Nutun Limited · JSE:NTU
Nutun — Transaction Capital — SBG Securities General Financials Conference 2020
48 slides from Nutun's conference presentation, November 2020
Slide 1: SBG Securities General Financials Conference: Assessing a New Normal
T R A N S A C T I O N C A P I TA L SBG SECURITIES GENERAL FINANCIALS CONFERENCE “ASSESSING A NEW NORMAL” 2020 NOVEMBER
Slide 2: Transaction Capital Group Structure
TRANSACTION CAPITAL GROUP STRUCTURE 1 TRANSACTION CAPITAL IS AN INVESTOR IN & OPERATOR OF ALTERNATIVE ASSETS IN CREDIT RELATED & SPECIALISED MARKET VERTICALS WITH A NEAR 20-YEAR TRACK RECORD FOR HIGH-QUALITY EARNINGS GROWTH & ATTRACTIVE RISK-ADJUSTED RETURNS GROWING EARNINGS BASE BY EXPANDING EXISTI
Slide 3: Excellent Track Record of Growth & Financial Performance
EXCELLENT TRACK RECORD OF GROWTH & FINANCIAL PERFORMANCE 2 5 YEAR HEADLINE EARNINGS CAGR PRIOR TO COVID-19 OF 24% CAGR FY14 – FY191: HY20 results pre COVID-19 adjustments 2 215 Headline earnings ▲24% in line with historical growth track record HEPS ▲23% Headline earnings ▲19% Dividend per share ▲31%
Slide 4: Transaction Capital Remains Well Positioned for Growth
TRANSACTION CAPITAL REMAINS WELL POSITIONED FOR GROWTH 3 WITH ROBUST FINANCIAL POSITION PRE & POST COVID-19 PRE & POST COVID-19 BALANCE SHEET IS ROBUST UNDERPINNED BY • >R1.5bn new facilities concluded by SA Taxi since April 2020 for new loan originations A CONSERVATIVE CAPITAL STRATEGY WITH AMPLE C
Slide 5: Transaction Capital
Transaction Capital
Slide 6: Transaction Capital Subscribes for a Non-Controlling 49.9% in WeBuyCars
TRANSACTION CAPITAL SUBSCRIBES FOR A NON-CONTROLLING 49.9% IN WeBuyCars 5 A QUALITY BUSINESS WITH HIGH CASH CONVERSION RATES & STRONG ORGANIC GROWTH PROSPECTS EARNINGS ACCRETIVE CASH DEPLOYMENT INTO A RELEVANT & SCALABLE BUSINESS WITH POTENTIAL TO GROW IN VALUE Purchase consideration 3 ¹ Cash (R1.12
Slide 7: WeBuyCars Financial Performance
FINANCIAL PERFORMANCE 6 A HIGH GROWTH BUSINESS THE INVESTMENT IN WeBuyCars WILL ACCELERATE OPPORTUNITY FOR WeBuyCars TO ▲UNIT ECONOMICS PER ESTABLISHED INFRASTRUCTURE ROBUST TRANSACTION CAPITAL’S GROWTH RATE VEHICLE SOLD FROM GREATER TAKE-UP RATE OF F&I PRODUCTS1 FACILITATING OPERATIONAL LEVERAGE BA
Slide 8: WeBuyCars Operational Performance
OPERATIONAL PERFORMANCE 7 SIGNIFICANT GROWTH ACHIEVED CAGR 2017 to 2020 Vehicles sold per year ▲ 58% Vehicle supermarket visits per year1 ▲ 42% Advertising expense per vehicle ▼ 11% 1 928 1 937 Robust stock turn at <30 days resulting in high cash conversion rates 1 661 1 530 25.3 24.1 24.6 STRONG CO
Slide 9: WeBuyCars Market Positioning
WEBUYCARS | MARKET POSITIONING 8 COMPETITIVE ADVANTAGES 2. ARTIFICIAL INTELLIGENCE (AI), ANALYTICS & LEAD GENERATION • AI applied to › Ensure vehicles bought & sold at a fair price › Adjust pricing according to value & demand, preserving margins & high stock turn • Lead generation to target high-qua
Slide 10: Rationale: High Quality Standalone Business with Strong Organic Growth Prospects
RATIONALE|HIGH QUALITY STANDALONE BUSINESS WITH STRONG ORGANIC GROWTH PROSPECTS 9 RATIONALE VALUE CREATION | WeBuyCars’s GROWTH OPPORTUNITES • Favorable structural market conditions • WeBuyCars › Significant position in resilient SA used vehicle market › High quality business INCREASE VOLUMES ENHANC
Slide 11: Midstream Vehicle Supermarket
MIDSTREAM VEHICLE SUPERMARKET 10
Slide 12: Midstream Vehicle Supermarket
MIDSTREAM VEHICLE SUPERMARKET 11
Slide 13: Used Vehicle Market Context & Environment: Vehicle Parc
USED VEHICLE MARKET CONTEXT & ENVIRONMENT 12 USED VEHICLE INDUSTRY IS RESILIENT, DEFENSIVE & GROWING DESPITE SOUTH AFRICA’S ECONOMIC CLIMATE SOUTH AFRICA’S VEHICLE PARC¹ IN SOUTH AFRICA THERE ARE 10.8 MILLION VEHICLES1 VEHICLE PARC GROWING DESPITE NEW VEHICLE SALES ▼OVER LAST 10 YEARS • Personal veh
Slide 14: Used Vehicle Market Context & Environment
USED VEHICLE MARKET CONTEXT & ENVIRONMENT 13 USED VEHICLE MARKET IS RESILIENT & GROWING DESPITE DIFFICULT ECONOMIC ENVIRONMENT USED VEHICLE SALES PER YEAR ~1.2 MILLION (9 year CAGR ▲ 3.8% | 5 year CAGR ▲1.7%) • USED VEHICLE SALES ARE DRIVEN BY: NEW VS USED VEHICLE SALES CAGR › Economic environment ▼
Slide 15: Global Listed Peers
GLOBAL LISTED PEERS 14 A MIX OF MARKET PARTICIPANTS INCLUDING ONLINE PLATFORMS; MARKET PLACES; FRANCHISE DEALERS; E-COMMERCE WITH VEHICLE SUPERMARKETS WeBuyCars BUSINESS MODEL UNIQUE IN SA WITH COMPARABLE INTERNATIONAL PEERS 1 Advertising Europe Revenue Units sold cost as % Advertising 2019 (US$) (‘
Slide 16: WeBuyCars Stacks Up Well Against Comparable International Peers
WeBuyCars STACKS UP WELL AGAINST COMPARABLE INTERNATIONAL PEERS 15 PROFITABILITY SURPASSES COMPARABLE PEERS, SUPPORTED BY EFFICIENT INVENTORY MANAGEMENT & EFFECTIVE ADVERTISING SPEND • Hybrid model including • Hybrid model including • Hybrid model including • Fully online e-commerce & physical infra
Slide 17: Transaction Capital
oO Transaction Capital
Slide 18: SA Taxi Fleet Movement
SA TAXI FLEET MOVEMENT 17 2020 COMPARED TO 2019 (WEEK ON WEEK) % CHANGE (SAME WEEK, PRIOR YEAR) COVID-19 has proven that 30 the minibus taxi industry is indispensable to SA’s 20 economic productivity • 40% of South African’s use public transport 10 • Minibus taxi is the dominant mode of public trans
Slide 19: Transaction Capital Risk Services (TCRS)
(a) Transaction Capital cousin: | TRANSACTION CAPITAL “OSSEENE | RISK SERVICES (TCRS)
Slide 20: TCRS Market Positioning: Diversified Business Model
TCRS MARKET POSITIONING | DIVERSIFIED BUSINESS MODEL 19 BY BUSINESS ACTIVITY, REVENUE MODEL, GEOGRAPHY, SECTOR, CLIENT & MANDATE BUSINESS ACTIVITIES COLLECTION SERVICES DIVERSIFICATION ~3% ~2% Contingency & FFS Selected Australia international NPL Portfolios as principal 26% markets2 Australia >1% ~
Slide 21: Transaction Capital's Consumer Credit Rehabilitation Index (CCRI)
TRANSACTION CAPITAL’S CONSUMER CREDIT REHABILITATION INDEX (CCRI) 20 CREDIT REHABILITATION IS A CRUCIAL ELEMENT IN GROWING AN INCLUSIVE ECONOMY CONSUMER’S PROPENSITY TO REPAY DEBT DETERIORATING WITH WEAK ECONOMIC CONDITIONS EXACERBATED BY COVID-19 % CHANGE IN REHABILITATION PROSPECT FOR Q3 2020 • Na
Slide 22: TCRS Market Positioning: Diversified Business Model by Sector
TCRS MARKET POSITIONING | DIVERSIFIED BUSINESS MODEL 21 BY SECTOR, CLIENT & MANDATE RETAIL TIER 1 COMMERCIAL BANKING EDUCATION SPECIALISED LENDING $ 9 sectors PUBLIC UTILITIES SECTOR INSURANCE TELCOS
Slide 23: TCRS Strategic Growth Initiatives to Create Value
TCRS STRATEGIC GROWTH INITIATIVES TO CREATE VALUE 22 ACQUISITION OF NPL PORTFOLIOS AS A PRINCIPAL IN SOUTH AFRICA & AUSTRALIA GROWTH TRAJECTORY TO SUPPORT FUTURE POSITIVE PERFORMANCE COLLECTION MULTIPLE VINTAGE PERFORMANCE¹ AS AT 31 MARCH 2020 5 321 Rand million Cost price of purchased book debts ac
Slide 24: Questions
(a) Transaction Capital SS ON QUESTIONS
Slide 25: Appendix: HY20 Results
(a) Transaction Capital APPENDIX HY20 RESULTS
Slide 26: Group Financial Highlights
GROUP FINANCIAL HIGHLIGHTS 25 HY20 COMPARED TO HY19 ROBUST OPERATIONAL, FINANCIAL & CREDIT PERFORMANCE IN LINE WITH EXPECTATION OF HIGH-TEEN % GROWTH 20% 19% Pre COVID-19 adjustments • Headline earnings ▲19% to R402m (HY19: R338m) (65) 15% • Headline earnings per share ▲18% to 65.4 cents (HY19: 55.3
Slide 27: Unfettered Access to Liquidity
UNFETTERED ACCESS TO LIQUIDITY 26 R2.7 billion R5.5 billion R1.8 billion WELL CAPITALISED TOTAL EQUITY TOTAL EQUITY TOTAL EQUITY BALANCE SHEETS 21.4% 26.7% 3.1 times CAPITAL ADEQUACY RATIO CAPITAL ADEQUACY RATIO LEVERAGE Equity 16.5% | Subordinated debt 4.9% Equity 23.1% | Subordinated debt 3.6% UND
Slide 28: Diversified Debt Funding Strategy
DIVERSIFIED DEBT FUNDING STRATEGY 27 DIVERSIFICATION BY DIVERSIFICATION BY DIVERSIFICATION BY DEBT INVESTOR CATEGORY FUNDING STRUCTURE & INSTRUMENT GEOGRAPHY & CAPITAL POOL 15% 13% 21% 20% 11% 33% 20% 9% 18% 13% 24% 40% 80% 36% Warehousing facilities Institutional investors On-balance sheet & syndic
Slide 29: Diversified Debt Funding Strategy: Debt Structure
DIVERSIFIED DEBT FUNDING STRATEGY 28 PASS THROUGH WAREHOUSING PRIVATE STRUCTURED FINANCE ON BALANCE SHEET DEBT STRUCTURE STRUCTURES FACILITIES (MAJORITY INTERNATIONAL DFIs) & SYNDICATED LOANS HY20 BALANCE OUTSTANDING R4.6 billion R1.7 billion R4.2 billion R2.4 billion COMPOSITION ~36% ~13% ~33% ~18%
Slide 30: SA Taxi Environment & Market Context
SA TAXI ENVIRONMENT & MARKET CONTEXT 29 MINIBUS TAXI INDUSTRY IS RESILIENT, DEFENSIVE & GROWING DESPITE SA’S ECONOMIC CLIMATE PUBLIC TRANSPORT COMMUTERS RELY ON MINIBUS TAXIS TRAIN GIVEN THEIR ACCESSIBILITY, AFFORDABILITY, RELIABILITY & FLEXIBILITY < 500 000 ▼33% • 40% of South Africans use public t
Slide 31: Environment for Minibus Taxi Operators
ENVIRONMENT FOR MINIBUS TAXI OPERATORS 30 MINIBUS TAXIS ARE THE PREFERRED MODE OF PUBLIC TRANSPORT DUE TO COMPETITIVE PRICING, ACCESSIBILITY & RELIABILITY LOWER LSM CONSUMERS SPEND ~ 40% OF MONTHLY HOUSEHOLD INCOME ON PUBLIC TRANSPORT FARES COMMUTER TRIPS VIA BUS & RAIL MOSTLY REQUIRE FIRST & LAST K
Slide 32: SA Taxi Market Positioning
SA TAXI MARKET POSITIONING 31 VERTICALLY INTEGRATED BUSINESS MODEL
Slide 33: SA Taxi Market Positioning: Developmental Credit
SA TAXI MARKET POSITIONING 32 VERTICALLY INTEGRATED BUSINESS MODEL DEVELOPMENTAL CREDIT DRIVING POSITIVE SOCIAL IMPACT SA TAXI FINANCE INCLUSIVE GROWTH | ECONOMIC TRANSFORMATION 11.3 billion 33 079 ~1.3 PROPORTION OF CUSTOMERS CLASSIFIED ~ 80% Proportion of customer base AS PREVIOUSLY FINANCIALLY EX
Slide 34: SA Taxi's Vertically Integrated Business Model
SA TAXI’S VERTICALLY INTEGRATED BUSINESS MODEL 33 MINIMISING THE COST OF RISK, BY MAXIMISING RECOVERIES SA Taxi’s vertically integrated business model • Repossess, refurbish, salvage parts, resell & refinance • Loss given default <25% • Recovery ratio >75% LOSS GIVEN NON-PERFORMING REPOSSESSION DEFA
Slide 35: SA Taxi Auto Repairs
SA TAXI MARKET POSITIONING 34 VERTICALLY INTEGRATED BUSINESS MODEL SA TAXI AUTO REPAIRS | AUTOBODY SA TAXI AUTO REPAIRS ~20 000m² ~220 per month ~400 WORKSHOP INTERNAL VEHICLE EMPLOYEES FACILITIES REFURBISHMENT CAPACITY >75% ~ 4% to ~6% RECOVERY RATES ON REPOSSESSION, AVERAGE REFURBISHMENT COST¹ R
Slide 36: SA Taxi Direct
SA TAXI MARKET POSITIONING 35 VERTICALLY INTEGRATED BUSINESS MODEL NEW MINIBUS TAXI SA TAXI DIRECT • SA Taxi Direct sells new & pre-owned minibus taxis • SA Taxi’s pre-owned minibus taxis: › Rebuilt to a high-quality › Trusted product in the industry › Provides a reliable & affordable alternative in
Slide 37: SA Taxi Protect
SA TAXI MARKET POSITIONING 36 VERTICALLY INTEGRATED BUSINESS MODEL TELEMATICS & TECHNOLOGY SA TAXI PROTECT >31 000 MAJORITY OF FINANCED CLIENTS INSURANCE CLIENTS CHOOSE TO BE INSURED BY SA TAXI¹ >2.0 >100 BROKER NETWORK PRODUCTS PER CLIENT to expand total addressable market • Premiums remained stabl
Slide 38: SA Taxi Auto Parts
SA TAXI MARKET POSITIONING 37 VERTICALLY INTEGRATED BUSINESS MODEL SA TAXI AUTO PARTS | SALVAGE SA TAXI AUTO PARTS LAUNCHED MARCH 2018 | SALVAGE OPERATIONS ESTABLISHED THEREAFTER • Import & locally procure new parts from source at lower cost COST OF REFURBISHMENT • Salvage used parts from vehicles
Slide 39: SA Taxi Rewards
SA TAXI MARKET POSITIONING 38 VERTICALLY INTEGRATED BUSINESS MODEL SANTACO & SA TAXI DELIVERING SUSTAINABLE SA TAXI REWARDS BENEFITS TO SA TAXI CLIENTS & THE INDUSTRY • Direct benefits for the industry resulting from ownership transaction FUEL PROGRAMME between SA Taxi & SANTACO • Leverage industry’
Slide 40: Shareholding, Dividend & Board of Directors
(a) Transaction Capital SHAREHOLDING cust: | DIVIDEND & BOARD Wee (erm RECTORS
Slide 41: Shareholding, Dividend & Board of Directors
SHAREHOLDING, DIVIDEND & BOARD OF DIRECTORS 40 5% Dividend • No interim dividend declared | Preserving financial flexibility & liquidity 21% Accelerated bookbuild enhancing liquidity & daily trade • Free float ▲to 79% (HY19: 68%) • Average daily number of shares traded ▲>100% to 1.5m (HY19: 0.4m) •
Slide 42: COVID-19 Initiatives, Impact & Responses
(a) Transaction Capital COVID-19 coummmnt | INITIATIVES, IMPACT "| & RESPONSES
Slide 43: COVID-19 Impact
COVID-19 IMPACT 42 COVID-19 IMPACT ON SA TAXI’S FLEET ACTIVITY¹ COVID-19 IMPACT ON COLLECTION ACTIVITY¹ ~68% ~58% ~70% ~1 700 ~650 >1 000 CALL CENTRE CALL CENTRE CALL CENTRE OPERATING VEHICLES OPERATING HOURS PASSENGER LOADS AGENTS ON SITE AGENTS ON WFH AGENTS ON WFH ~44% ~47% ~47% MARCH 2020 MID AP
Slide 44: Progressive COVID-19 Initiatives
PROGRESSIVE COVID-19 INITIATIVES 43 SA TAXI SUPPORT TCRS SUPPORT • Minibus taxi industry, drivers & commuters • TCRS clients & employees › >R3m donation towards health & safety › Continued employment to >1 000 call centre staff on WFH › Hand sanitisers & facial masks at ranks › No compromise to data
Slide 45: COVID-19 – A Flexible Response
COVID-19 – A FLEXIBLE RESPONSE 44 BUSINESS MODEL ASSETS & CASHFLOW • Business model remains highly relevant in post COVID-19 environment • Short-term disruption to collections • SA Taxi • SA Taxi › Industry to recover quickly, as demand for minibus taxi services will be 1 st to benefit › Loan repaym
Slide 46: Glossary
(a) Transaction Capital ee ee KOK KKK KX KK XK cases | GLOSSARY XK XX KX KK KK
Slide 47: Glossary
GLOSSARY 46 ERC Estimated undiscounted remaining gross cash collections from NPL Portfolios over the next 120 months AUS Australia F&I products Finance, insurance based, tracking & other allied products ACCSYS Accsys, a 100% owned subsidiary of TCRS FFS Fee-for-service Fihrst Net1 Fihrst Holdings (P
Slide 48: Disclaimer
DISCLAIMER 47 This presentation may contain certain "forward-looking statements" regarding beliefs or expectations of the TC Group & any investments made by the TC Group, its directors & other members of its senior management about the TC Group’s &/or its investments’ financial condition, results of
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