Vanquis Banking Group PLC · LSE:VANQ
Vanquis Banking — Provident Financial — FY2002 Earnings Presentation
46 slides from Vanquis Banking's earnings presentation, 2003
Slide 1: Provident Financial
PROVIDENT FINANCIAL
Slide 2: Full year results to 31 December 2002
Provident Financial Full year results to 31 December 2002
Slide 3: Highlights
Provident Financial Highlights > Strong growth > Good results > Excellent progress > Sound foundations for future growth
Slide 4: Strategy
Provident Financial Strategy We aim to be a leading international provider of simple financial services > Serving customers earning moderate incomes > 2 strands: - international expansion - broader product range > Internationalisation - a proven success > Broader product range - Yes Car Credit acqui
Slide 5: Developments planned for 2003
Provident Financial Developments planned for 2003 > Market test of a credit card > Home credit pilot in Mexico
Slide 6: Group results for 2002
Provident Financial Group results for 2002 Highlights > Turnover up by 5.0% to £875 million > Home credit customers up by 12% to 2.6 million > Pre-exceptional profit up 7.4% to £182.1 million > Pre-exceptional earnings per share up 5.3% to 53.05 pence > Dividend per share up 5.3% to 30.90 pence
Slide 7: Divisional results
Provident Financial Divisional results 2002 2001 change £m £m % UK home credit 152.5 150.4 1.4 International 10.6 0.8 1,302.9 Motor insurance 35.8 35.1 2.0 Central costs (17.8) (13.2) (36.3) Businesses sold or closed* 1.0 (3.5) 128.1 Pre-exceptional profit 182.1 169.6 7.4 Pre-exceptional earnings pe
Slide 8: Capital structure
Provident Financial Capital structure 2002 2001 change £m £m £m Receivables 963 729 234 Borrowings 696 484 212 Consumer credit capital 227 192 35 Consumer credit goodwill 85 3 82 Motor insurance capital 91 102 (11) Group capital 403 297 106 Consumer credit capital % net receivables 24% 26% Gearing 1
Slide 9: Free cash flow and surplus capital generated
Provident Financial Free cash flow and surplus capital generated 2002 2001 £m £m UK home credit free cash flow 81.5 77.3 International home credit free cash flow (52.6) (62.0) Home credit free cash flow 28.9 15.3 Add back: debt funding of loan book growth 55.7 60.5 Home credit surplus capital 84.6 7
Slide 10: Full year results: Motor insurance
Provident Financial Full year results > Motor insurance
Slide 11: Motor insurance: overview
Provident Financial Motor insurance: overview > Cyclical downturn in 2002 > Market premiums down, claims costs up > Provident Insurance premium rates increased > Sharp fall in policyholder numbers and gross written premiums > Pre-tax profit up 2% to £35.8 million > 29% post-tax ROE
Slide 12: Motor insurance: full year results
Motor insurance Full year results 2002 2001 change £m £m % Gross written premium 242.5 255.3 (5.0) Gross earned premium 258.3 239.1 8.0 Underwriting profit 11.4 12.0 (5.3) Combined ratio (%) 96% 95% Investment income 24.4 23.1 5.8 Profit from motor underwriting 35.8 35.1 2.0 Average investment fund
Slide 13: The insurance cycle
Motor insurance The insurance cycle ‘000 Policyholders £m 900 PBT 40 800 35 700 30 600 25 500 20 400 15 300 200 10 100 5 0 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Slide 14: Regulation
Provident Financial Regulation > EU Consumer Credit Directive > UK Consumer Credit Act review
Slide 15: Full year results: UK consumer credit division
Provident Financial Full year results > UK consumer credit division • UK home credit • Yes Car Credit • Credit card – Vanquis Bank
Slide 16: Home credit: overview
UK consumer credit Home credit: overview > Long established, successful business > Cash generative > 1.6 million customers > Personal service and close customer relationships > Transparent, flexible and convenient > Tailored to suit customers’ requirements > Customer satisfaction of 90%
Slide 17: Home credit: market conditions
UK consumer credit Home credit: market conditions > Mature market > Balancing growth, costs and bad debt > Customers better off, borrowing less frequently > Working harder to recruit more customers > Increase in bad debts, but optimum profit outcome
Slide 18: Home credit: key statistics
UK consumer credit Home credit: key statistics 2002 2001 change % Customer numbers 1.63m 1.61m 1.4 Credit issued £922m £915m 0.7 Average credit issued per customer £581 £589 (1.3) Collections £1,299m £1,273m 2.0 Net receivables at year end £636m £618m 3.0 Year ended 31 December
Slide 19: Home credit: full year results
UK consumer credit Home credit: full year results 2002 2001 change £m £m % Turnover 481.9 465.5 3.5 Bad debt 84.9 76.3 (11.3) Bad debt % credit issued 9.2% 8.3% (0.9) Operating costs 225.9 218.6 (3.3) Interest payable 18.6 20.2 7.8 Profit before tax 152.5 150.4 1.4 Free cash flow 81.5 77.3 5.4 Year
Slide 20: Yes Car Credit: overview
UK consumer credit Yes Car Credit: overview > Impressive growth record > Leading position in attractive market > Unique integrated, credit-led business model > Excellent growth prospects > Modestly earnings enhancing in 2003; increasingly thereafter
Slide 21: Yes Car Credit: profit and loss
UK consumer credit Yes Car Credit: profit and loss Pro-forma 2002 2001 change % Cars sold 30,615 24,049 27 Turnover £207m £153m 35 Cars financed in-house 22,981 16,035 43 % financed in-house 75% 67% 8 Customer receivables £163m £103m 59 Bad debt as % of average net receivables 14.1% 15.3% Pro-forma
Slide 22: Vanquis Bank: credit card
UK consumer credit Vanquis Bank: credit card > Market test > Experienced team > Target market > Outsourced infrastructure > Market opportunity > Differentiated offer > International markets
Slide 23: Full year results: International
Provident Financial Full year results > International home credit
Slide 24: International home credit: overview
International home credit International home credit: overview > Substantial growth > Excellent results from Poland and Czech Republic > Businesses successfully established in Hungary and Slovakia > Customers up 36% from 708,000 to 960,000 > Turnover up 43% to £142 million > Profit before tax up from
Slide 25: Strong customer growth continues – up 36%
International home credit Strong customer growth continues – up 36% 960,000 708,000 466,000 138,000 1999 2000 2001 2002 Slovakia - - 5,000 27,000 Hungary - - 10,000 55,000 Czech Republic 66,000 161,000 189,000 218,000 Poland 72,000 305,000 504,000 660,000 As at 31 December
Slide 26: Strong growth in credit issued – up 34%
International home credit Strong growth in credit issued – up 34% 287 (£m) 213 116 28 1999 2000 2001 2002 Slovakia - - 1 5 Hungary - - 2 14 Czech Republic 13 42 53 70 Poland 15 74 157 198 Year ended 31 December
Slide 27: Country profit/(loss) before tax
International home credit Country profit/(loss) before tax 2002 2001 change £m £m £m Poland 16.7 6.7 10.0 Czech Republic 5.1 2.5 2.6 Hungary (3.1) (2.3) (0.8) Slovakia (2.0) (1.3) (0.7) Divisional overhead (6.1) (4.8) (1.3) Profit from ongoing operations 10.6 0.8 9.8 Year ended 31 December
Slide 28: Annual profits
International home credit Annual profits Poland (£m) 16.7 Czech Republic (£m) 6.7 5.1 2.5 0.1 (0.6) (1.5) (2.6) (0.2) (1.1) (2.7) (2.8) Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Hungary (£m) Slovakia (£m) (2.3) (3.1) (1.3) (2.0) Yr 1 Yr 2 Yr 1 Yr 2
Slide 29: Mexico
International home credit Mexico
Slide 30: Mexico: country information
International home credit Mexico: country information Mexico Poland > Population 103 million 38 million > % of cities with over 10,000 people 82% 62% > Per capita annual income $8,800 $9,000 > S&P country rating A- A- > Economic growth rate (2003 est.) 3.5% 3.1% > Inflation 5.1% 3.2% > Interest rate
Slide 31: Mexico
International home credit Mexico Modern glass architecture of buildings along the Paseo de la Reforma, Mexico City.
Slide 32: Mexico
International home credit Mexico The Monument of the Angel of Independence The Cathedral of Mexico The Palace of Fine Arts
Slide 33: Mexico: target market
International home credit Mexico: target market C Demographic 26% of Population Household income between US $1,000 and US $3,000 per month. • Houses or apartments with two bedrooms and one bathroom. • Few houses with telephone lines. Most houses have televisions with videos, and in some cases a pers
Slide 34: Mexico: results of research
International home credit Mexico: results of research > Large and attractive market > Strong customer appeal > Under-served market
Slide 35: Group prospects for 2003
Provident Financial Group prospects for 2003 > Modest growth for UK home credit > Yes Car Credit expected to grow significantly > Investment in credit card circa £7 million > Lower profits from motor insurance > Further substantial growth from international
Slide 36: Group prospects for 2003
Provident Financial Group prospects for 2003 > Modest growth for UK home credit > Yes Car Credit expected to grow significantly > Investment in credit card circa £7 million > Lower profits from motor insurance > Further substantial growth from international
Slide 37: Group prospects for 2003
Provident Financial Group prospects for 2003 Provident has an impressive record of growth and we are confident about prospects for 2003 182.1 Pre-exceptional profit before tax (£m) 169.6 155.0 160.2 145.9 136.5 118.5 101.1 81.1 62.5 34.1 40.7 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 20
Slide 38: Provident Financial
PROVIDENT FINANCIAL
Slide 39: Poland: key statistics
Appendix International home credit Poland: key statistics 2002 2001 change % Customer numbers 660,000 504,000 31 Credit issued £198.1m £157.9m 26 Average credit issued per customer £348 £381 (9) Collections £244.5m £179.9m 36 Net receivables at year end £115.4m £82.4m 40 Year ended 31 December
Slide 40: Poland: profit and loss account
Appendix International home credit Poland: profit and loss account 2002 2001 change £m £m % Turnover 102.2 74.1 38 Operating costs 53.5 45.0 (19) Bad debt 18.1 11.8 (53) Bad debt % credit issued 9.1% 7.5% Interest payable 13.9 10.6 (31) Profit 16.7 6.7 147 Profit margin 16.3% 9.1% Year ended 31 Dece
Slide 41: Czech Republic: key statistics
Appendix International home credit Czech Republic: key statistics 2002 2001 change % Customer numbers 218,000 189,000 16 Credit issued £69.8m £53.2m 31 Average credit issued per customer £345 £300 15 Collections £86.3m £68.0m 27 Net receivables at year end £38.9m £27.5m 41 Year ended 31 December
Slide 42: Czech Republic: profit and loss account
Appendix International home credit Czech Republic: profit and loss account 2002 2001 change £m £m % Turnover 33.6 24.9 35 Operating costs 18.5 14.4 (29) Bad debt 7.7 6.0 (28) Bad debt % credit issued 11.0% 11.2% Interest payable 2.3 2.0 (15) Profit 5.1 2.5 109 Profit margin 15.2% 9.9% Year ended 31
Slide 43: Hungary: key statistics
Appendix International home credit Hungary: key statistics 2002 2001 change % Customer numbers 55,000 10,000 411 Credit issued £13.7m £1.7m 711 Average credit issued per customer £464 £371 25 Collections £12.1m £1.0m 1,077 Net receivables at year end £6.9m £1.0m 590 Year ended 31 December
Slide 44: Hungary: profit and loss account
International home credit Appendix Hungary: profit and loss account 2002 2001 change £m £m % Turnover 4.9 0.4 1,000 Operating costs 6.4 2.5 (155) Bad debt 1.1 0.1 (710) Bad debt % credit issued 8.0% 8.0% Interest payable 0.5 0.1 (563) Profit/(loss) (3.1) (2.3) (35) Year ended 31 December
Slide 45: Slovakia: key statistics
Appendix International home credit Slovakia: key statistics 2002 2001 change % Customer numbers 27,000 5,000 434 Credit issued £5.0m £0.7m 609 Average credit issued per customer £354 £383 (8) Collections £4.6m £0.5m 818 Net receivables at year end £2.2m £0.3m 633 Year ended 31 December
Slide 46: Slovakia: profit and loss account
International home credit Appendix Slovakia: profit and loss account 2002 2001 change £m £m % Turnover 1.7 0.2 827 Operating costs 3.0 1.4 (118) Bad debt 0.4 0.1 (613) Bad debt % credit issued 8.0% 8.0% Interest payable 0.3 - (636) Profit/(loss) (2.0) (1.3) (53) Year ended 31 December