Nutun Limited · JSE:NTU
Nutun — Transaction Capital — FY2017 Earnings Presentation
43 slides from Nutun's earnings presentation, 2017
Slide 1: Results for the year ended 30 September 2017
jp Y / RAN » FOR THE YEAR ENDED 30 SEPTEMBER ] »—
Slide 2: Transaction Capital 2017
2017 oO Transaction Capital
Slide 3: Group structure and 2017 financial & operational highlights
TRANSACTION CAPITAL GROUP STRUCTURE 2017 FINANCIAL & OPERATIONAL HIGHLIGHTS (FY17 compared to FY16) CEO: Terry Kier, 10-year group tenure CEO: David Hurwitz, 12-year group tenure CEO: Dave McAlpin, 9-year group tenure R303 MILLION¹ R8.3 BILLION R577 MILLION¹ 96.4 CPS R233 MILLION¹ R891 MILLION HEADL
Slide 4: Group strategic & operational highlights
GROUP STRATEGIC & OPERATIONAL HIGHLIGHTS STRATEGIC POSITIONING OF OPERATING DIVISIONS DEBT CAPITAL MARKETS 5 years since listing Uninterrupted access to the debt capital markets • Headline earnings compound annual growth rate (CAGR) of 21% • Despite political instability & SA’s sovereign rating down
Slide 5: Divisional strategic & operational highlights
DIVISIONAL STRATEGIC & OPERATIONAL HIGHLIGHTS ACQUISITIONS JUNE 2017 MINIBUS TAXI INDUSTRY PROTEST ACTION 3 acquisitions within Transaction Capital Risk Services (TCRS) Immediate assistance to clients • 100% of Recoveries Corporation (January 2017) • Reduced top interest rate to 26.5% on future loan
Slide 6: Transaction Capital evolution since listing
TRANSACTION CAPITAL EVOLUTION SINCE LISTING MANAGEMENT INTERVENTIONS TO CREATE VALUE October 2016 Conditional share plan approved November 2016 Established R2bn domestic note programme at group level November 2013 CAGR 2012 to 2017: Paycorp disposal for R937m December 2016 / January 2017 Headline ea
Slide 7: Group portfolio mix
GROUP PORTFOLIO MIX COMPOSITION OF EARNINGS POST ACQUISITIONS TO BE MORE EVENLY WEIGHTED 7% 9% 40% 37% 2017 2016 53% 54% SA Taxi TCRS GEO ACCRETIVE CASH DEPLOYMENT CONVERTING INTEREST INCOME ON EXCESS CASH INTO OPERATING EARNINGS AT TCRS Rm Growth Contribution Headline earnings 2017 2016 2017 2017 2
Slide 8: Transaction Capital 2017
2017 Transaction Capital a
Slide 9: SA Taxi
SA TAXI 1 An innovative & pioneering business model with operations expanding throughout the financial services & asset value chain, building a scalable SA TAXI IS A VERTICALLY platform INTEGRATED TAXI 2 A unique blend of vehicle procurement, retail, repossession & refurbishment PLATFORM INCORPORATI
Slide 10: SA Taxi impact
SA TAXI IMPACT DELIVERING A SOCIAL & COMMERCIAL BENEFIT SME SME EMPOWERMENT EMPOWERMENT & & ECONOMIC ECONOMIC TRANSFORMATION TRANSFORMATION INCLUSIVE GROWTH SA Taxi facilitates asset ownership by black owned SMEs BLACK OWNED SMEs 100% WOMEN OWNED SMEs 21% UNDER THE AGE OF 35 YEARS 17% PROPORTION OF
Slide 11: SA Taxi impact: clients
SA TAXI IMPACT SA TAXI’S CLIENTS 50 YEARS OLD 36 YEARS OLD 38 YEARS OLD Owns & operates 6 taxis, employing 8 people Entered the industry as a driver for 8 years. Owns 5 taxis Now owns & operates 10 taxis 60 YEARS OLD 52 YEARS OLD 50 YEARS OLD Now owns 3 taxis, after her father bought her Entered the
Slide 12: Environment & market context
ENVIRONMENT & MARKET CONTEXT MINIBUS TAXI INDUSTRY IS RESILIENT, DEFENSIVE & GROWING DESPITE SA’S ECONOMIC CLIMATE TRAIN 1 MILLION ▼>30% COMMUTER TRIPS DAILY MINIBUS TAXI PUBLIC TRANSPORT COMMUTERS RELY RECEIVES 44% OVER 15 MILLION ▲ ON MINIBUS TAXI GIVEN ITS ACCESSIBILITY, OF GOVERNMENT SUBSIDY COM
Slide 13: Environment & market context: SA Taxi fleet movement
ENVIRONMENT & MARKET CONTEXT SA TAXI FLEET MOVEMENT MINIBUS TAXI IS THE DOMINANT MODE OF PUBLIC TRANSPORT IN AN INTEGRATED PUBLIC TRANSPORT NETWORK Taxi rank Bus station Train station SA Taxi exposure Railway lines Major highways Secondary highways Minibus taxi serves as a trunk service in parallel
Slide 14: Commuter options: short distance route
COMMUTER OPTIONS MINIBUS TAXI IS THE PREFERRED MODE OF PUBLIC TRANSPORT DUE TO COMPETITIVE PRICING, ACCESSIBILITY & RELIABILITY SHORT DISTANCE ROUTE | SOWETO TO JOHANNESBURG: 23KM COMPARATIVE MODES OF TRANSPORT Taxi Train Bus BRT N Station & Scheduled Scheduled Accessibility On route scheduled stops
Slide 15: Commuter options: long distance route
COMMUTER OPTIONS MINIBUS TAXI IS THE PREFERRED MODE OF PUBLIC TRANSPORT DUE TO COMPETITIVE PRICING, ACCESSIBILITY & RELIABILITY LONG DISTANCE ROUTE | JOHANNESBURG TO DURBAN: 595KM COMPARATIVE MODES OF TRANSPORT Bus - Taxi Train Bus - Eldo Greyhound Station & Scheduled Scheduled Accessibility On rout
Slide 16: Environment for minibus taxi operators
ENVIRONMENT FOR MINIBUS TAXI OPERATORS MINIBUS TAXI OPERATORS REMAIN RESILIENT DESPITE THE CURRENT CHALLENGING ECONOMIC ENVIRONMENT VEHICLE & OPERATING COSTS STRUCTURAL ELEMENTS For the period 1 Oct 2015 to 30 Sep 2017 AGEING FLEET: demand for minibus vehicles exceeds supply TOYOTA MINIBUS TAXI PRIC
Slide 17: Environment & market context: total addressable market
ENVIRONMENT & MARKET CONTEXT TOTAL ADDRESSABLE MARKET STRUCTURALLY DEMAND FOR MINIBUS TAXI VEHICLES > SUPPLY DEMAND: AN AGEING NATIONAL FLEET IN SOUTH AFRICA THERE ARE REQUIRING RELACEMENT & RECAPITALISATION ~150 000 TAXI OPERATORS 70 000 - 80 000 FINANCED & INSURED >200 000 MINIBUS TAXIS ~200 000 T
Slide 18: SA Taxi market positioning
SA TAXI MARKET POSITIONING VERTICALLY INTEGRATED BUSINESS MODEL IN SOUTH AFRICA THERE ARE 70 000 - 80 000 FINANCED & INSURED >200 000 MINIBUS TAXIS 1 IN 3 OF THE NATIONAL FINANCED FLEET IS FINANCED & INSURED BY SA TAXI FINANCING OPERATIONS INSURANCE OPERATIONS VEHICLE RETAIL & REFURBISHMENT OPERATIO
Slide 19: SA Taxi evolution since listing
SA TAXI EVOLUTION SINCE LISTING MANAGEMENT INTERVENTIONS TO CREATE VALUE CAGR 2012 to 2017: Non-interest revenue Headline earnings¹ ▲19% composition July 2017 Gross loans & advances ▲12% 26% (FY12) to 33% (FY17) October 2013 November 2015 Accounting consolidation of NPL ratio ▼ 8% Recovery on reposs
Slide 20: SA Taxi financial performance
SA TAXI FINANCIAL PERFORMANCE • Headline earnings¹ ▲22% to R303m 51.1 › All organic growth 48.7 48.6 • NIM ▲ to 11.4% from 11.1% › Funding costs ▲by 80bps to 11.4% o Repo rate ▼25bps o ▲foreign debt to 21% from 13%, fully hedged to Rand › Average interest rate of 24.4% on origination (NCA max cap of
Slide 21: SA Taxi credit performance
SA TAXI CREDIT PERFORMANCE • Gross loans & advances ▲16% to R8.3bn › Number of loans originated ▲9% › Rand value of loans originated ▲20% › Toyota vehicle prices ▲from ~R350 000 in October 2015 to >R400 000 (FY17: ▲2%) • NPL ratio improved to 17.1% from 17.4% › Continued strong collection performanc
Slide 22: SA Taxi operational performance
SA TAXI OPERATIONAL PERFORMANCE SA TAXI OPERATOR PROFILE GEOGRAPHIC DISTRIBUTION VEHICLES ON BOOK 1.2 83% 26% 4.3 YEARS >85% 3% 2% VEHICLES TOYOTA LOANS ORIGINATED TO REPEAT AVERAGE AGE INSURED 6% PER CUSTOMER VEHICLES CUSTOMERS (DURING FY17) OF VEHICLE WITH SA TAXI 5% 9% SA TAXI CREDIT PROFILE OF L
Slide 23: Transaction Capital 2017
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Slide 24: Transaction Capital Risk Services (TCRS)
TRANSACTION CAPITAL RISK SERVICES (TCRS) 1 Innovative & bespoke technology systems that drive superior performance & efficiency TRANSACTION CAPITAL RISK SERVICES IS A 2 Generating in-depth insights from the continuous collection of accurate TECHNOLOGY-LED, & valuable data to develop a consolidated v
Slide 25: Environment & market context: challenging consumer credit
ENVIRONMENT & MARKET CONTEXT CHALLENGING CONSUMER CREDIT ENVIRONMENT IN SOUTH AFRICA, OF THE 35 MILLION ADULTS1 THERE ARE: CREDIT REHABILITATION IS A CRUCIAL ELEMENT IN GROWING AN INCLUSIVE ECONOMY Launched in June 2017 9.7 MILLION (~40%) NON-PERFORMING CREDIT CONSUMERS2 TRANSACTION CAPITAL’S CONSUM
Slide 26: TCRS market positioning
TCRS MARKET POSITIONING DATA, ANALYTICS & SCALABLE TECHNOLOGY PLATFORM ANALYTICS Predictive & layered voice analytics to determine: DATA SOURCES • Optimised campaign INCLUDE: • Propensity to pay Data sourced • Right time to call MASTER DATA UNIVERSE from MDU • Right day to pay PRINCIPAL (MDU) for ma
Slide 27: TCRS evolution since listing
TCRS EVOLUTION SINCE LISTING MANAGEMENT INTERVENTIONS TO CREATE VALUE December 2016 November 2015 Entered value added services market via 75% acquisition of Road Cover CAGR 2012 to 2017: Early adoption of IFRS 9 Headline earnings ▲20% October 2014 December 2015 January 2017 Services EBITDA ▲22% Rest
Slide 28: TCRS' diversified business model
TCRS’ DIVERSIFIED BUSINESS MODEL ORIGINATE MANAGE COLLECT VALUE ADDED SERVICES, LEAD PAYMENT SERVICES & CONTINGENCY & FFS GENERATION & CUSTOMER ACQUISITION ACCOUNT MANAGEMENT A$900 MILLION 23% Insurance Public sector R21 Telcos & Other Insurance Specialist Insurance 28% AUSTRALIA² 24% Utilities, Tel
Slide 29: Contingency & FFS
CONTINGENCY & FFS SOUTH AFRICA: TRANSACTION CAPITAL RECOVERIES 23% Insurance Provider of collection & recovery services, including early stage rehabilitation, late stage collections & legal recoveries Public sector Utilities, Telcos & Other 28% AUSTRALIA² 24% Banking & Commercial SA Insurance Rank 1
Slide 30: Acquisition of NPL portfolios as principal
ACQUISITION OF NPL PORTFOLIOS AS PRINCIPAL ESTIMATED REMAINING COLLECTIONS (ERC)1 • Current economic context favours VINTAGE PERFORMANCE AS AT 30 SEPTEMBER 2017 acquisition of NPL portfolios • 29 portfolios acquired for R356m with Specialist lending Other a face value of R5.2bn 29% 6% 2013 1.7 0.5 2
Slide 31: Payment services & account management; SME financing
PAYMENT SERVICES & ACCOUNT MANAGEMENT SME FINANCING & SERVICES TRANSACTION CAPITAL PAYMENT SOLUTIONS Specialist in customised, innovative & flexible payment services Specialist Insurance ~3 MILLION Resulting in lending 25% & telcos DISBURSEMENTS 4% FOR CLIENTS EACH YEAR ~R27 BILLION 25% Credit Other
Slide 32: Value added services, lead generation & customer acquisition
VALUE ADDED SERVICES, LEAD GENERATION & CUSTOMER ACQUISITION ROAD COVER • TCRS entered the value-added services market segment in SA via the acquisition of Road Cover Telcos & Other • Provider of proprietary value-added services to the mass consumer market on a subscription basis Insurance 1%12% • A
Slide 33: TCRS financial performance
TCRS FINANCIAL PERFORMANCE • Core headline earnings ▲39% to R233m › Excludes once-off acquisition costs of R22m › Accretive cash deployment converting cash yield into earnings • Headline earnings organic growth ▲12%¹ • Contingency & FFS revenue › Growing revenue from adjacent sectors › Insurance, te
Slide 34: Transaction Capital 2017
2017 oO Transaction Capital
Slide 35: Capital & funding evolution since listing
CAPITAL & FUNDING EVOLUTION SINCE LISTING November 2016 Established a R2bn domestic note programme at TC group level November 2015 January 2017 Transsec 2: First local DFI: R100m debt facility R4bn S&P rated & February 2017 listed securitisation Issued 28.4 million shares raising R419m established S
Slide 36: Capital management
CAPITAL MANAGEMENT PERFORMANCE • Uninterrupted access to the debt capital markets 40 › Despite political instability & SA’s sovereign rating downgrade in April 2017 30 › Raised ~R6bn in debt facilities from 33 separate funding transactions in 2017 22 38.9 32.6 › 2018 fully funded 43.3 • Continue to
Slide 37: Funding philosophy
FUNDING PHILOSOPHY INNOVATION DIVERSIFICATION BY DIVERSIFICATION BY Innovation is encouraged to cultivate unorthodox thinking FUNDING STRUCTURE DEBT INVESTOR CATEGORY & develop pioneering funding solutions DIVERSIFIED & ENGAGED DEBT INVESTORS 5% • Diversification by geography, capital pool, debt inv
Slide 38: Shareholding
SHAREHOLDING • Accelerated bookbuild (Feb 2017) › 28.4m shares issued raising R419m › Creates capacity for further acquisition opportunities 5% 31% › Oversubscribed › Predominantly taken up by institutional investors o Institutional shareholding ▲from 28% to 31% › Directors shareholding holding ▼fro
Slide 39: Transaction Capital 2017
2017 Transaction Capital a
Slide 40: Investment case
INVESTMENT CASE COMPELLING & UNIQUE AS WE EXECUTE ON OUR STRATEGY • Two well established, autonomous & unique financial services businesses: › SA Taxi › Transaction Capital Risk Services (TCRS) • Positioned in attractive market segments occupying leading market positions • Highly defensive businesse
Slide 41: Investment case continued
INVESTMENT CASE CONTINUED COMPELLING & UNIQUE AS WE EXECUTE ON OUR STRATEGY BUT UNDERPINNED BY A ROBUST • Experienced, diverse & independent directors at group & subsidiary level CORPORATE GOVERNANCE • Institutionalised governance, regulatory & risk management practices FRAMEWORK & SOUND GOVERNANCE
Slide 42: Questions
Slide 43: Disclaimer
DISCLAIMER This presentation may contain certain "forward-looking statements" regarding beliefs or expectations of the TC Group, its directors & other members of its senior management about the TC Group's financial condition, results of operations, cash flow, strategy & business & the transactions d