Announcement PDF 24 MAY 2023 ASX RELEASE Plenti Annual Report 2023 Plenti Group Limited (ASX:PLT) provides the attached Annual Report 2023. Authorised for release by the Board of Plenti Group Limited. For more information please contact: Daniel Foggo Chief Executive Officer shareholders@plenti.com.au Miles Drury Chief Financial Officer About Plenti Plenti is a fintech lender. We provide faster, fairer loans by leveraging our smart technology. We offer award-winning automotive, renewable energy and personal loans, delivered by our proprietary technology, to help creditworthy borrowers bring their big ideas to life. Since our establishment in 2014, our loan originations have grown consistently, supported by diversified loan products, distribution channels and funding, and underpinned by our exceptional credit performance and continual innovation. For more information visit plenti.com.au/shareholders. Plenti Group Limited ABN 11 643 435 492 Building Australia’s best lender Annual Report 2023 Annual Report FY23 Plenti uses smart technology to provide faster, fairer loans so our customers can bring their big ideas to life. We’re taking market share in three large lending verticals. Our ambition is to build Australia’s best lender. About Plenti Loan portfolio by year ($m) Plenti offers award-winning automotive, renewable energy and personal loans, delivered by proprietary technology. We help creditworthy borrowers bring their big ideas to life. Since establishment in 2014, our loan originations have grown strongly, driven by our leading technology and the innovations we continually bring to market. Our growth has been supported by our diversified loan offerings, broad customer reach and diversified funding, and is distinguished by the strength of our credit performance. 1,766 Our purpose To bring our customers’ big ideas to life 1,300 Our vision Faster, fairer loans through smart technology 615 Our mission FY21 FY22 FY23 Building Australia’s best lender 1 Contents 2 FY23 highlights 6 Chairman’s message 7 CEO’s message 8 Our strategy 9 Operational overview 14 Environment, social and governance 18 Board & management 20 Directors’ report 49 Financial statements 95 Shareholder information About this report This FY23 Annual Report for Plenti Group Limited (ACN 643 435 492) is issued on 24 May 2023. Shareholders can request a printed copy of the Annual Report, free of charge, by emailing or writing to: Plenti 14 Martin Place SYDNEY NSW 2000 shareholders@plenti.com.au 2 Annual Report FY23 FY23 highlights Operational highlights Automotive Renewable energy Personal Effective execution of plans to grow commercial and EV-specific automotive finance. Strong growth reflecting the strength and breadth of referral partner network, including new partnerships with equipment manufacturers and energy retailers. Successful reprioritisation of direct-to-consumer capabilities, which drove 50% half-on-half growth in direct-to-consumer lending. Loan portfolio Loan portfolio Loan portfolio $ 998m 34% on pcp 201m $ 42% on pcp $ 568m 37% on pcp Financial highlights Revenue $ 143.5m Loan portfolio $ 1.8bn Cash NPAT 90+ days arrears 4.5m 42bps Cumulative lending since launch FY23 originations 3.5bn 3.0% $ $ 3 Our growth highlights We leveraged the diversity of our loan offerings to deliver strong loan portfolio growth. Loan portfolio by year ($m) $ 36% on pcp 1 1,300 470 230 286 152 30 FY16 1. 74 FY17 FY18 Previous corresponding period. FY19 FY20 1,766 FY21 FY22 FY23 4 Annual Report FY23 Our journey so far Since launching in 2014 with an ambition to deliver market-leading technology and shift finance from being a friction to a lubricant in the lives of Australians, Plenti has grown consistently to become Australia’s largest fintech consumer lender. 2022 Partnership with AGL established to accelerate home solar-battery uptake POST-IPO Renewable energy and personal loan ABS transaction completed $280m PRE-IPO 2020 Cash NPAT profitability achieved 2014 – Launched as Australia’s first licensed peer-to-peer lender – Introduced granular risk-adjusted pricing to Australian personal loan market – Introduced innovative digital end-to-end borrower experience with unique ‘RateEstimate’ rate quote technology Warehouse funding facility established for renewable and personal loans $100m $1.0bn cumulative loans funded Launched first automotive manufacturer integration Launched Notes Market in the Plenti Lending Platform 2015 – Carsales invests $10m 2017 – Renewable energy lending launched – supported by $20m in CEFC funding – Secured automotive lending launched – supported by funding from several banks 2018 – Adelaide office established – Appointed exclusive administrator for Home Battery Scheme in South Australia – $100m of funding secured from CEFC to support renewable energy lending in South Australia 2021 Automotive loan for commercial customers launched with market-leading digital experience Inaugural asset-backed securities transaction completed $306m Electric vehicle loan offering launched to help Australia transition to EV ownership 2019 – Direct-to-consumer secured automotive loan launched – First bank warehouse funding facility established for secured automotive loans Second automotive warehouse established with dedicated EV-specific tranche Second automotive ABS transaction completed $437m 2023 Renewable energy and personal loan ABS transaction completed $300m Launched GreenConnect, an industry-first platform that brings together equipment, installation, VPP and finance offerings to make household renewable energy more affordable $3.5bn cumulative loans funded $0.5bn cumulative loans funded Loan portfolio reached $1bn 2020 – Appointed exclusive administrator of Empowering Homes Program pilot by NSW Government – Rebranded as Plenti from RateSetter – Listed on the ASX in a $280m IPO $2.5bn cumulative loans funded >100,000 borrowers Automotive Personal Borrowers/Investors Renewable Energy Achievements 5 Technology-led lending Using technology to build Australia’s best lender Superior customer experiences Rich partner integrations We’ve built a market-leading technology platform Advanced credit analytics Fast Fast approvals Scalable Extensible Efficient Our platform by numbers ~ 50 Engineers, product managers and designers 2.5m ~ Web and API requests from customers and partners per day 99.95% ~ 89 ~ > Uptime over the past 12 months Up to Credit algorithms and rules evaluated per credit decision 6 Deployments of new products and features per day 4,250 Payments processed per day 6 Annual Report FY23 Chairman’s message Financial markets have been in sharp focus this year, driven by rapid inflation increases in most markets and corresponding interest rate increases by central banks. The impacts have been widespread, including bank failures in the US and Europe. Thankfully the Australian economy has been less impacted by these developments. Domestic inflation pressure (notably wage inflation) has been more moderate, which has to date helped contain necessary interest rate increases relative to some markets. Our banking system has also continued to function effectively, supported by the actions and policies our government and regulators have taken and sustained since the global financial crisis. Although media attention has focused on banks, when considering how our financial system is serving us I often think the positive contribution made by non-banks (including fintechs) is overlooked – an increasingly important consideration given non-banks continue to grow their market presence. In this regard, I draw your attention to a report released by Perpetual Corporate Trust and the Australian Securitisation Forum in late 2022 titled ‘Agility agenda: The story of Australia and New Zealand’s non-bank sector: past, present and future’. Amongst other matters, this report highlights how fintechs and other non-bank lenders are successfully: i) providing finance to customer segments where traditional banks are unable or unwilling (for a variety of reasons) to provide funding; and ii) introducing technology to make borrowing quicker, easier and more convenient for customers. Additionally, the report makes it apparent that fintechs and non-bank lenders can introduce competition which has not historically been present between the major banks. It is in this context that I express my pride in Plenti’s progress over the past year. Our continued emphasis on developing market-leading technology has again helped us to raise standards and expectations among customer and introducer partners in each of our lending verticals. Our continued growth in the prime borrower market has provided further evidence that fintechs can take meaningful market share in large lending markets, and which traditional banks and lenders would gladly service, rather than seeking only to serve underserved lending niches. And the strong growth in our loan portfolio – which is hedged against interest rate risks – has allowed us to contribute to a more diversified and resilient financial system. The last year has seen increased media and investor attention on fixed income investments, partly due to the greater volatility in equity markets. This is another area where Plenti has been able to make a positive contribution. Our retail investor platform, the Plenti Lending Platform, reached $1 billion in cumulative lending during the year, and at last count had paid its investors over $90 million in interest. Our team continued to prioritise the development of the Plenti Lending Platform throughout the year, helping to broaden the fixed income investment options available to Australian retail investors, whilst contributing further to the diversity of Plenti’s funding mix. Reflecting on how Plenti serves its customers, it is important to recognise that the income of the average Australian has been squeezed in real terms over the last year, despite the comparative strengths of the Australian economy. It is not surprising therefore that, across all lending markets, there is evidence that arrears and loss rates are moving towards levels experienced before the various stimulus measures taken as a consequence of the COVID-19 pandemic. Such a period of reversion is to be expected, and those lending businesses that made responsible lending decisions in recent years should, in my view, be well prepared for and be capable of handling this reversion, especially given low levels of unemployment are expected to be maintained, which is a significant lead-indicator of credit performance. In recent months your Board and management team has devoted significant time to considering how Plenti fits into its competitive environment. As a diversified lending business in highly fragmented lending markets, Plenti competes with a large number of businesses. However, few businesses achieve Plenti’s scale, few are able to drive such strong cost-to-income metrics, and even fewer are able to develop their technology with our cadence. We believe that our deliberate differentiation of Plenti’s customer experiences, customer reach, funding diversity and borrower credit strengths will support our sustained outperformance in terms of both scale and profitability over the short-to-medium term. I would like to thank my fellow directors for all that they have contributed during the year. On behalf of the Board and all stakeholders, I thank Martin Dalgleish for all he contributed over the eight years of his tenure as a director until August last year. I would also like to acknowledge the significant contribution Stephen Benton has made since joining the Board and the Audit and Risk committee in July 2022. On behalf of all directors, I wish to recognise the exceptional work of our executive team, our leadership group, and all of the Plenti team in helping to drive the very pleasing results that are set out in this annual report. Mary Ploughman Chairman 7 CEO’s message Plenti’s mission is to build Australia’s best lender. No matter the economic environment, our focus remains on leveraging our technology advantages to deliver market-leading experiences to our customers, as we help them bring their big ideas to life. We are proud of Plenti’s exceptional growth track record since we funded our first loan in 2014 and of the reputation we have developed with our customers and partners. Periods of change offer opportunities. I believe that over the past year, the changes we’ve observed in the Australian economy – including higher interest rates and normalising credit conditions – have granted Plenti the opportunity to demonstrate how our business is differentiated from other lenders. In the past year I believe we have clearly demonstrated the strength of the foundations we have built across technology, customer reach, funding diversity and credit capabilities. Notably, we grew our loan portfolio by 36% to $1.77 billion, our revenue by 62% to $143.5 million, and our Cash NPAT from $0.5 million to $4.5 million. I am extremely proud of how well the Plenti team adapted to a rapidly changing environment, optimising as required to balance the sometimes competing priorities of growth and profitability, and continuing to drive operational efficiencies to underpin both short and longer term profitability. We also maintained our strong commitment to driving innovation in each of our three key lending verticals – automotive, renewable energy and personal lending. This year I was particularly proud of the renewable energy finance innovations we delivered, which helped to grow our loan originations in this vertical by 24%. As you may recall, since founding Plenti we’ve sought not only to help our customers, but to support Australia’s clean energy future. In 2017 we launched our renewable energy lending team, which helped Australian households purchase solar-battery systems. This was then extended in 2021 when we launched our discounted electric vehicle finance offerings and integrated with the Australian online car purchase journey of the world’s largest electric vehicle manufacturer. During the year we continued to help drive broader adoption of renewable energy systems. Most notably, we launched our GreenConnect platform – an exciting initiative which demonstrates how our team is capable of shaping the future of the markets in which we operate. Turning to another key competitive strength of Plenti, in the past year the diversity of our funding continued to be evidenced, supported by our heritage as a peer-to-peer lending business. Through the Plenti Lending Platform, over 26,000 registered investors have together funded over $1 billion in loans, and earned over $90 million in interest, whilst receiving back 100% of interest and principal due. During the year, we renewed our focus on enhancing our retail investor offering, firstly by simplifying and reshaping our investment markets, and secondly by launching a new investment market, the Notes Market. As well as enhancing our offering to investors, the Notes Market provides further diversity to Plenti’s ABS funding whilst also releasing corporate capital invested in Plenti’s ABS transactions. More broadly, we have continued to take significant strides in developing the depth of our funding. Most notably, we completed two ABS transactions, one of which was voted by industry participants as KangaNews Deal of the Year for 2022, bringing our total ABS issuance to over $1.3 billion, and established Plenti as a regular issuer of high-quality ABS notes, with a growing following amongst both domestic and international investors. Our ability to fund the strong growth in our loan portfolio year after year, has benefited from our consistent focus on funding prime credit customers. Any benchmarking of our average customer credit profile and overall credit performance generally illustrates how differentiated our credit focus and capabilities are. Our relentless focus on using technology to attract and fund prime credit customers, and price our loans profitably, will help ensure we deliver value to our shareholders over the long term. Looking forward, we remain very confident about the scale of the business we believe we will build, and the returns we believe we can deliver. In terms of the next year, we have shifted our posture to be ready to take advantage of growth opportunities, as we know that by growing our loan portfolio, we can enjoy the economic benefits that come from earning more revenue and net interest amounts, from what is a platform cost-base. Looking further forward, our ambition is to achieve cost efficiencies of at least $25 million as our loan portfolio doubles from $1.5 billion to reach $3.0 billion, as we expressed during the year. What we have accomplished over the past 12 months can be attributed to the dedication of Plenti’s exceptional team – our ’Plentineers’. On behalf of the Board and our Executive team, I thank each Plentineer for the results we are so pleased to deliver in this report. I also thank our Board for the invaluable advice and support they have provided across so many facets of our business. We benefit from a Board that brings significant relevant experience, is highly engaged and highly motivated to drive strong and differentiated results for our shareholders. Together, our team is striving every day to build a business of real scale, and a legacy we can be proud of. Recognising our momentum, execution capabilities and market opportunities, I’m tremendously excited by Plenti as we advance our ambition to build Australia’s best lender. Daniel Foggo CEO 8 Annual Report FY23 Our strategy Building a sustainable and profitable business Through building on our existing foundations and leveraging our competitive strengths, we are committed to building a sustainable and profitable business which delivers strong returns for investors. Our strategic priorities have been consistent since we launched our services to customers in 2014. These priorities are to: ■ Establish market leadership ■ Extend our technology advantages ■ Optimise our funding Plenti’s first strategic priority – to establish market leadership – reflects our ambition to continue growing loan originations, and to be the recognised leader in each of our lending segments as measured by customer demand, loan portfolio size, and consumer opinion. We believe our progress towards achieving this strategic priority will continue to be supported by positive structural changes that are underway in the large automotive, renewable energy and personal loan lending verticals, which together represent around $50 billion of lending each year. Plenti’s second strategic priority – to extend our technology advantages – encompasses our dedication to driving innovation and delivering to our customers and partners even simpler, faster and fairer loans; and to driving operational efficiencies as we scale. In the past year, key technology improvements have included loan application speed and efficiency enhancements, rich integrations with referral partners, and of course growth initiatives such as the launch of our GreenConnect platform. Additionally, the technology underpinning our credit performance – including credit decision and pricing models – was further advanced. These facilities are complemented by a wholesale funding structure, supported by investment from banks and the Government’s Clean Energy Finance Corporation, and our retail investor platform, the Plenti Lending Platform – our original funding source and which has now attracted over 26,000 investors. During the year, we completed two ABS transactions, bringing our total ABS issuance to over $1.3 billion. The effective execution of our strategic priorities can be seen in the results that follow, and our continual advancement towards our mission, which is to build Australia’s best lender. Plenti’s final strategic priority – to optimise our funding – reflects our commitment to achieving funding depth and diversity, in turn helping to provide business resilience, whilst minimising funding costs. In this regard, Plenti has three dedicated warehouse funding facilities – two for automotive loans (one of which includes an EV-specific tranche) and another for renewable energy and personal loans. Strategic priorities Establish market leadership Extend our technology advantage Optimise our funding Establish prime lending leadership positions across each of our lending segments – as measured by borrower demand, loan portfolio size and customer experience Continually invest in our technology platform to innovate and deliver market-leading lending experiences to customers Continually develop funding diversity and scalability Market leadership Technology advantage Leverage technology platform to continually increase operating efficiency Optimise the costs of funding Funding optimisation 9 Operational overview Automotive lending Plenti has established a meaningful presence in the ~$35 billion secured automotive loan market since launching its secured automotive offering in 2017. Secured automotive lending remained our largest vertical during the year, with loan originations of $572 million, down 11% on the prior year, but driving loan portfolio growth of 34%, given the rapid loan origination growth achieved in the prior year. The moderation in loan originations reflected our decision to materially increase borrower rates to drive a recovery in margins, offsetting funding cost increases experienced during the year. Additionally, a number of external factors, including continued restrictions in supply of new vehicles, led to constrained growth of the overall automotive finance market. Our proprietary technology platform continued to provide a significant advantage relative to traditional lenders allowing us to deliver market-leading customer approval, settlement and funding experiences across a broad range of distribution channels. $ Loan originations ($m) We maintained our focus on further developing market-leading automotive loan application experiences, building distribution capabilities through both digital and broker referral partners, developing our highly effective sales team, enhancing our fast and efficient loan processing capabilities, and advancing our automotive funding program. Several product enhancements were delivered over the year, including the deepening of our technology integration with a large EV manufacturer, providing a seamless digital end-to-end quoting, application and settlement experience, directly integrated into their online vehicle sales experience – which is understood to be the first integration of its kind in Australia, and sets a new standard for the experience that can be delivered to new car buyers. This sophisticated integration capability and proven track record positions Plenti well to take advantage of the trend for automotive manufacturers and dealers to deliver high-quality sales and finance experiences online. Our ongoing automotive lending activities were supported by the completion of a $437 million secured automotive loan ABS transaction, bringing our total secured automotive ABS issuance to over $740 million. 998m 35% Loan book 34% on pcp 1. Management estimate. > New car loan originations 639 (11)% 572 on pcp 231 FY21 FY20 FY22 FY23 FY21 Closing loan book ($m) 998 34% on pcp 745 264 FY21 $ FY20 FY22 FY23 35bn+ Annual lending 1 2% estimated Plenti market penetration FY21 10 Annual Report FY23 Operational overview Renewable energy lending Plenti is committed to helping Australian households transition to a clean energy future through financing the installation of solar panels and home batteries. Renewable energy lending increased by 24% to $122 million, despite a reduction in the number of systems installed in Australia year-on-year. There were 310,352 installations in 2022, down from 2021’s record 389,665 installations.1 However, the market continued to benefit from favourable trends, including: ■ Increases in household energy costs (up 20% in 2022)2, making the economics of the installation of solar and/and solar-battery systems more appealing ■ Increases in proportion of systems installed with batteries, now 15% of total installations, up from 3% in 2021, driving increased demand for finance given the higher cost ■ Government programs continuing to promote/subsidise the installation of household renewable energy systems We increased market share by continuing to expand our accredited referral partner network, supported by our diverse product offering allowing referral partners to offer both interest-free finance and interest-bearing green loan solutions at the point-of-sale. 750 > Partner network of renewable energy equipment vendors Loan originations ($m) 122 In a step forward for our partnership-led growth strategy, we launched GreenConnect, an innovative point-of-sale platform that brings together product manufacturers, energy retailers, installers, and Plenti’s cost-effective finance to provide households with access to a broad selection of more affordable home solar-battery systems. By combining all services into one platform, we are together making the purchase of a solar-battery system simple and easy to understand, whilst improving the value provided to homeowners. We have announced GreenConnect partnerships with AGL, Hanwha Qcells Australia, Sonnen and Amber, and expect to add additional partners over the coming year. Plenti concluded its delivery of two state government household solar and battery schemes this year. Delivery of the $100 million Home Battery Scheme was completed in South Australia, facilitating over the life of the program the installation of 21,343 solar and battery systems and creating 250MWh of storage capacity. In New South Wales, the pilot for the Empowering Homes Program was completed. Since inception Plenti’s renewable energy lending has facilitated the installation of over 35,516 solar and solar-battery systems. 201m 12% $ Loan book 42% on pcp 1. Clean Energy Council Australia – Clean Energy Report 2022. 2. Treasury estimates. Originations with batteries 24% on pcp 98 57 FY21 FY20 FY22 FY23 FY21 Closing loan book ($m) 201 42% on pcp 142 86 FY21 ~ FY20 FY22 FY23 320k FY21 Households installing solar annually 1 ~10% estimated finance market penetration 11 Personal lending Loan originations ($m) 437 Personal loan originations were $437 million, up 20% on the prior year, reflecting growth in market demand and Plenti’s continued market share gains. This loan origination growth drove a 37% increase in the loan book over the year. Loan origination growth was also supported by increases in market share from leading mortgage and asset finance brokers, attracted to the speed and ease of the application and funding experience we offer our partners. Overall personal loan market loan originations increased strongly in the year, recovering from reduced demand the year prior due to the impacts of COVID-19. Demand increased across most major loan purposes, including loans for vehicles, home improvement, travel, medical procedures and weddings. Our ongoing personal loan activities were supported by the completion of a $300 million personal loan and renewable energy receivables ABS transaction. Network of accredited broker partners 17 loan aggregator partners Loan book 1. ABS 5601.0 Table 27 LTM to Jun-20. 37% on pcp FY20 FY22 FY23 FY21 Closing loan book ($m) 568 37% on pcp 413 264 FY21 8,500 568m 800k $ on pcp 183 FY21 Plenti’s personal loan origination growth was supported by investments in direct origination technology and capabilities, helping improve customer experiences, reduce application processing and decisioning times and optimise customer acquisition costs. In particular, investments in data capabilities – including machine learning technologies and deeper integrations with digital marketing partners – delivered significant improvements in cost efficiency of digital origination channels. Enhanced use of data assisted in greater leveraging the over 800k loan applicants or borrower profiles in our ecosystem to drive additional originations from repeat and cross-sell borrower customers. > 20% 365 Customers in ecosystem $ FY20 FY22 FY23 12bn Annual lending opportunity 1 3% estimated market share FY21 12 Annual Report FY23 Operational overview Credit performance From a credit perspective, our long-held ambition is to develop better loan options for Australia’s prime credit customers, and to leverage our technology and data capabilities to ensure that we not only improve customer experiences but drive strong and consistent credit performance outcomes. Since Plenti’s inception, we have been successful at attracting and funding the prime credit customers we have targeted. At the end of the period, the weighted average Equifax comprehensive credit score across our loan portfolio was 831, significantly above the Australian population average. We were also successful during the year at maintaining our strong credit track record, with credit losses across the year representing only 0.68% of our average loan portfolio. The strength of our average borrower credit characteristics and our credit performance continued to be supported by our secured automotive and renewable energy loan books, which empirically have attracted higher credit quality borrowers and delivered superior credit outcomes. We have had two key priorities across our credit activities over the last year. The first was to further enhance our credit decisioning and pricing capabilities, including through the introduction of machine-based learning for our personal lending activities, so we can m