Good morning, everyone. I'm Michael Tilley, I'm pleased to welcome you to the 2023 annual general meeting of Latitude Group Holdings Limited. It's now just after 10:00 A.M., I'm joining you today from Melbourne, I'd like to begin by acknowledging the traditional owners and custodians of the land on which we meet today, the Wurundjeri people of the Kulin nation. I pay my respects to their elders, both past and present. Under Latitude's constitution, a quorum is required for this meeting, I've been advised that a quorum is present, I declare this meeting open. Today's meeting is being held in person, there is the ability for shareholders to also watch a live webcast of the meeting. To provide sufficient time to vote, I now declare voting open on all items of business.
A significant number of shareholders have already voted, appointed proxies, and submitted questions ahead of this meeting. We'd like to thank them for doing so. I'll start today's meeting by walking you through a few procedural guidelines for voting and question submission. I'll deliver my address. Then I'll pass to Bob Belan, our new Managing Director and CEO, who will give his address and provide a presentation on Latitude's 2022 performance highlights and financial results. Finally, we'll turn to the formal business of the meeting. Before we begin, I'd like to introduce my fellow directors who are also in person with us today. To my left, we have Vicki Letcher, our Company Secretary, and Alison Ledger, Non-Executive Director. Alison is also Chair of the Remuneration and People Committee and the Technology Committee.
To my right, we have Bob Belan, Managing Director and CEO, Mark Joiner, Non-Executive Director and Chair of the Risk Committee, and Julie Raffe, Non-Executive Director, and Julie is Chair of the Audit Committee. Unfortunately, Aneek Mamik, who's based in New York, was unable to come here for the meeting today. Scott Bookmyer, who's based in Denver, was on his way, but his plane was diverted and he's unable to be here. Beaux Pontak is also an apology. Paul Varro, our CFO, and Chris Wood, the Lead Engagement Partner of our auditor KPMG, are also in attendance, and Chris is available to answer questions related to the accounts and conduct of the audit and the auditor's report. The notice of meeting, dated the 24th of March 2023, has been distributed to all shareholders. I'll take that as read.
By attending our 2023 annual general meeting today, you, as a Latitude shareholder or your appointed proxy, will have the opportunity to ask questions and vote if you haven't already done so. Voting today will be conducted by way of a poll on all items of business, and Computershare will act as the independent returning officer. For those watching the live webcast, you will not be able to submit votes online. For shareholders, proxies, and corporate representatives in person, you'll be able to vote at any time during this AGM by completing the blue voting card that was provided to you on admission to the meeting. White cards are for visitors only who cannot vote or ask questions. Shareholders with a pink card are not entitled to vote on the items of business.
I'll provide a warning before I move to close voting at the end of the meeting today. Thank you to those shareholders who submitted questions in advance of the meeting today. It is my duty as chairman to ensure that shareholders have the opportunity to ask questions and discuss the items of business during the meeting. We ask that all questions and comments be concise, be confined to the particular item being discussed and to matters relevant to shareholders as a whole, be informative and respectful. Only shareholders validly appointed proxies and corporate representatives who were given a blue or pink voting card upon entry are entitled to ask questions. When I call for questions, please raise your blue or pink card and state your name or organization you represent before asking your question. I'll move to my address.
COVID and the post-COVID economy have been particularly challenging for your company. During COVID, Latitude operations were severely disrupted by extended lockdowns in its key locations of Melbourne and Auckland. Federal government financial initiatives to support the community led to significantly higher repayments by customers, leading to a reduction in receivables from AUD 7.67 billion in December 2019 to AUD 6.47 billion in December 2022.
Lower receivables result in lower interest income. Your company implemented significant productivity initiatives along with the deployment of remote working technology solutions to ensure that under all scenarios, the business could continue to service our customers and remain profitable, earning a Cash NPAT of AUD 153.5 million in the 2022 year. Post COVID and in less than 12 months, Australia and New Zealand have seen a significant increase in inflation and a near record number of interest rate increases. The nature of your company's business model is such that recovering a large number of consecutive monthly interest rate increases involves a time lag. While each central bank rate increase flows almost immediately into Latitude's cost of funds, increases in rates charged to customers can take weeks, or in some cases, many months to recover.
I'm pleased to be able to inform shareholders that in recent months, prior to the cyber incident, gross receivables were growing again as repayment rates began to normalize and net interest income is responding positively to management's initiatives to recover rate increases. Your company has also experienced a malicious criminal cyberattack in recent weeks. We apologize unreservedly to all of those customers who've been impacted. We've put in place a comprehensive care package for all impacted customers, which includes remediation for the cost of replacing identity documents. You may wonder why your board has not communicated more directly with you on this. The attack on Latitude is a criminal offense, and as such, is the subject of a comprehensive criminal investigation by the Australian Federal Police.
Your board's ability to speak freely on these matters is severely restricted by your company's obligations to not inhibit or influence the police inquiries or investigations. What I can share with you is this: there's been no evidence in our systems of activity from the threat actors since the 16th of March. Access to Latitude's systems was gained via a third-party service provider, which is a significant international vendor. Existing Latitude finance and credit card customers were able to continue to transact and make payments throughout the attack period, although there was restrictions on processing some new customer applications. Latitude will not pay a ransom. To do so would not assure the security of our customers' information stolen and only incentivize more cybercrime. The Department of Home Affairs, the Australian Cyber Security Centre, extremely appreciative for both their guidance and support.
Your board and management have been focused on the risk of cyberattacks for a number of years, hiring experts to run mock attacks on our systems, and we were prepared for the risk of an attack with agreed procedures, policies, and quick and clear decision-making authorities in place. The Latitude management team have worked countless hours since the attack to protect the company and its customers from further damage from this malicious attack. While the one-off financial costs of the attack remain under review, Latitude has substantial insurance cover that will help to offset some of the direct costs incurred. Beyond the one-off cost, the disruption to business as usual is still being assessed and is expected to adversely impact our 2023 growth trajectory and net profit.
I must say, Latitude accepts only it is responsible for protecting customer data, and that failure by large global vendors during this attack does not exonerate Latitude of that responsibility. I wish now to turn to the retirement of James Corcoran from the board, and that of Ahmed Fahour as CEO and Managing Director of Latitude, and the recent appointment of Bob Belan as our new CEO and Managing Director. Ahmed presided over Latitude during four and a half years of significant change, implementing significant investments in information, technology, and productivity. During Ahmed's time, receivables per full-time employee grew from AUD 4.6 million to more than AUD 6.4 million, while customer serving capabilities were materially enhanced. Ahmed led the company in its ASX listing and through the dark and difficult days of COVID lockdowns and the transition to remote working.
On behalf of my fellow directors and all of the employees at Latitude, I would like to take this opportunity to express our sincere thanks and best wishes to Ahmed Fahour in whatever activities he may choose to engage in post Latitude. I would also like to thank James Corcoran, who stepped down from the board in February 2023, for his significant and lasting contribution to the company. You'll shortly have an opportunity to hear directly from our new CEO and Managing Director, Bob Belan. Needless to say, Bob's introduction to the role has been a real baptism of fire. Bob knows Latitude well, having joined from the Symple acquisition in 2021, and having led the Money business division since then, overseeing the integration of the two businesses and, in particular, the transition of Latitude customers onto the new Latitude Money Platform.
While it's a great credit to the Latitude management team that Ahmad's successor was within our team, your board conducted a global search to ensure that every possible candidate was identified and explored. It's a great credit to Bob that he was selected against a field of high-quality Australian and international candidates, and we have every confidence in his ability to generate great service for customers and great results for shareholders. Finally, I'd like to thank my colleagues on the board for all of their time and diligence over the past 12 months, and in doing so, welcome Aneek Mamik and Julie Raffe to the board.
I'd also like to take this opportunity to thank the more than a thousand employees at Latitude who've worked tirelessly over the past year in responding to the COVID crisis, the rapid and significant changes in inflation, rising interest rates, and the more recent criminal activity. Despite what you may read or hear in the media from time to time, most boards and management of Australia are well-meaning people who work hard to deliver great results for customers and shareholders, and the Latitude team is no exception. I'll now hand over to Bob to provide his address.
Thank you, Mike, and good morning, everyone. Thank you for joining us at today's annual general meeting. I'd like to begin today with a summary of our 2022 financial results, offer some commentary on what contributed to last year's performance, and importantly, share my thoughts on what's needed in the months and years ahead for Latitude to realize its full commercial potential. Last year, our company earned a cash profit of AUD 153.5 million. That was down AUD 47 million on the prior year, which is a decrease of 23%. While this result was clearly below our expectations, there were a number of very positive trends and notable highlights that are important to call out and that will ultimately help support the growth of your company in the future years. Firstly, demand for our products remained very strong.
We generated roughly AUD 8 billion in new volume last year across our pay and our money divisions. That's up 8% versus 2021. Volume growth in our money division was a particular standout, generating record new originations of AUD 1.7 billion, a 12% annual increase. Volumes in our pay division reached AUD 6.3 billion. That's growth of 7% year-on-year. These volumes results helped increase our receivables balance by 2% to reach AUD 6.5 billion. For context, this represents our highest receivables balance in 18 months, going back to June 2021. The quality of our loan book remains strong, with charge-offs at a historical low of 2.35%. Cost discipline was another key standout in last year's results. Our cash operating expense was down AUD 34 million or 9%.
That was a function of in-year management actions and the roll-through of productivity benefits from investments made in prior years. Our most significant challenge in 2022 was, of course, the rapid change in monetary policy here in Australia and in New Zealand, the fastest and most abrupt tightening cycle since the 1980s. The impact of this on our business was profound, resulting in AUD 54 million in higher funding costs, which clearly had a direct and a negative impact on last year's earnings. While aggressive pricing action was taken by the management team throughout the year, we simply could not keep up with the pace of the changes that were passed through. Very pleasingly, however, our balance sheet remains robust and is well structured to support our future growth.
We ended the year with a tangible equity ratio, which is the key measure of capital adequacy of 8.5%. That's above our target range of 6%-7%. We continue to take a very prudent approach to credit loss provisioning, reserving at 1.6 times net credit losses versus 1.3 during the pre-COVID period. Very importantly, we have strong relationships with a broad set of finance partners that provide access to the capital that we need to underpin the future growth of our company. What's ahead for 2023? To be very clear, Latitude's business model is unquestionably strong, the strategy of focusing on our core retail finance, credit card, and personal lending segments will absolutely remain our priority.
What's required, however, is that we take steps to ensure the company's capital is invested into a smaller set of higher-yielding growth opportunities. To that end, we will soon complete the sale of our insurance business, which is expected to return approximately AUD 90 million of capital upon completion next month. We are also in the process of closing down our small ticket buy now, pay later platform, which will result in roughly AUD 10 million in annual operating expense reduction going forward. We'll soon launch a new set of strategic revenue and cost optimization opportunities and initiatives aimed at improving our operating leverage. While expense management has been a key highlight in our results over the past few years, there's still more opportunity, in my opinion, to run our business more efficiently going forward.
We will continue to seek out new partnerships, new distribution channels, and new revenue streams to help drive incremental profit growth in the years ahead. This includes the launch of our exciting new credit card partnership with David Jones, which is expected to launch later this year. As debt markets settle in the coming months, we intend to leverage our deep and broad relationships with our finance partners here domestically as well as internationally, to optimize our balance sheet and reduce our capital costs. We also remain open-minded about inorganic growth opportunities, very specifically acquisitions, but only when these deals are short terms earning, earnings accretive for Latitude shareholders. Before I close, I thought I'd say a few words about the cyberattack that was committed against our company last month.
As we've stated publicly, a few days prior to our announcement on the 16th of March, our security monitoring systems detected unauthorized access to our technology environment. We made the difficult but necessary decision to shut down our systems and cease normal business operations in order to purge the attacker from our systems. As the chairman stated, this criminal attack is under investigation by Australian Federal Police, and the full set of facts are emerging as part of the forensic review that's still underway. This incident is deeply regrettable, and I sincerely apologize to all of those who have been impacted. We cannot undo what's happened, but we can take responsibility for supporting our customers through this and to take the appropriate steps to safeguard our business from an incident like this happening in the future.
We remain resolute in our focus on continuing to serve the financial needs of our customers while taking the actions necessary to generate better and sustained financial returns for you, our shareholders. Thank you again for joining us here today. I'll pass it back to our Chairman, Mike Tilley.
Thank you, Bob. Ladies and gentlemen, we'll now turn to the formal business of the meeting. Before we move to the agenda items, I'd now like to address any questions in relation to the presentation I gave today or Bob just gave, or more broadly in relation to the company. Are there any questions?
Good morning, Mr. Chairman. My name is Chris Lob. I'm representing the Australian Shareholders Association at this morning's meeting. Just wondering your, the board's thoughts along not holding a hybrid meeting this morning. You've restricted to a webcast together with people present. Could you just outline the thinking behind that decision?
Yes, well, I mean, we held a hybrid meeting last year. There was good reason for doing that because a lot of people couldn't travel around because of restrictions with COVID. It's a lot of an additional work and expense. Last year, only one shareholder participated through the hybrid process and, pretty much disrupted the meeting with the process that they pursued. This year, we decided not to hold a hybrid meeting. Are there any other questions? There being no further questions, the Latitude Group Holdings Limited board tables the minutes from last year's AGM, held on the 27th of April, 2022 for approval. The minutes are on site today, and if anyone would like to review them, our company secretary has a copy.
If there are no objections, I declare them to be approved. Prior to commencement of today's meeting, valid votes have been received representing approximately 83% of the issued capital of your company. I now show on the screen the proxy votes received prior to the meeting for each of the resolutions being put today. Where the chair of the meeting has been nominated as a shareholder's proxy, all open and available proxies will be voted in favor of all resolutions. There are voting restrictions for some resolutions, as outlined in the notice of meeting, which apply to those who have an interest in the resolutions and certain of their related parties or associates. The first item of business is to receive and consider the annual financial report, together with the directors' and auditors' reports for the year end of 31st of December, 2022.
A copy of which has previously been provided to shareholders. There is no requirement for shareholders to vote on these reports. I would open up to shareholders the opportunity to ask questions. Does any shareholder have questions on the first item of business today, the consideration of the financial statements and reports? There being no questions, we come to the items of business for which voting is required. Item two relates to the adoption of the remuneration report. The resolution being put to the meeting is displayed on the screen. Please note that a vote on this resolution is advisory only and does not bind the directors or the company. Are there any questions or comments that a shareholder would like to make in relation to this resolution? Yes.
Thank you again, Mr. Chairman. There's quite a extensive statutory disclosure contained within the annual report, but most public companies in this day and age also provide actual remuneration received. Many retail shareholders find the statutory disclosures quite confusing and difficult to follow. As a result, they actually would like to see what actually executives and directors receive in actual remuneration in any one period. Would you like to comment?
Look, the. Yes, I can consider doing that. The reality is that the statutory amount shown are significantly higher than the actual amounts received. We've always thought that showing the larger amount was more in line with the principles that ASIC is seeking and the ASX is seeking to pursue here. You know, there are times when you show a more favorable light on things that you do get challenged by ASIC as to whether or not that is not misrepresenting or misleading from the statutory number. We will take that on notice and have a think about it. Were it true that the actual amounts received were higher than the statutory amounts, then I think there would be a much stronger case. Are there any other questions?
Okay. There being no further questions, would you please record your vote now if you've not already voted. Item 3A relates to the election of Ms. Julie Raffe as the director, and details of Julie's qualifications, career experience, and other interests have been set out in the notice of meeting and in the director's report. I'll ask Julie to speak to you about what she brings to the collective capability of the board. Thank you, Julie.
Thank you, Mike, and good morning, everyone. I am a chartered accountant, was previously the Finance Director of Village Roadshow Limited, an ASX-listed company. My key areas of experience are risk, governance, strategy, and capital management. I think that adds a bit to the board. I'm a non-executive director of Ridley Corporation Limited and a non-executive member of the advisory board of Ironman4x4 Proprietary Limited. In the not-for-profit space, I'm President of Financial Executives Institute of Australia, and I'm also the Vice Chair of the mental health charity, Entertainment Assist. Thank you for your time, and I appreciate the opportunity to continue to serve the company and its shareholders as a director. Thank you very much.
Thanks, Julie. As a director, and a colleague, Julie's made a great contribution to the board in the time that she's been on the board. The resolution being put to the meeting is displayed on the screen. Are there any questions that anyone would like to ask in relation to this resolution? Yes.
It's not directed to Julie directly, but I notice in your policy in relation to minimum shareholding requirements for directors that it doesn't apply to non-executive directors. Could you just explain a little bit further thinking behind that policy adoption, please?
There are people that argue that having a minimum shareholding is a conflict because someone that's a shareholder is not acting purely independently, just as someone that's on the board too long perhaps is determined to lose their independence. I don't think that a minimum shareholding obligation on an independent director or any of the independent directors on the Latitude board would change their effort, their commitment, their contribution, or their diligence. I think we think that it's just a provision that goes beyond what's required.
Sorry. I think shareholders generally, especially at the retail end, do appreciate when directors actually have skin in the game, as the term goes.
Well, I understand that, you know, almost 80% of the company is represented around the board table already. To suggest that there isn't a significant representation of shareholders on the board, you know, our CEO has well in excess of AUD 10 million shares. I have well in excess of AUD 3.5 million. You know, there is a large amount of shareholder representation around the board table already. I think if this was a case where there was no significant shareholder and no director of the board represented shareholder, had a material shareholding, it might be different, but I think in this case, it really doesn't make a difference. Thank you.
Can I just add, I do actually have personal holding in Latitude. Thank you.
Okay. There being no further questions, would you please record your vote now if you've not already voted. Item 3B relates to the election of Mr. Aneek Mamik as a director, and details of Aneek's qualifications, career experience, and other interests are set out in the notice of meeting and in the directors report. Aneek is unable to attend today's meeting. As such, he's provided me with the following statement and asked me whether I would read it out on his behalf. "Regretfully, I'm unable to join the AGM today. However, I'm appreciative of the opportunity to continue to serve the company and its shareholders as a director. I am a partner and head of financial services investing for Värde, a global alternative investment firm that has invested more than 95 billion in both public and private markets.
I'm currently a director of New York Stock Exchange listed OneMain Financial, a leading consumer credit provider, and Mercury Financial, a U.S.-based financial technology firm. Prior to Värde, I worked at GE Capital for 15 years, including assignments in GE Money, which is now Latitude. I completed my Bachelor of Masters in Business from Monash University, as well as qualifying as a chartered accountant. The resolution being put to the meeting is now displayed on the screen. Are there any questions or comments in relation to this resolution?
Thank you. Thank you. Mr. Chairman, John Richards, shareholder. Well, sorry, representing Australian Minerals Shareholder. What percentage of the board meetings in the past year has Mr. Mamik attended?
Many of our board meetings have been by Zoom because of travel and other problems. Mr. Mamik has only been on the board since February this year, and he was physically in attendance at our last board meeting, and I think that's the only board meeting that we've had since he joined the board. He joined the board at the end of February. We had a board meeting in March, which he attended, and he's unable to be here today. I can assure shareholders that Mr. Mamik is a very, very experienced consumer finance globally, consumer finance expert.
OneMain Financial, the business that he's on the board of in the United States, is very similar to Latitude in terms of its operations in the United States. He brings significant experience, and he represents Värde, which is obviously a substantial shareholder in the company.
Let me ask this follow-up question. During your research on him and his choice to become an NED, have you set a quota that he should attend in the future?
But, you know, if you look in the annual report, you will see that this company often holds in excess of 15, sometimes 19 or 20 board meetings a year. For a director that is based overseas, to expect them to come to 60% of that many meetings, would mean that they would be traveling for 10, 12 weeks of the year just to be involved in Latitude. I think we would not be able to keep him as a director under those circumstances. But he comes to the meetings that matter, meetings around strategy, meetings around budgeting, and makes a significant contribution.
At this day and age, to give you an example, we now use a quarter of the floor space that we did pre-COVID to run our business, so 25% of the floor space that we did. Operating on remote Zoom or similar meeting arrangements has become pretty much par for the course. We would expect that it's going to stay that way, and we think that opens up to the company the opportunity to get some of the best experts in what we do around the world to participate in the board and operations of the business. Are there any other questions? Thank you. There being no further questions, would you please record your vote now if you've not already voted.
Item 3 C relates to the reelection of Alison Ledger as a director. Details of Alison's qualifications, career experience, and other interests are set out in the notice of meeting and in the director's report. I'll now hand over to Alison to speak to you about what she brings to the collective capability of the Latitude board. Thank you, Alison.
Thank you, Chairman, and thank you for your consideration. I have over 35 years of experience in financial services as a banker, a management consultant, and a corporate P&L owner. Prior to becoming a full-time non-executive director, I was Executive General Manager of Product Pricing and eBusiness for IAG and COO of the Buzz Insurance and IAG subsidiary. Previously, I was a partner at McKinsey & Co. in London and Sydney and consulted to global financial institutions. My areas of expertise are strategy, risk governance, and operational management. I've also held senior roles at Chase and Bankers Trust. Currently, I'm a non-executive director of ASX-listed Audinate Group and CountPlus Limited. I'm also a director of Latitude's insurance subsidiaries, Hallmark General and Hallmark Life Insurance. I have a BA in Economics from Boston College and an MBA from Harvard. I'm a graduate of the AICD.
I would welcome the opportunity to continue to serve Latitude. Thank you.
Thanks, Alison. Alison has been on the board now for five years, I believe, and chairs the Remuneration and People Committee and the Technology Committee and is a significant contributor and a valued colleague. The resolution's been put on the screen, and I'm opening it up, if there are any questions on this resolution? Yes, sir.
Just been interested in your role as Chairman of the Technology Committee. I noted from the director's report you met twice through the year. In light of the recent issues around the scamming, is there any intention to perhaps increase the scrutiny or increase the number of meetings that this important committee may hold throughout a year?
Thank you. I think typically we meet from two to four times a year. It depends. Technology is also a topic that's on the board agenda, so it's covered at the board meetings as a whole. The subcommittee meetings really look at investment specifically and operational projects. It is covered on a regular basis on the board agenda.
Thank you. Are there any other questions? There being no further questions, please record your vote now if you have not already voted. Item 3D relates to the re-election of Mr. Scott Bookmyer as a director. Details of Scott's qualifications, career experience, and other interests are set out in the notice of meeting and in the director's report. Unfortunately, Scott's flight was diverted overnight due to an ill passenger being on board the flight, and he's therefore still in transit to Australia and is unable to make today's meeting. As such, he's provided me with the following statement and asked me to read it out on his behalf. In addition to my role at Latitude, I'm currently a director at the Laser Clinics Group and the Australian Venue Co I've previously been a director of MYOB, GenesisCare, Unisteel, and Alliance Tire.
I have over 30 years of professional experience and have worked at KKR in the financial services industry for more than 20 years. Most recently, I ran KKR's Australian and New Zealand business. Prior to KKR, I worked at the Boston Consulting Group and Procter & Gamble. I hold a BA in Economics with honors from Indiana University and a Masters of Business Administration from the University of Chicago. I'm appreciative of the opportunity to continue to serve the company and its shareholders as a director, and the resolution being put to the meeting is displayed on the screen. Are there any questions or comments in relation to this resolution? Sir, I might say that Mr. Bookmyer does attend almost every board meeting, so even though he's not based in Australia. There being no further questions, please record your vote now if you've not already voted.
Ladies and gentlemen, that now concludes our discussion on the items of business. In a couple of minutes, I'll close the voting. Please ensure that you've cast your vote on all the resolutions. I will pause now for a moment to allow you to finalize your votes. Oops. Thank you. Thank you, everybody. I'll declare voting now closed. The voting results from this meeting will be released to the ASX and posted in the investor relations section of www.latitudefinancial.com.au later today. That concludes our meeting. I thank you for taking the time to join the directors and myself today. Your ongoing support is greatly appreciated. Thank you very much.