Slide 1: Transaction Capital Interim Results
O Transaction Capital INTERIM - aa
Slide 2: Interim Results for the Half Year Ended 31 March 2016
INTERIM RESULTS FOR THE HALF YEAR ENDED 31 MARCH 2016 2
Slide 3: Strategic & Operational Highlights
STRATEGIC & OPERATIONAL HIGHLIGHTS • Robust financial performance › 19% organic growth in headline earnings & headline earnings per share › Continued improvement in credit metrics › Early adoption of IFRS 9 • Strategic positioning of operating divisions › Occupy leading market positions › Highly def
Slide 4: Interim Results for the Half Year Ended 31 March 2016
INTERIM RESULTS FOR THE HALF YEAR ENDED 31 MARCH 2016 4
Slide 5: Environment: Macro-economic, Capital Markets, Regulatory
ENVIRONMENT MACRO-ECONOMIC ENVIRONMENT • Macro- & socio-economic challenges continue to constrain growth in South Africa › Political: political instability & potential sovereign rating downgrade › Social: persistent low employment levels with little or no real wage growth; continued protest action &
Slide 6: Environment: Defensive Positioning
ENVIRONMENT Defensive positioning enables Transaction Capital to grow earnings despite a challenging & low growth South African economic environment ASSET-BACKED LENDING • Minibus taxi infrastructure remains the dominant form of public transport • Commuters’ use of taxis remains consistently high as
Slide 7: Interim Results for the Half Year Ended 31 March 2016
INTERIM RESULTS FOR THE HALF YEAR ENDED 31 MARCH 2016 7
Slide 8: Transaction Capital Group
TRANSACTION CAPITAL GROUP FOR THE SIX MONTHS ENDING 31 MARCH 2016 TRANSACTION CAPITAL LIMITED – CEO: David Hurwitz, group tenure: 11 years | employees: 3 822 | headline earnings: R210m ASSET-BACKED LENDING RISK SERVICES CEO: Terry Kier CEO: David McAlpin Group tenure: 9 years Group tenure: 8 years H
Slide 9: Transaction Capital's Asset-Backed Lending Division
TRANSACTION CAPITAL’S ASSET-BACKED LENDING DIVISION A unique blend of vehicle SA Taxi Generating in-depth client insight via granular procurement, sales, repossession & is an asset-backed lender that telematics, credit, vehicle & other data to enable precise refurbishment capabilities, with comprehe
Slide 10: Minibus Taxis Are the Dominant Mode of Public Transport
MINIBUS TAXIS ARE THE DOMINANT MODE OF PUBLIC TRANSPORT Other 66% Minibus taxi Walk 21% 1% Share of Public Public RAIL BUS MINIBUS transport 40% transport transport choices choices Car 38% 2 million 9 million >15 million Bus 21% 13% Train commuter trips commuter trips commuter trips daily daily dail
Slide 11: Daily Commuters Rely on Minibus Taxis
DAILY COMMUTERS RELY ON MINIBUS TAXIS Minibus taxis service rail & bus nodes Major train nodes Major bus nodes SA Taxi network Source: SA Taxi telematics data as at 1 April 2016 | National Land Transport Strategic Framework 2015 INTERIM RESULTS STRATEGY & PROSPECTS FOR THE HALF YEAR ENDED 31 MARCH 2
Slide 12: Minibus taxi industry quote
“The minibus taxi industry is today the most critical pillar of our public transport sector” Arrive Alive INTERIM RESULTS STRATEGY & PROSPECTS FOR THE HALF YEAR ENDED 31 MARCH 2016 12
Slide 13: Demand for Vehicles Exceeds the Current Supply
DEMANDS FOR VEHICLES EXCEEDS THE CURRENT SUPPLY • Estimated fleet of >200 000 minibus taxis in South Africa, with ~70 000 to 80 000 financed • ~135 000 (68%) are old & unsafe vehicles that need to be replaced • Ageing fleet & recapitalisation drives higher demand for vehicles & consequently a need f
Slide 14: 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 ~ 200’000 R6.7 billion >15 million minibus taxis account for ¹ currently finan
Slide 15: Asset-Backed Lending Distinctive Competencies
ASSET-BACKED LENDING DISTINCTIVE COMPETENCIES ENABLING SERVICING MANAGING THE RETURNS SMEs SMEs FROM SMEs EQUITY FINANCIAL ALLOCATION INSURANCE COLLECTIONS REPOSSESSION SERVICES & DEBT RAISING CREDIT UNDERWRITING & ORIGINATION REPAIRS VEHICLE SUPPLY & MAINTENANCE REFURBISH RESALE VEHICLE & SALES SER
Slide 16: Asset-Backed Lending Distinctive Competencies
ASSET-BACKED LENDING DISTINCTIVE COMPETENCIES FINANCE SA TAXI PROTECT SA TAXI DIRECT TAXIMART PROPRIETARY TELEMATICS DATA USED THROUGHOUT THE VALUE CHAIN Approved route vs. route actually travelled Distance travelled on an hourly basis INTERIM RESULTS STRATEGY & PROSPECTS FOR THE HALF YEAR ENDED 31
Slide 17: Asset-Backed Lending: Looking Forward
ASSET-BACKED LENDING LOOKING FORWARD FIXED ROUTE POINT-TO-POINT SME (MINIBUS TAXI) (METERED TAXI) (BAKKIE) LEVERAGE EXISTING CAPABILITIES IN ADJACENT UNDER-SERVED MARKET SEGMENTS Leading market position Apply existing capabilities Further develop encompassing the entire value chain & develop associa
Slide 18: Transaction Capital's Risk Services Division
TRANSACTION CAPITAL’S RISK SERVICES DIVISION An efficient platform driving superior performance & facilitating scale via Generating in-depth insight to enable precise & informed … is a technology-led, cutting edge IT systems & processes internal & external decisioning data analytics driven provider
Slide 19: A Growing Non-Performing Loans Market in South Africa
A GROWING NON-PERFORMING LOANS MARKET IN SOUTH AFRICA › 162 BOOKS PURCHASED since 1999 59 103 105 Capital Solutions R16bn 63 67 89 78 Non-performing loan value 76 Customer Management 81 FACE VALUE OF Solutions 69 DEBT SERVICED R15bn 61 R81bn¹ 43 Other 36 34 33 fragmented 31 participants in addressab
Slide 20: 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 there are 35 million ADULTS [aged 15-65] 24 million ACTIVE CREDIT CONSUMERS 4.4 million 2 700 UNIQUE MBD CUSTOMERS COLLECTION AGENTS 10 million NON-PERFORMING CRED
Slide 21: 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 Lead generation &
Slide 22: Client Engagement Model: Market Segments
RISK SERVICES 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 CUSTOMER MANAGEMENT
Slide 23: Risk Services: Looking Forward
RISK SERVICES LOOKING FORWARD CONSUMER CREDIT BANKING SPECIALIST PUBLIC TELCOS INSURANCE SMEs RETAIL LENDING SECTOR, SOEs Provide Increase Provide Cautiously Expand Expand Augment broader penetration broader expand into this into this offering to ORIGINATE service offering into Tier I service offeri
Slide 24: Interim Results for the Half Year Ended 31 March 2016
INTERIM RESULTS FOR THE HALF YEAR ENDED 31 MARCH 2016 24
Slide 25: Financial Highlights
FINANCIAL HIGHLIGHTS RETURN ON AVERAGE ASSETS CREDIT LOSS RATIO ▲ TO IMPROVED TO INTERIM DIVIDEND 4.2% 3.2% FOR THE HALF YEAR FROM FROM OF HEADLINE EARNINGS 3.9% 3.9% 12 cents PER SHARE PER SHARE ▲20% TO RETURN ON NON-PERFORMING AVERAGE EQUITY ▲20% 37.0 cents LOAN RATIO ▲ TO IMPROVED TO DIVIDEND COV
Slide 26: Financial Position: Group
FINANCIAL POSITION GROUP • Conservative growth in gross loans & advances from R6.5bn to R7.1bn ▲11% › Origination strategies remained conservative targeting improved credit quality, new 53.2 product lines including Nissan minibus and Toyota Corolla (Zebra) 45.4 42.8 • Equity R2.7bn ▲11% 41.3 › Posit
Slide 27: Financial Performance: Group
FINANCIAL PERFORMANCE GROUP 65.2 • HEPS ▲20% from 30.9cps to 37.0cps 61.9 62.3 63.1 • Headline earnings▲19% from R176m to R210m › Net interest income ▲7% driven by: – Gross loans and advances ▲11% 15.9 15.0 – NIM ▼ to 12.3%, from 12.9% 13.0 » Slight increase in cost of borrowing 13.1 12.9 12.3 » Cha
Slide 28: Portfolio Mix
PORTFOLIO MIX Rm Growth Contribution • Contribution 2016 2015 2014 › Asset-backed lending increased marginally Headline earnings IFRS 9 IFRS 9 IAS 39 2016 2015 2016 2015 2014 to 56% Asset-backed lending¹ 118 98 74 20% 32% 56% 55% 50% › Risk services contribution decreased marginally from 34% to 33%
Slide 29: Asset-Backed Lending Performance
ASSET-BACKED LENDING PERFORMANCE • Headline earnings attributable to the division ▲23% to R118m • Net interest margin decreased marginally from 47.7 48.4 11.1% to 11.0% 43.2 › Funding costs increased slightly to 10.4% from 41.8 10.3% • Non-interest revenue ▲ 33% to R150m › Normalisation of cost reco
Slide 30: Asset-Backed Lending Credit
ASSET-BACKED LENDING CREDIT • Gross loans & advances ▲12% to R6.7bn 48.3 › Number of loans ▲3% 43.3 › Credit granting criteria remain conservative • Non-performing loan ratio improved to 18.0% from 19.3% 30.4 • Credit-loss ratio ▼ from 4.1% to 3.4% › Continued strong collection performance 26.0 › En
Slide 31: 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 INTERIM RESULTS FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 MARC
Slide 32: SA Taxi Facilitates Financial Inclusion
SA TAXI FACILITATES FINANCIAL INCLUSION SA TAXI PROVIDES ESSENTIAL FINANCIAL SERVICES TO UNDERSERVED SMALL BUSINESSES 12% • SA Taxi fills a critical funding gap, providing credit to entrepreneurs who Proportion of customer base Score below which would otherwise be excluded from the formal economy gi
Slide 33: Transaction Capital Risk Services (TCRS)
TRANSACTION CAPITAL RISK SERVICES (TCRS) • Headline earnings▲15% to R70m 83.9 • Agency revenue ▲6% 82.4 82.4 81.5 › Increased focus on profitability of mandates eliminating non-profitable legacy mandates • Principal revenue ▲9% › Solid result given conservative approach to book buying › Purchased bo
Slide 34: Capital Management
CAPITAL MANAGEMENT • SA Taxi accessed the local debt capital markets via its various structures 53.2 › Cumulatively raising R1.3bn › Strategy remains innovative and continue 45.4 to pursue multiple tactics to diversify 42.8 41.3 funding base • 11 institutions invested R1.4bn of debt capital 12.0 › A
Slide 35: Funding Philosophy
FUNDING PHILOSOPHY Diversification by Diversification by funding structure funder category • Wholesale funding model proves to be robust › “Positive liquidity mismatch” between 19% 12% 24% asset & liability cash flows 37% 14% › Adequate liquidity to meet operational and capital investment funding re
Slide 36: Shareholding 31 March 2016
SHAREHOLDING 31 MARCH 2016 7% 26% 47% 10% 10% Directors of Transaction Capital and its subsidiaries & their associates Old Mutual Investment Group South Africa Proprietary Limited Allan Gray Remaining institutional shareholders Retail investors INTERIM RESULTS FINANCIAL REVIEW FOR THE HALF YEAR ENDE
Slide 37: Interim Results for the Half Year Ended 31 March 2016
INTERIM RESULTS FOR THE HALF YEAR ENDED 31 MARCH 2016 37
Slide 38: 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 39: Interim Results for the Half Year Ended 31 March 2016
INTERIM RESULTS FOR THE HALF YEAR ENDED 31 MARCH 2016 39
Slide 40: 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