you think that perhaps there's a good reason for that? And perhaps it's hubris on the part of the company to think that in a much larger market with much larger financial institutions, perhaps the opportunity is not as attractive as we think it is, hence their reluctance.
Yeah, look, another good question. We have explained the market characteristics which have led to this. So, there was historically a very vibrant sector with a number of very large listed operators who provided consumer credit in the segments in which we operate. In fact, three large listed entities who are no more. And essentially, their demise was brought about by a change in the regulatory landscape and a failure to adapt. The key change was the introduction of what we would call in Australia, responsible lending, which at its essence is a mandatory assessment of affordability, ensuring that you can evidence an assessment of the customer's ability to repay the loan without incurring substantial hardship. So making sure that income minus necessary expenses and other obligations allows for a sufficient surplus to repay the loan. So these large incumbents failed to adapt.
They were then subject to wholesale claims, which brought them to their knees. And perhaps another point I didn't mention in relation to the previous question is the fact that that's an environment we have encountered in Australia and have successfully navigated, and so we do a comprehensive affordability assessment, and we take that approach to the U.K. So yes, doesn't mean it's not without risk. All our businesses have risk, but it is one that we're familiar with and have successfully managed to date.
And I think to add, you will note from Thomas' earlier presentation, the number of loans we are writing in the U.K. at around 150 or so thus far is relatively small, and that is all about ensuring that those learnings and those competitive advantages do apply before we ramp things up. So one more question.
I just wanted to ask a final one, in relation to the PDL business and Australia versus the U.S.A. If you look at your segment reporting for the year just gone, U.S.A. generated AUD 53.5 million of earnings before interest and tax, about AUD 50 for Australia, but the volume of capital committed to the U.S.A. is more like AUD 520 million as opposed to AUD 320 million for Australia. So I guess I just wanted to understand from a I know you have been making improvement in the U.S.A., and based on your presentation today, that improvement is continuing. Does the U.S.A. have the same return on capital sort of performance potential for Credit Corp as what Australia does, or does it not because we are not such a large player in the U.S.A. compared to Australia?
Yeah, so another good question. The short answer is yes, it does have the same potential. As we make investments, as we make purchases today, we are using the same return criteria. What we are dealing with is a situation where we have a lot of historical assets which are still sitting on our books, which are not yielding that required rate of return. So, I think the return on equity for our U.S. business last year was about 8%, I think, whereas our Australian business was 16%. Now that was an improvement. The year before, return on equity in the U.S. was 6%, so it improved by two points. And we are on a strongly improving trajectory there, and we expect further significant improvement in returns out of the U.S. business in the current year.
So we are on a strong trajectory of return improvement, and that should see us in years to come achieving that 16% hurdle, in terms of the whole business there in the U.S.
Is there a timeframe? By your comments, I gather you are referencing the write-down as it related to FY 2022, FY 2023 purchases, and that they are still on the books at economics that were not expected. Is there a timeframe that sort of substantially burns off? Is that another couple of years from now that that is such a small part of the book that we should start to see the FY 2024 plus vintages, and what the profitability of those purchases are more clearly?
Yeah, that is right. That is what is happening, and that is what is driving the substantial improvement in return on equity year-on-year.
Thank you.
All right. Thank you. Are there any further questions? Back over here again.
Thank you for your indulgence. What is the advantage of having multiple brands in the Credit Corp stable? For instance, there are six non-Credit Corp brands listed on page seven of the annual report, and they have been through acquisitions, really. Is the intent to keep all of those brands going? What is the advantage of it if that is the case?
Yeah, look, ideally, we wouldn't have that many. As you have identified, they have arrived with us through acquisitions. A lot of those brands sit within our collection services business. A lot of the rationale for some of those acquisitions was to retain clients. Some of those clients identify quite strongly with those individual brands, and there is a particular personality that they perceive is associated with that, and it assists us in retaining those clients.
So it is an exercise in pragmatism as long as it makes sense to them. There is no overhead associated with maintaining those different names. By and large, systems have been merged, and for the most part, we are operating off a common platform. There is still a little bit more work to do on the last of our major acquisitions, which was Collection House. That will be completed in the current year.
But yeah, look, it is really just responding to client preference. I am not sure whether you are familiar with New Zealand, but certainly the Baycorp brand in New Zealand is a very, very strong and well-known name. In that market, we do a lot of small to medium enterprise collections, and there is a strong awareness and a strong affinity for that brand. So that one is probably here to stay.
Thank you.
Thanks.
Did you have a—
Can you just run us through, in the consumer lending business, the customer acquisition cost for new customers, comparing the U.K., the U.S., and Australia?
Yeah, look, we don't undertake any lending in the U.S. We have run pilots in the past, and customer acquisition costs were very high, and that's been part of the reason why we are no longer lending in that market. In the U.K., in answering your question, obviously, I won't be too specific but what I will say is that in the U.K., our cost of acquisition is considerably lower than it is in Australia, and that reflects that absence of supply, the lack of competition. That's precisely what we're looking to take advantage of or use to facilitate our growth, is originate lots of loans, acquire lots of customers at a time when the cost of acquisition is relatively cheap.
Sorry, just to follow up on that. Once the U.K. business is expanded to a somewhat larger footprint, what would you say, given that lower customer acquisition cost, how much lower would the minimum amount lent be that would break even compared to Australia? Presuming that if you have a lower cost to acquire customers, you can lend them lesser amounts and still be profitable, that expands your customer base.
Yeah. Look, obviously we prepare a pro forma to deliver our ROE. So already that's reflected in there. It's all a question of back-solving the yield, our interest rate that we charge, which competitively is the lowest in the segment. All of those factors are going into our economics. But having said that, in the long term, we wouldn't expect cost of acquisition to remain where it is today.
All right. Any further questions? Yeah.
Can you just run us through what the company's doing in terms of data security, given that over the past year there's been a lot of breaches of customer data by large corporations, both from external hackers, given that AI's made them more effective, and internally from rogue AI leaking that data? Obviously, the company has a large amount of sensitive customer data.
Right. Well, we're lucky enough to have our CIO, Tim Cullen, in the room. While I could probably provide a reasonable answer, I'll ask Tim to address your question with some specificity.
Yeah, it's on, Tim.
Thank you. Can you hear me all right?
Yeah.
Yeah.
Thank you for the question. It's a very good question. We obviously maintain a number of security standards, controls, checks. We certainly maintain a very heightened activity, and are very conscious of the increasing threat landscape that's out there. So in terms of how we protect our data, in terms of how we regularly test our controls both internally and externally, and maintain a level of effectiveness, is certainly at the forefront of what we do. We're definitely not complacent in this world, and continue to monitor the threat landscape that's there and continue to invest heavily in improving and continually improving our security footprint.
Obviously, it's a bit of a moving feast at the moment, too, as you see the development of continued, particularly some of the AI-driven tools. It's an area of considerable focus of the board at each board meeting is, the rate, whether we have had any attempts, how those attempts are being dealt with, and the general uplift in our systems.
Just a follow-up question on AI. If you look at page 34 of the annual report, it states that the company has enabled a network of AI champions who are building custom agents to support their own workflows and assisting peers. Can we have an explanation of why the company has chosen that approach rather than having a more centralized and standardized usage of AI throughout the company?
Do you want?
Yeah. Look, we do have a centralized approach to AI. We have a center of excellence. We have made a commitment to platform tools, including the Gemini suite. We also have access to other large language models. There is that central oversight and facilitation. But the real benefit of AI is not to try and run it like a traditional IT project from the center, where we say, "Oh, we're going to revamp this particular process, and it's going to be done over the next 12 months." We set up a war room, and we all wear the T-shirts, and hopefully we get there in the end. The real benefit of AI is that a single individual with very good knowledge of a particular area can effectively create a solution in a matter of days.
By ensuring that all of our people have access and can effectively turn their ideas and aspirations into working agents, which are effectively applications, we can unleash our ability to move very quickly, and we've already seen that across a number of areas. Already we have agents in place that as soon as a call is finished, are already scoring and providing feedback on where one of our people went well and where there was room for improvement. When we receive a complaint from a customer, an initial draft is automatically populated by interrogating everything we know about our interactions with that customer on our database, and an enormous store of templates from prior responses.
When we say we have created a network of people, they are our own people, but they tend to be specialist experts in different parts of our business, creating these agents within a controlled framework that is managed centrally. Before these things are deployed, they are subject to further review for some of the things that Tim was talking about in terms of security and proper deployment and making sure that they will be able to run efficiently and effectively on our platform as they are scaled up and rolled out.
Maybe just for further context, because it is the topic du jour at the moment, but we see AI very much as a productivity enhancer. We have roughly 2,200 employees around the world at the moment, and we see that number not particularly changing over the next 12 months. It is very much employees who are using it to do their jobs better and more efficiently and get those productivity enhancements, but with that centralized infrastructure of control over the top. There was another question over here.
Does Credit Corp use white hat hackers to test its systems? If so, how often?
Yeah. Look, we do regularly subject all our systems to penetration testing, particularly when there is any change. Then there is also a programmed schedule of this penetration testing. As I understand it, and Tim can probably clarify it for me, we use external parties that do employ people skilled in hacking into systems and people with all sorts of credentials, as I understand.
Yes.
Sorry, a follow-up on the same question, and I do not know the answer to this at all. Right now, white hat hackers can do stuff, normal hackers, people can do stuff. The future is going to be AI. We are going to be hacked by AI, not by a guy sitting there. He is going to start some machine. We could do the same thing, start an AI and try and hack into our system, but there is a risk there that our data goes out as a consequence of that. Have we done anything like that? Considered that? How would that work in the future? Because the future is going to be AI getting in. How can we start to use AI to test our systems in a safe way?
Yeah. Look, it is my understanding that is what we do. I will just look over for Tim for some positive affirmation. Yes, he is nodding. So yeah, that is what takes place. So, both vendors, principally external vendors, are using these AI tools to test our systems in a controlled environment, of course, where once they get in or once they are exfiltrating, the data is actually not going anywhere.
All right. Any further questions?
Can you just talk about the company's risk management and planning processes in terms of where we currently are in the macroeconomic landscape, where risk of a global financial crisis is looking extremely elevated? If you look at major property markets in all the developed economies have turned down. The AI bubble is showing signs of strain that it could pop sometime in the next year or two, and obviously, the flow on consequence of that would be heightened unemployment and reduced ability of consumers to pay. In terms of the balance sheet, you could say it would appear to be more conservative than competitors and would be considered conservative under fairly normal conditions. But under that type of crisis, there would be a question mark on it. What kind of stress testing has the company done, and also how is it prepared for a potential downturn?
Yeah, look, I think you're right in identifying our conservative balance sheet as pretty much the most conservative in our industry as the key mitigant for some kind of global economic calamity. In terms of the way we're running the business, we're still endeavoring to follow our ordinary disciplines. Where we see things getting perhaps a bit overheated, and we would say to some extent pricing of U.S. debt ledgers a little bit overheated, then we're pulling back. That also should help us mitigate and manage risks, should there be some sort of correction affecting consumers. Beyond that, look, we are not economic forecasters. We don't spend a lot of time thinking about those factors other than just ensuring that we are well prepared for whatever may happen.
A lot of that focuses on the way we manage our balance sheet conservatively and seek to operate in businesses that can provide us with strong returns at relatively low levels of gearing. But yeah, look, I guess I've worked for Credit Corp now for 19 years, and there have been lots of potential calamities, very few which actually came to fruition in a way that seriously degraded prospects and outcomes. So it's difficult. We can't sort of jump at shadows, otherwise, we will miss out on substantial opportunities. So, I guess it largely comes down to our financial structure.
I think reflective of Thomas' comments around the U.S., it's often holding your discipline when pricing is getting sort of well ahead of where you think it should be. That's one of the key disciplines that one needs to have. So, holding back on that as we've seen prices go up beyond where we would consider the returns reasonable, just plays into our future capability to step back in in those situations. Obviously, when there is a pullback in the economy, then often that can throw up further opportunities for future investment as well. So ensuring you've got the capacity to do that when it occurs. All right. If there's no further questions, we'll move on to voting. Okay, so we'll now conduct the poll, and I'll go through the voting instructions.
Persons entitled to vote on this poll are all shareholders, corporate representatives, attorneys of members, and proxy holders who hold yellow voting cards. If you are attending the meeting in more than one of those capacities, for example, as a shareholder and also as a proxy holder, you'll have been issued with multiple voting cards. Detailed on the reverse of your yellow voting card is the resolutions being put to this poll, and relevant instructions are also provided on the reverse of your admission card. The procedures for filling the voting cards are as follows. If you're a proxy holder and have only directed votes for or against as shown on the summary of votes attached to your voting card, all you need to do is print your name and sign the yellow voting card and lodge it in a ballot box.
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If you require any assistance, please raise your hand and Rushad Bachana of Boardroom Proprietary Limited, our share registry, is on hand today to assist. When you have finished filling in your voting cards, please place them in one of the poll boxes provided by Boardroom. I will now pause to allow time, people to vote.
Does anyone need any more time to complete and lodge? No? All right. I now hereby declare that voting is now closed. I will ask the returning officer to count the results. The results of the poll will be released to the ASX later today. Ladies and gentlemen, that concludes this meeting. There being no further business, I declare the meeting closed. On behalf of the Board of Directors of Credit Corp, thank you for your participation in today's meeting. Thank you very much for the myriad of questions that we have received today.
I wish you all a good day. Thank you.