Solvar Limited (SVR.XA) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. My name is Stuart Robertson, and I'm the Chairman of Solvar Limited. On behalf of the Board, I'd like to welcome and thank you for taking the time to attend our 2025 Annual General Meeting of the company. I'd also like to formally acknowledge the many traditional owners of the country throughout Australia and recognize their continuing connection to the lands, waters and communities. This meeting is being held in a hybrid format, allowing for greater shareholder participation, including myself. For those of you attending in person, you may have noticed that I'm not in the room with you today. Unfortunately, due to a family matter was unable to travel today to attend the meeting person. For those shareholders attending virtually, I can assure you that you will have the same opportunity to participate today as you award if you attended the meeting in person. This includes being able to ask questions and vote through the online platform, and I'll discuss these processes a little later. For those of you attending virtually, if you have any technical difficulties with the [indiscernible] online platform screen now and someone will assist you. There is also an online meeting guide on the platform to assist you. If we experience technical issues that impact the online portion of the meeting, I'll assess the circumstances and communicate further with you via the online portal. If for some reason, we have technical difficulties with my participation in the meeting, our Managing Director, Scott Baldwin, will take over as Chair of the meeting. I hereby declare the meeting open. I'm advised by the company's secretary that the notice of the meeting have been properly dispatched and that a quorum of members is present and call the meeting to order. With us today, we have my fellow directors, Mr. Scott Baldwin; Mr. Symon Brewis-Weston, Mr. Craig Parker; and Ms. Kelly Corno; and our Company Secretary, Ms. Terri Bakos; and CFO, Mr. Siva Subramani. From our orders BD, we have Mr. Benjamin Lee. I'd like to start by reflecting on the achievements through FY '25, and I'll conclude with comments regarding the outlook for FY '26. Following my address, Scott Baldwin, our Managing Director, will give a short presentation on Solvar. Solvar delivered strong results for its shareholders through FY '25 against the macro environment that is as complex as many of us have seen in our career. The global economy is suffering from geopolitical complexities that brings significant risk. Whilst global trade tensions are as volatile as they have been in recent memory. This uncertainty lows through to the domestic economy, where growth has been muted, and we're seeing some recent upticks in unemployment. Given this, households remain cautious about spending and productivity growth remains lackluster and has failed to keep pace with uses growth. Some has been steering the middle path through these crosscurrents and still achieve top line revenue growth and loan book growth. In the 19 years, it has been ASX listed, the company is extremely proud that it is financed in excess of $3 billion or navigating new resonates. During FY '25, the group continued growing its loan book for its continuing operations to $832.7 million, up from $791.1 million in the prior year, whilst revenue grew to $180.3 million up from $177.9 million in the prior year. Our focus on diversifying the business from a product perspective, while also growing the loan book has been the correct strategy. In addition, our distribution remained well balanced between direct and intermediated channels which has been an important focus for the group. Your board and management have focused over the last number of years on achieving the strategic objectives of investing in infrastructure to enable lasting meaningful growth and in building resilience to be able to deliver results for shareholders in ever-changing challenging environments. I want to expand on 3 key initiatives that I believe ensures the ongoing future success of the business. So I will provide financing solutions in markets that are under service. Solvar addresses consumers' nondiscretionary demand for finance. The company has been predominantly focused on personal lending, servicing both the nonconforming and near prime sectors. Solvar believes there are still significant opportunities within these markets and continues to grow its business. In addition to this, the company in May 2025, launched a commercial lending business, Benny which leverages off the group's existing reputation and distribution network, targeting small and medium enterprises. The group also acquired a stake in Early Pay, which gives broader exposure to the commercial market. This diversification gives the group additional robustness by having access to large addressable markets and adjacent products. The second key initiative in enhancing the group's business has been a significant work undertaken on the financing side of the business. which is a key driver to the group's cess. The group has continued to evolve its funding program, and it's very pleasing that it achieved its first asset-backed securitization of approximately $200 million. While it's significant in terms of improving our funding margins, by securitizing a portion of its financing, the group's risk profile decreases due to the more aligned asset liability matching, but it enables. Group is also de-risked further by having multiple robust finance warehouses within the group, ensuring meaningful headroom to continue growth. To enable an ongoing program of securitization throughout the business into the future, Solvar is focusing on continuing to standardize its policies across the group. The third key initiative is the ongoing investment in technology. As a society, we continue to increase our dependency on digital and Internet connected technology, including the way we do business with our customers, which makes us a target for criminal cyber actors. The group achieved ISO 27001 certification, which is a risk management framework designed to help organizations identify, manage and protect sensitive information. By implementing best practice processes, the group aims to continue building on the strong foundations it has. Let's talk about performance. The group delivered normalized NPAT or net profit after tax of $34.1 million and an earnings per share of $0.168 per share. The group's continuing operations loan book grew to $832.7 million, up 5.3% on prior corresponding periods in revenue of $180.3 million, which is up 1.4% on the prior corresponding period. During FY '25, the group completed a $20.9 million share buyback and announced a total of $0.14 dividend fully franked per share for the financial year. In terms of outlook, the International Monetary Fund's world economic outlook is forecasting global growth to remain subdued with the overall environment remaining volatile with a range of domestic and international scenarios that could rapidly shift the outlook. Continued ongoing global conflicts could lead to downward revisions. In terms of the domestic market, interest rates were recently left on hold, and there's no clear indication of any further cuts. The group anticipates the resolution of the ASIC matter that commenced in 2023 through calendar year '26, while the Commerce Commission matter in New Zealand may continue into FY '27. With ongoing investments being made into infrastructure and the continuing buildout of adjacent business lines through FY '26, the group expects to see the first full year of these benefits from their investments being realized in FY '27. It's also anticipating that the churn rate that is a current industry-wide challenge will subside. In FY '26, the group anticipates new loan originations to exceed $400 million, with October just gone, having the strongest AFS originations in the last 7 months. The forecast Australian loan book for 30 June 2026 is expected to exceed $900 million, approximately an 8% growth over the FY '25 numbers. The group gives guidance of normalized net profit after tax of $36 million, which includes an additional one-off $2 million uplift from the sale of the arrears loan book in New Zealand. I'm pleased to welcome Kelly Corner to their first AGM. Kelly was appointed to the Board in September of this year and brings a wealth of knowledge in marketing and customer engagement. We're looking forward to Kelly's contribution to the Board in the coming years. Simon Bruce Weston is retiring at the conclusion of this meeting after 7 years as a valuable Board member. Simon chaired the Remuneration and Nomination Committee and was a member of the Audit and Risk Committee, and his knowledge and experience were greatly appreciated. On behalf of the Board, I'd like to thank Simon and wish him well in his future endeavors. Finally, I extend my gratitude to my fellow directors, our Managing Director, Scott Baldwin, his leadership team and all the Solver staff for their dedication to continue building a stronger, more resilient company. Okay. Shareholders participating online today can submit written questions at any time during the meeting proceedings by clicking on the Q&A icon on the top right of the online portal screen and then selecting other business or a specific resolution. Once you finalize the question, click on the send button. To ensure questions reach us in time, I ask that you submit them during the course of the meeting. If you wish to ask a question verbally, an audio question facility is available. Instructions on how to do this are contained at the bottom of the online portal. When asking a question, please state your full name before asking a question. All shareholders participating will have an opportunity to ask questions at set times during the procedure of the meeting. Please note, if you have a question that is specific to a resolution, we'll answer it as we address that resolution. If you have a general shareholder question, it will be addressed after the formal business of the meeting is completed. And if we're not able to get through all the questions today or if there are specific questions that would be better addressed on an individual basis, we'll respond to them after the meeting. If we receive multiple questions that are similar, we'll try to amalgamate them into one or choose the answer -- to answer the broadest question, which will cover off the others. We'll take questions from shareholders in the room first, followed by written questions via the online platform and then audio questions, if any. I'm now going to hand over to Scott to conduct the presentation.

Thank you, Stuart, and afternoon, shareholders, members and -- thank you for joining us today for S Annual General Meeting to share with you progress and provide an update [Audio Gap] up 40% on the prior -- as we look forward, FY '26, will be trough. We expect to conclude several strategic initiatives that will set the business up for strong PS therapy that lines, including the resolution finalization of the asset matter that has been there at some time. Improved funded diversification, as mentioned by the Chair, lower cost of debt funding. And we've also start to grow as we extend our account at proctor operating group. The matrices finance remains strong and the the strategic we've taken, we believe we are console go-digital sustaining the another -- in terms of some of the strategic initiatives, achievement in, we launched begin our dedicated commercial product. And we also have took a strategic stack in urban great born enforcing our growth into the SME sector. From a technology point of view, invested in digital platforms and automation that we continue to improve the user experience and our efficiency in -- we started FY '26 with the lowest head count businesses had in overlying years. And this is as a result of technology, we continue to mandarand shorten the decision time from where a customer is there's significant difference to the technology benefit come through our business. And we'll see that in the $3 million reduction in operating expense of average in the first quarter of the year. In terms of recent clients, as I mentioned, we achieved ISO 27001 certain, which has been significant work for the group. -- strengthens our size of resilience and our governments and such. We also take the onset forward to resolving asset monitor with adjustment of the -- from a social point of view, we contributed up $300,000 or community initiatives, which is reflected in the group's positive social outcomes. Our primary charity part of the niche dead supporting volt children and families, particularly throughout or continuing to grow in potential items and they fit community alteration, particularly in Cancer America obsoleting -- so was also made in efforts to the carbon netalation which we achieved in Q2 in those in a produced by the company. and do that to verify on onto -- Next slide, please. Super's capital management strategy remains focused on delivering sustainable shareholder returns through disciplined balance sheet optimization and strategic capital return. In FY '25, respective earnings per share with a $35 million on-market buyback program. With this, the group purchased 14.3 million shares for clinical findings at average developments. The share of that program continues in the 1 have been able to purchase shares below the value market. Our dividend policy statement to payout ratio up 90% in FY '25, we delivered a fully franked dividend of 40% -- this marks the 38th year of fully franked to 38 dividend pay by the company. And since this thing, we've returned over $1.40 per shareholder in. We move to the group and a healthy banking credit on and continue to see lagectivelyi those payments on. We recently completed our first asset curation established the second funded the monetary portfolio. This foot this warehouse provides meters or funding sources and pleasingly, a lower cost of fund business is a material from some in the nose that -- looking then Sarantis FY '26 with significant funding headroom and unrestricted capital, which will allow us to drive double-digit growth our crop -- we remain committed to balancing investments in technology and product posting at shareholder distributions ensuring long-term value generation share. Next slide, please. in the last quarter, technology implementation challenges today that a slow July have resulted in quite a modest Q1 results, where new loan originations was $94.9 million and down on that in the period. As I look by our Chairman, the start of Q2 has seen a donation originations and we are confident to see new loan originations that we were see $400 million. Tax selections in Q1 have been stronger than expected in a economic position with this accelerated number of consumers and get in, it has impacted their starting, which is down slightly to open. Finally, strange on the first quarter was -- next slide, please. Bad debt and portfolio quality have remained stable throughout Q1, considering slide in 1 remain confident that desk will be within the target range and the 1 in New seminal means that we will be able to reduce the portfolio in business and -- the ABS transaction was completed in FY '25 and the establishment of the new announced in superior terms and driven funding costs as announced one, provide a foundation for strong on growth without the need at position and -- Next slide please. FY '26, we at several years. We concluded several significant initiatives the physician sold well, strong NPS proper -- these include resolution of the asset rate that has been there for some time. enhanced fund diversification, improved cost of funding in level and also strengthening of our loss and oversight framework in our business, which will make sure online and greater operational across our business. In addition, we expanded our product offering, and we expect to see our line with the term growth supported by these investments in technology and greater risk management. Together, we expect that these actions would create a stronger, more agile business have delivering sustainable long-term growth -- thank you for the trust in '19. Together, we continue to innovate so and grow responsibly, and we treat further long-term value share I will now hand back to Mr. Stuart Robertson.

Thanks, Scott, Let me proceed with the formal aspects of the meeting. But before doing so, I'll remind you all that only shareholders or their appointed proxies and corporate representatives are entitled to vote or speak at this meeting. As each of the resolutions before us today will be cited by poll, I hereby appoint Ms. Christina Pickle of Computershare as a returning officer for the meeting. Votes will be counted after the end of the meeting and results published on the ASX and the company's website. Shareholders can cast their vote using the physical voting card that they received upon registering today or online through the meeting portal validating their online registration. For those voting online, a vote icon will appear at the top of the online platform screen. Selecting this table will bring up a list of resolutions and present you with voting options. To cast a vote, select 1 of the options, for, against or abstain. There's no need to submit your vote as the vote is automatically recorded. You'll receive a vote confirmation on your screen, and you can change your vote at any time until voting is closed after the meeting. Proxy holders are reminded that you must vote in accordance with the shareholders' direction. The proxy votes that have been submitted prior to today's meeting will be set out on the slides shown for each resolution. For some context, the current number of solver shares on issue is approximately $189 million. Shareholders are appointed the Chair of today's meeting, myself, as a proxy for up to 110 million shares to vote either for, against or with discretion for all resolutions. As indicated on the proxy form and in the Notice of Meeting, my intention as Chair is to vote all discretionary or undirected proxies held by me in favor of each resolution. Notice of Meeting with members' permission, I would like to take the notice of meeting, including explanatory memorandum as having been read and now to the formal business and resolutions, ordinary business, the 2025 annual report to receive the financial statements of Solver Limited for the year ended 30 June 2025, together with the director's report and the auditor's report as set out in the annual report. As advised, we have Mr. Benjamin Lee, the audit partner from BDO with us today. We have received no questions prior to the meeting on the accounts or conduct of the audit. Are there any questions in relation to these accounts and the conduct of the audit for the company's auditor? Terry, do we have any further online or verbal questions in relation to this.

[indiscernible] 1 question still that is general to the product segment. Yes, In relation to the financial statements, yes. It's a question in voting in general? Yes, I think so. you want to SP-5 Yes, Just looking at the annual report, I couldn't see the interest of the directors just following on Scott's commented the alignment of interest. So I wonder what page that's on comments here.

I'm referring to table 5.1 is the pro -- and this is down last year and the current and with 10.3 each. Okay.

Thank you. So I appreciate pace want to back for others. So it's good to see the directors have -- thank you Okay. Is there any other questions?

I'll now hand the chair back to Mr. Olson to consider the next resolution.

Thank you, Sean. Thank you. Okay. Resolution 3 is the election of Kelly Corner as a Director. This resolution is to consider the reelection of Ms. Kelly Corner as a Director of the company. Ms. Corner was appointed to fill a casual vacancy on 1 September 2025. Details of Ms. Corner's qualifications, background and experience are contained in the explanatory memorandum attached to the notice of meeting -- on screen now are details of the valid proxies received prior to the meeting. Are there any questions in relation to this meeting sorry, in relation to this resolution? None? Are there any online or verbal questions in relation to this resolution? No. I'll put the resolution for the resolution to a vote. Please cast your vote if you wish to vote. [Voting]

Let's move to the next resolution. Resolution 4, the issue of performance rights to Mr. Scott Baldwin under the employee equity plan. This resolution is to consider the issue of performance rights to Mr. Scott Baldwin, Details of the issue to Mr. Baldwin are contained in the explanatory memorandum attached to the notice of meeting. On screen now are details of the valid proxies received prior to the meeting. Are there any questions in the room in relation to this resolution. No. Are there any online or verbal questions in relation to this resolution? No, Okay. I'll now put the resolution to a vote. Please cast your vote. [Voting]

I'll move on to Resolution 5, Renewal of takeover approval provision in the constitution. The purpose of this resolution is to allow for shareholder approval in the event that there is a proportional takeover bid for the company's securities. Further details of the provisions are contained in the explanatory memorandum attached to the notice of meeting. On screen now are details of the valid proxies received prior to the meeting. Are there any questions in the room in relation to this resolution.

No questions.

Terry, are there any online or verbal questions in relation to this resolution?

No questions.

I'll now put the resolution to a vote. Please cast your vote if you wish to vote. [Voting]

Ladies and gentlemen, that now concludes the formal business for meeting. Directors of the company and management will be pleased to take any questions you may have regarding -- the company and the formal closure of the meeting. If you've not yet voted and wish to do so, please vote now. Voting will be open for 5 minutes after the conclusion of the Q&A. And I want to thank everyone for your attendance, and I'll officially close the meeting at 3:33 p.m. We'll now answer any questions from shareholders. We'll start with then in the room, then online and then via telephone. answer any questions in the room?

Do you want me to read that? SP-10 Yes, I rate that Yes. Chairman, this is a small statement followed by questions. Since our CEO has been in the wrong share -- does that have been well Sharehold including had growing nearly 18% per atfor 63 years, an incredible number are outputs, not inputs. So just from your observation, what is in the DNA of the organization that led to this result. What is the unseen we can't see only 8 companies on the ASX have delivered a CAGR rate for more than the year. So the our Board should be mended.