Nutun Limited · JSE:NTU
Nutun — Transaction Capital — FY2013 Earnings Presentation
43 slides from Nutun's earnings presentation, 2013
Slide 1: Results Presentation
(a Transaction Capital RESULTS PRESENTATION 2018
Slide 2: Agenda
AGENDA ● Highlights ● Environment ● Financial review ● Disposal of Paycorp & Bayport ● Use of proceeds ● Restructure of board & group executive office ● Strategy & Prospects ● Conclusion 2
Slide 3: Highlights
TRANSACTION CAPITAL HIGHLIGHTS |
Slide 4: Group structure – at 30 September 2013
HIGHLIGHTS GROUP STRUCTURE – AT 30 SEPTEMBER 2013 Transaction Capital Limited – year ended 30 September 2013 Employees: 5,386 Headline earnings: R545m (Continuing R480m) Lending Services Total income: R3,741m Headline earnings: R362m Total income: R1,331m Headline earnings: R160m Asset-backed lendin
Slide 5: Financial highlights
HIGHLIGHTS FINANCIAL HIGHLIGHTS ● Gross loans & advances ▲20% from R9.8 billion to R11.7 billion ● Headline earnings ▲35% from R405 million to R545 million ● Weighted average number of shares ▲12% from 519 million to 584 million ● HEPS ▲20% from 78.0 cps to 93.4 cps ● ROE ▼ from 18.6% to 17.4% ● ROA
Slide 6: Financial highlights (continuing operations)
HIGHLIGHTS FINANCIAL HIGHLIGHTS (CONTINUING OPERATIONS) ● Total income ▲18% from R3.9 billion to R4.6 billion ● Non-interest revenue ▲15% from R1.7 billion to R1.9 billion ● Continuing headline earnings ▲34% from R359 million to R480 million ● Continuing HEPS ▲19% from 69.1 cps to 82.3 cps 6
Slide 7: Strategic & operational highlights
HIGHLIGHTS STRATEGIC & OPERATIONAL HIGHLIGHTS ● Disposal of Paycorp & Bayport ● Board considering declaring a distribution of 200 cps ● Restructure of board & group executive office 7
Slide 8: Environment
TRANSACTION CAPITAL ENVIRONMENT) |
Slide 9: Environment
ENVIRONMENT ENVIRONMENT ● Consumer economy softened throughout 2013: o employment & real wage growth slowed o disposable income eroded by exchange rate related inflation o high unsecured growth rate slowing with market saturation & credit provider caution o summonses ▲ judgements ▼ term & limit ▲= c
Slide 10: Company environment
ENVIRONMENT COMPANY ENVIRONMENT ● Asset-backed lending: SA Taxi – Specialised development financier of mini-bus taxis to SMEs o mini-bus taxis dominant public transport in RSA; estimated c.200,000 vehicles; c.60,000 financed; 23,453 by SA Taxi o market opportunity in renewal of aging fleet; unthreat
Slide 11: Company environment
ENVIRONMENT COMPANY ENVIRONMENT ● Credit Services: MBD Credit Solutions – Receivables collections as agent & principal o fragmented industry: 2,000 debt collection agencies & 16,000 registered collectors o market leader: 9 call centres, assets under management of R25.8bn (44% as principal) o stresse
Slide 12: Financial review
TRANSACTION CAPITAL FINANCIAL REVIEW
Slide 13: Financial position
FINANCIAL REVIEW FINANCIAL POSITION 41.6 ● Conservative growth of gross loans & advances from R9.8bn to R11.7bn (▲20%) 35.7 o Asset-backed R5.9bn (▲17%) o Unsecured R5.8bn (▲23%) 29.6 ● Slowing rate of growth of gross loans 5.7 & advances o capital rationing constrains growth o origination strategie
Slide 14: Financial performance
FINANCIAL REVIEW FINANCIAL PERFORMANCE ● Headline earnings ▲35% from R405m to R545m 59.2 59.3 o growth in gross loans & advances (▲20%) 54.6 o stable net interest margin o 9% ▲ in EBITDA from services ● Continuing headline earnings ▲34% from R359m to R480m 18.6 17.1 17.4 ● HEPS ▲20% from 78.0 cps to
Slide 15: Portfolio mix
FINANCIAL REVIEW PORTFOLIO MIX Rm Growth Contribution Headline earnings 2013 2012 2011 2013 2012 2013 2012 2011 ● HEPS from continuing operations Asset-backed lending 163 133 109 23% 22% 30% 33% 37% ex-unsecured lending ▲30% from 37.1 Credit services 95 88 61 8% 44% 17% 22% 20% cps to 48.1 cps Corpo
Slide 16: Asset-backed lending – SA Taxi
FINANCIAL REVIEW ASSET-BACKED LENDING – SA TAXI ● Gross loans & advances ▲15% to R5.5bn 36.4 31.9 o number of accounts ▲4% 27.5 o refurbishment & finance of entry level vehicles discontinued with write offs 30.9 accelerated ● Non-performing loan ratio ▲ from 31.9% 15.2 15.3 15.6 to 36.4% o more comp
Slide 17: Asset-backed lending – SA Taxi; Rand Trust
FINANCIAL REVIEW ASSET-BACKED LENDING – SA TAXI; RAND TRUST ● Headline earnings ▲23% to R163m 44.8 45.5 o total income up 14% 41.6 o net interest margin ▲ to 12.3% o ▼ average cost of borrowings o lower credit loss ratio in SA Taxi of 5.4% o strong growth from Rand Trust ● Marginal ▲ in cost-to-inco
Slide 18: Unsecured lending – Bayport
FINANCIAL REVIEW UNSECURED LENDING – BAYPORT ● Gross loans & advances ▲23% from R4.7bn to R5.8bn 64.2 o slowing & cautious rate of growth (55% in 2012) ● Conservative origination strategy determined by 53.2 54.3 o capital rationing o ▼ credit risk appetite 35.1 o ave. monthly disbursements 2013: R17
Slide 19: Unsecured lending – Bayport
FINANCIAL REVIEW UNSECURED LENDING – BAYPORT ● Headline earnings ▲20% to R199m 54.3 52.5 o total income ▲ 25% 47.5 o net interest margin ▼ to 19.6% o ▼ ave. cost of borrowings o Cost-to-income ▼ to 47.5% on improved efficiency ● Credit loss ratio ▲ to 14.1% o significant ▲ in NPL coverage & provisio
Slide 20: Unsecured lending – Bayport
FINANCIAL REVIEW UNSECURED LENDING – BAYPORT 35% 30% 25% 20% 15% Older curves improving 10% 5% Recent curves stacking below historical levels 0% 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 MOB ● Vintage curves from the H1 of 2013 revealed deterioration in the credit environment ● “Flare
Slide 21: Unsecured lending – Bayport
FINANCIAL REVIEW UNSECURED LENDING – BAYPORT Older curves improving Recent curves stacking below historical levels Enlargement of the preceding Bayport vintage curve slide • Recent curves stack below historical levels 21
Slide 22: Credit services – MBD Credit Solutions; Principa Decisions
FINANCIAL REVIEW CREDIT SERVICES – MBD CREDIT SOLUTIONS; PRINCIPA DECISIONS ● Headline earnings ▲ 8% to R95m o challenging collections environment 85.5 84.4 84.4 o earnings growth continue to lag large purchases of book debts o modest revenue growth of 2% 48 o stringent cost management; stable cost
Slide 23: Payment services – Paycorp (discontinued operation)
FINANCIAL REVIEW PAYMENT SERVICES – PAYCORP (DISCONTINUED OPERATION) 4,651 ● Proceeds of R937m disposal received 4,381 1 November 2013 4,072 ● Headline earnings ▲41% to R65m 88.3 o strong performance from core ATM 86.3 86.6 business o Includes R15m of earnings related to disposal 14 9.9 9.5 ● Active
Slide 24: Funding
FINANCIAL REVIEW FUNDING ● 21 institutions invested R5.6bn of debt 43.9 capital 40.5 o Asset-backed lending: R2.6bn 35.7 o Unsecured lending: R2.4bn 31.7 o Corporate support: R477m ● New debt investors: 23.0 o 4 new to group 2,601 o 3 new to asset classes 19.6 1,946 ● Cost of borrowing ▼ from 10.7%
Slide 25: Funding philosophy
FINANCIAL REVIEW FUNDING PHILOSOPHY Diversification by funding structure ● Proven wholesale funding model o “positive liquidity mismatch” between asset & liability cash flows 25% 29% o no exposure to overnight debt instruments Rated unlisted securitisation & limited exposure to 12-month instruments
Slide 26: Disposal of Paycorp & Bayport
DISPOSAL OF PAYCORP & BAYPORT
Slide 27: Disposals – Paycorp
DISPOSAL OF PAYCORP AND BAYPORT DISPOSALS – PAYCORP ● Acquired from founder Steven Kark in 2006 to form Transaction Capital ● In Q2 FY13 Actis made unsolicited offer for Paycorp ● On 6 August 2013 Transaction Capital entered into an agreement to dispose of 100% of Paycorp for R937m (18.7 times earni
Slide 28: Disposals – Bayport
DISPOSAL OF PAYCORP AND BAYPORT DISPOSALS – BAYPORT ● March 2010 82.65% of Bayport Financial Services (BFS) acquired for R537m ● Transaction held potential for later acquisition of Bayport Management Services (BML) & re-integration of BML & BFS under management of founding partners Kurland & Stone (
Slide 29: Use of proceeds
TRANSACTION CAPITAL USE OF PROCEEDS
Slide 30: Use of proceeds
USE OF PROCEEDS USE OF PROCEEDS ● Sufficient portion of proceeds will be retained to optimise equity & debt structures of the continuing subsidiaries, fund organic growth, & underpin significant acquisitive activity in medium term ● Balance of R1.2bn returned to shareholders ● Absent any unforeseen
Slide 31: Restructure of board & group executive office
RESTRUCTURE OF BOARD & GROUP EXECUTIVE OFFICE
Slide 32: Restructure of board & group executive office
RESTRUCTURE OF BOARD & GROUP EXECUTIVE OFFICE RESTRUCTURE OF BOARD & GROUP EXECUTIVE OFFICE ● Coincident with & allied to the expiry of the CEO’s service contract on 30 November 2013 ● Effective 26th November: o Steven Kark & Cedric Ntumba tendered resignations ● With effect from the 15th January 20
Slide 33: Restructure of board & group executive office
RESTRUCTURE OF BOARD & GROUP EXECUTIVE OFFICE RESTRUCTURE OF BOARD & GROUP EXECUTIVE OFFICE ● All directors’ fees or compensation will be altered concomitant with their new responsibilities ● All group office functions have been devolved to subsidiaries or reduced to support the smaller portfolio ●
Slide 34: Strategy & prospects
TRANSACTION CAPITAL STRATEGY & PROSPECTS —
Slide 35: Strategy
STRATEGY & PROSPECTS STRATEGY Invest in organic & acquisitive growth of non-deposit taking niched financial services businesses to render acceptable risk adjusted returns to shareholders ● Ensure a defensible competitive stance for each business unit through the definition & delivery of a compelling
Slide 36: Transaction Capital continuing operations – FY2013
STRATEGY & PROSPECTS TRANSACTION CAPITAL CONTINUING OPERATIONS – FY2013 Transaction Capital Limited – year ended 30 September 2013 Employees: 3,673 Headline earnings: R282m Lending Services Total income: R1,396m Headline earnings: R163m Total income: R806m Headline earnings: R95m Asset-backed lendin
Slide 37: Financial position – pro-forma
STRATEGY & PROSPECTS FINANCIAL POSITION – PRO-FORMA YE Sep Post Post Post ● Paycorp disposal 2013 as Paycorp Bayport dividend of o PE on FY2013 earnings 18.7 reported disposal disposal 200 cps Disposal consideration Rm 937 1,333 o IRR 18%, excluding gearing benefits Headline earnings Rm 545 480 281
Slide 38: Shareholding
STRATEGY & PROSPECTS SHAREHOLDING 30 September 2013 ● Percentage held by institutional investors ▲ from 10% to 14% o Paycorp staff exiting share scheme 7% o Excludes OMLACSA 9% ● Percentage held by retail investors ▲ from 6% to 7% 14% ● Share Appreciation Rights plan successfully introduced 60% 9% 1
Slide 39: Prospects
STRATEGY & PROSPECTS PROSPECTS ● New leadership from 15 January 2014 ● Decision & announcement on distribution when Bayport proceeds received ● Despite challenging environment, early 2014 performance of Transaction Capital is in line with the guidance on revenue & profit growth rates provided on lis
Slide 40: Conclusion
TRANSACTION CAPITAL CONCLUSION |
Slide 41: Thank you
TRANSACTION CAPITAL THANK YOU
Slide 42: Presenters' details
ADDENDA PRESENTERS’ DETAILS ● Mark J Lamberti | CEO markl@transactioncapital.co.za ● David Hurwitz | CFO davidh@transactioncapital.co.za ENQUIRIES ● Investor Relations | Phillipe Welthagen +27 (0) 11 555 5004 phillipew@transactioncapital.co.za ● Media | Nick Roodman (Brunswick) +27 (0) 11 502 7300 4
Slide 43: Disclaimer
ADDENDA 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