Nutun Limited · JSE:NTU
Nutun — Transaction Capital — FY2015 Earnings Presentation
38 slides from Nutun's earnings presentation, November 2015
Slide 1: Transaction Capital Audited Results
O Transaction Capital AUDITED ~ FESUL]S
Slide 2: eel
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Slide 3: Strategic & Operational Highlights
STRATEGIC & OPERATIONAL HIGHLIGHTS • Robust financial performance › 20%* organic growth in headline earnings per share › Continued improvement in credit metrics • Reconstitution of operating divisions (asset-backed lending & risk services) › Occupy leading market positions › Experienced & skilled ma
Slide 4: Environment
20 ENVIRONMENTO~
Slide 5: Macro-economic Environment
ENVIRONMENT MACRO-ECONOMIC ENVIRONMENT • Macro- & socio-economic challenges continue to constrain growth in South Africa › Social: persistent low employment levels with little or no real wage growth; growing protest action & social unrest › Energy: electricity supply constraints, higher electricity
Slide 6: Environment
ENVIRONMENT Defensive positioning enables Transaction Capital to prosper despite a challenging & low growth South African economic environment ASSET-BACKED LENDING • Replacement of ageing national minibus taxi fleet stimulates demand for taxi finance • Commuters’ use of taxis remains consistently hi
Slide 7: Strategy & Prospects
STRATEGY & PROSPECTS
Slide 8: Transaction Capital Group September 2015
TRANSACTION CAPITAL GROUP 30 SEPTEMBER 2015 TRANSACTION CAPITAL LIMITED – CEO: David Hurwitz, group tenure: 10 years | employees: 3 913 | headline earnings: R393m ASSET-BACKED LENDING RISK SERVICES CEO: Terry Kier CEO: David McAlpin Group tenure: 8 years Group tenure: 7 years HEADLINE EARNINGS R212m
Slide 9: SA Taxi provides business support to SMEs
SA TAXI PROVIDES BUSINESS SUPPORT TO SMEs DEEPENING ACCESS TO DEVELOPMENTAL CREDIT, & FINANCING UNDER-SERVED & EMERGING SMES WHO WOULD OTHERWISE REMAIN OUTSIDE THE FORMAL ECONOMY IN SOUTH AFRICA OUR PORTFOLIO RESULTING IN R6.2 billion 1.2 billion >200 000 taxis account for¹ 69% currently financed SA
Slide 10: Transaction Capital's Asset-Backed Lending Division
TRANSACTION CAPITAL’S ASSET-BACKED LENDING DIVISION Generating in-depth client insight via granular telematics, credit, vehicle & other data to enable A unique blend of precise & informed credit origination vehicle procurement, & collections decisioning sales, repossession & …utilises its proprietar
Slide 11: Asset-Backed Lending Distinctive Competencies
ASSET-BACKED LENDING DISTINCTIVE COMPETENCIES CAPITAL LOAN RISK REFURBISHMENT/ ALLOCATION ORIGINATION MANAGEMENT RECYCLING & MANAGEMENT & SALES & COLLECTIONS OF ASSETS Allocate equity, geared Originate & sell Assess, monitor Extend with debt, to achieve new & pre-owned & manage risk the economic lif
Slide 12: Asset-Backed Lending Looking Forward
ASSET-BACKED LENDING LOOKING FORWARD FIXED ROUTE POINT-TO-POINT SME (MINIBUS TAXI) (METERED TAXI) (BAKKIE) CAPITAL Established dedicated Apply existing Further develop ALLOCATION panel facility capabilities bakkie offering & develop to SMEs, Continue to associated building on strengthen procurement
Slide 13: Transaction Capital Risk Services in South Africa
TRANSACTION CAPITAL RISK SERVICES ENSURES A HEALTHY SOUTH AFRICAN CONSUMER CREDIT ENVIRONMENT IN SOUTH AFRICA OUR PORTFOLIO RESULTING IN 5.7 there are: 35 2 800 million million UNIQUE MBD CUSTOMERS 16 ADULTS [aged 15-65] CALL CENTRE AGENTS in 23 4 SOUTH AFRICAN ADULTS million million ACTIVE CREDIT C
Slide 14: Benchmark Against Global Listed Peers
WE BENCHMARK OURSELVES AGAINST THE FOLLOWING GLOBAL LISTED PEERS EUROPE Purchased Book Debt UNITED STATES Credit Management Services Investment in Receivable Portfolios Accounts Receivable Management BRAZIL Distressed Assets Credit Recovery Services SOUTH AFRICA AUSTRALIA Capital Solutions Purchased
Slide 15: Transaction Capital's Risk Services Division
TRANSACTION CAPITAL’S RISK SERVICES DIVISION An efficient platform driving superior performance & facilitating scale via cutting edge IT systems & processes Generating in-depth insight to enable precise & informed … is a technology-led, Improving our clients’ internal & external decisioning ability
Slide 16: A Growing Non-Performing Loans Market in South Africa
A GROWING NON-PERFORMING LOANS MARKET IN SOUTH AFRICA NON-PERFORMING LOAN MARKET SIZE & GROWTH (Rbn)2 FACE VALUE OF DEBT SERVICED 158 BOOKS PURCHASED 103 105 63 Other players Capital 67 since 1999 89 78 in addressable Solutions 76 R14bn Non-performing loan value market R69bn¹ Customer 69 61 Manageme
Slide 17: Customer Management Client Engagement Model
RISK SERVICES PRODUCT SOLUTIONS CUSTOMER ENGAGEMENT LIFECYCLE ORIGINATE MANAGE COLLECT Identifying & winning new customers Enabling payment processes Solving our clients’ impaired debt problem using data analytics & customer management through collections & capital solutions 1 2 3 CUSTOMER MANAGEMEN
Slide 18: Market Segments
MARKET SEGMENTS CUSTOMER ENGAGEMENT LIFECYCLE ORIGINATE MANAGE COLLECT Identifying & winning new customers Enabling payment processes Solving our clients’ impaired debt problem using data analytics & customer management through collections & capital solutions 1 2 3 Lead generation & customer acquisi
Slide 19: Risk Services – Looking Forward
RISK SERVICES – LOOKING FORWARD CONSUMER CREDIT BANKING SPECIALIST PUBLIC TELECOMS INSURANCE SMEs RETAIL LENDING SECTOR, SOEs Provide Target Apply Expand Develop Develop Augment services each bank services to services to competencies competencies offering to ORIGINATE earlier in with tailored a grea
Slide 20: Acquisitions
ACQUISITIONS • Low growth South African economy with many challenges • Similar level of performance & growth expected in the medium term › Established businesses with highly defensible market positions › Attractive risk adjusted returns achieved organically › Continue reinvesting into organic capita
Slide 21: Acquisition Target Criteria
TARGET STRATEGIC ACQUISITIONS TO FURTHER LEVERAGE & ENHANCE OUR CAPABILITIES & EXPAND INTERNATIONALLY MARKET POSITION CAPABILITIES • Niche market participant in their chosen • Deep industry knowledge vertical • Intellectual property & expertise that can: • Strong relationships with their clients › b
Slide 22: Audited Results for the Year Ended September 2015
AUDITED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER
Slide 23: Financial Highlights
FINANCIAL HIGHLIGHTS RETURN ON AVERAGE ASSETS CREDIT LOSS RATIO ▲ TO IMPROVED TO 4.4% TOTAL DIVIDEND 3.6% FROM FOR THE YEAR OF HEADLINE EARNINGS FROM 3.5% 22 cents PER SHARE* 4.2% PER SHARE ▲20% TO RETURN ON ▲38% NON-PERFORMING AVERAGE EQUITY 69.0 cents IMPROVED TO ▲ TO DIVIDEND COVER HEADLINE EARNI
Slide 24: Early Adoption of IFRS 9
EARLY ADOPTION OF IFRS 9 RATIONALE • Accounting policies more closely aligned to the group’s operational policies and strategic intentions • Increased provisions result in lower balance sheet risk • Removes uncertainty around the future impact on financial results, ratios and the availability of cap
Slide 25: Early Adoption of IFRS 9: Provisions
EARLY ADOPTION OF IFRS 9 EXPECTED VS. INCURRED LOSS IFRS 9 ADOPTION AND INCOME STATEMENT ILLUSTRATION ULTIMATE LOSS REMAINS UNCHANGED ADOPTION PROVISIONS Stage 1 Stage 2 Stage 3 Repo IMPAIRMENT STAGE IAS 39 Provisions IFRS 9 Provisions AUDITED RESULTS FINANCIAL REVIEW FOR THE YEAR ENDED 30 SEPTEMBER
Slide 26: Financial Position – Group
FINANCIAL POSITION GROUP 49.5 • Conservative growth in gross loans & advances from R6.1bn to R6.7bn ▲10% 45.4 43.3 › Origination strategies remained conservative 41.6 targeting improved credit quality, new product lines including bakkies & Nissan minibus • Equity R2.6bn ▲14% › Group well positioned
Slide 27: Financial Performance – Group
FINANCIAL PERFORMANCE GROUP • HEPS* ▲20% from 57.3cps to 69.0cps • Headline earnings* ▲19% from R330m to R393m › Net interest income ▲13% › Improved credit metrics › 18% ▲ in EBITDA* from services 16.7 15.4 • Compared to 2014 IFRS 9 pro forma result 13.1 13.0 › Headline earnings ▲30% 12.5 12.8 › HEP
Slide 28: Portfolio Mix
PORTFOLIO MIX Rm Growth Contribution • Contribution Headline earnings 2015 2014 2013 2015 2014 2015 2014 2013 › Asset-backed lending contribution flat at 53% Asset-backed lending¹ 208 176 154 18%* 14% 53% 53% 54% › Credit services contribution decreased marginally from 35% to 34% Risk services 134 1
Slide 29: Asset-Backed Lending Performance
ASSET-BACKED LENDING PERFORMANCE • Headline earnings attributable to the division* ▲20% to R212m • Net interest margin stable at 11.3% › Incorporates the suspension of interest in 48.9 accordance with IFRS 9 48.7 43.6 44.1 • Credit loss ratio improved from 4.4% to 3.9% • Cost-to-income ratio stable
Slide 30: Asset-Backed Lending Credit
ASSET-BACKED LENDING CREDIT 47.0 45.9 • Gross loans & advances ▲12% to R6.2bn › Number of loans ▲3% › Origination strategies remained conservative › Access to new premium vehicles interrupted from March onwards - provided SA Taxi with 31.0 opportunity to sell more repossessed 27.7 vehicles › Exclusi
Slide 31: Risk Services
RISK SERVICES • Headline earnings*▲16% to R134m 86.9 › Earnings growth in MBD & Rand Trust 83.8 82.1 82.5 exceeded 30% › Agency revenue ▲16% › Principal revenue ▲25% 51 49 49 › Losses in Principa’s Qarar joint venture 46 tempered performance and was sold in September 2015 › Cost-to-income ratio impr
Slide 32: Capital Management
CAPITAL MANAGEMENT • SA Taxi returned to local debt capital markets during April and November via 49.5 Transsec (RF) Ltd 45.4 43.3 › Cumulatively raised almost R1bn 41.6 › Remainder successfully raised via offshore 477 and local unlisted funding sources 849 849 437 › Strategy remains innovative and
Slide 33: Funding Philosophy
FUNDING PHILOSOPHY Diversification by Diversification by funding structure funder category • Wholesale funding model proves to be robust › “Positive liquidity mismatch” between asset & liability cash flows 16% 13% 1% 27% › No exposure to overnight debt instruments 13% & limited exposure to 12-month
Slide 34: Shareholding November 2015
SHAREHOLDING 20 NOVEMBER 2015 8% 17% 46% 5% 8% 8% 8% Directors of Transaction Capital and its subsidiaries & their associates Old Mutual Investment Group South Africa Proprietary Limited Ethos Private Equity Allan Gray Public Investment Corporation Remaining institutional shareholders Retail investo
Slide 35: Conclusions
CONCIUSOMTS
Slide 36: Investment Case
INVESTMENT CASE TRANSACTION CAPITAL IS …invested in market-leading • Divisions are of scale holding leading positions in the markets they serve. companies • Scalable business platforms which can be leveraged for profitable growth. • Taxi finance market is under-served, with the ongoing replacement o
Slide 37: Questions
FSTONS AUDITED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER
Slide 38: Disclaimer
DISCLAIMER This presentation may contain certain "forward-looking statements" regarding beliefs or expectations of the TC Group, its directors and other members of its senior management about the TC Group's financial condition, results of operations, cash flow, strategy and business and the transact