Vanquis Banking Group Plc · LSE:VANQ
Vanquis Banking — Provident Financial — H1 2005 Earnings Presentation
44 slides from Vanquis Banking's earnings presentation, Sep 14, 2005
Slide 1: Interim results to 30 June 2005
PROVIDENT FINANCIAL Interim results to 30 June 2005 14 September 2005
Slide 2: Our presentation today
PROVIDENT FINANCIAL Our presentation today > Overview – Robin Ashton > Financial review – John Harnett > Regulatory developments – John Harnett > UK consumer credit – Chris Johnstone > International – David Swann > Motor insurance – Robin Ashton > Outlook – Robin Ashton > Questions
Slide 3: Overview
PROVIDENT FINANCIAL Overview Strong profit growth offset by Yes Car Credit PBT Reduced slightly by 1.3% to £82.9 million EPS Reduced by 1.1% to 23.07p DPS Increased by 3% to 14.06p
Slide 4: Financial review: divisional results
PROVIDENT FINANCIAL Financial review Divisional results half-year ended 30 June 2005 2004 Change £m £m % UK consumer credit 47.1 62.0 (24.0) International 19.2 10.7 79.4 Motor insurance 23.1 16.6 39.2 Central costs (6.5) (5.3) (22.6) Profit before tax 82.9 84.0 (1.3) Tax rate 29.3% 29.7% - Earnings
Slide 5: Financial review: balance sheet
PROVIDENT FINANCIAL Financial review Balance sheet June 2005 June 2004 £m £m Consumer credit receivables 1,134 1,006 Net consumer credit borrowings 829 692 Group net assets 406 371 Comprising: Consumer credit capital 209 210 Consumer credit goodwill 94 88 303 298 Motor insurance capital 103 73 Consu
Slide 6: Consumer credit regulatory capital
PROVIDENT FINANCIAL Financial review Consumer credit regulatory capital June 2005 Dec 2004 £m £m Receivables 1,134 1,200 Other risk weighted assets 220 194 Total risk weighted assets 1,354 1,394 Capital reserves – Tier 1 264 289 Subordinated debt – Tier 2 100 - Total capital resources 364 289 Capita
Slide 7: Consumer credit regulation: Consumer Credit Bill
PROVIDENT FINANCIAL Consumer credit regulation Consumer Credit Bill > Progressing through the parliamentary process > Expected to become law towards the end of this year > Modernise regulation of consumer credit > Enhance consumer protection > Easier for consumers to challenge unfair practices and t
Slide 8: Consumer credit regulation: Competition Commission
PROVIDENT FINANCIAL Consumer credit regulation Competition Commission (CC) > Inquiry into the supply of home credit in the UK continues > Several submissions of evidence provided show: > responsible lender > operating in a highly competitive market > transparent products > home service valued by cus
Slide 9: Consumer credit regulation: Polish rate cap
PROVIDENT FINANCIAL Consumer credit regulation Polish rate cap > New law introduced > Maximum interest rate of four times the Lombard rate > Lombard rate is currently 6% > Result is an interest cap of 24% > Effective for loans issued from February 2006 > Preparations made for this eventuality > No m
Slide 10: UK consumer credit
PROVIDENT FINANCIAL UK consumer credit 2005 interim results UKIHC Yes Car Credit Vanquis Bank
Slide 11: UK consumer credit profit before tax
PROVIDENT FINANCIAL UK consumer credit 2005 interim results profit before tax 2005 2004 Change £m £m £m UK home credit 60.5 61.1 (0.6) Yes Car Credit (6.2) 5.7 (11.9) Vanquis Bank (7.2) (4.8) (2.4) 47.1 62.0 (14.9) 6 months to 30 June
Slide 12: UK home credit overview H1 2005
PROVIDENT FINANCIAL UK home credit Overview H1 2005 > Continues to produce a solid performance > Market conditions remain competitive > Customer numbers 4% lower > Credit issued increased by 4% > Good sales of larger loans product to selected, low risk customers
Slide 13: UK home credit customers and credit issued
PROVIDENT FINANCIAL UK home credit Customers and credit issued (MAT) at June Customer Credit numbers issued `000 £m 1,800 1,000 1,600 900 1,400 800 1,200 700 600 1,000 500 800 400 600 300 400 200 200 100 0 0 92 93 94 95 96 97 98 99 00 01 02 03 04 05 Customer numbers ('000) Credit issued (£m) MAT
Slide 14: UK home credit 2005 interim results
PROVIDENT FINANCIAL UK home credit 2005 interim results 2005 2004 Change £m £m % Customer numbers (m) 1.46 1.53 (4.1) Credit issued 386.9 372.5 3.9 Average customer receivables 550 537 2.3 Revenue 281.6 280.7 0.3 Impairment (100.9) (96.6) (4.5) Interest (5.9) (7.5) 21.3 Costs (114.3) (115.5) 1.1 Pro
Slide 15: UK home credit prospects for H2 2005
PROVIDENT FINANCIAL UK home credit Prospects for H2 2005 > Challenging market conditions will continue > Continued reduction in customer numbers > Credit issued per customer will continue to rise but at lower rate > Early signs of an increase in arrears and impairment charges > Manage costs tightly
Slide 16: Yes Car Credit overview H1 2005
PROVIDENT FINANCIAL Yes Car Credit Overview H1 2005 > Performance below expectations > Lower sales (down 25%) are key problem > Reduced response rates to advertising and lower conversion > External factors > depressed market – down 7% > increased competition > Internal factors > advertising effectiv
Slide 17: Yes Car Credit 2005 interim results
PROVIDENT FINANCIAL Yes Car Credit 2005 interim results 2005 2004 Change Change £m £m £m % Cars sold (units) 15,289 20,406 (5,117) (25) Revenue 121.0 143.8 (22.8) (16) Gross profit 55.7 66.6 (10.9) (16) Impairment (18.9) (17.8) (1.1) (6) Interest (7.0) (5.5) (1.5) (27) Costs (36.0) (37.6) 1.6 4 Prof
Slide 18: Yes Car Credit improvement plan
PROVIDENT FINANCIAL Yes Car Credit Improvement plan > Determined action to address the issues at Yes Car Credit > New senior management team recruited > Comprehensive improvement plan > Aim to increase sales volumes and profit margins, and reduce impairment costs > Objective to break even for 2006 a
Slide 19: Yes Car Credit improvement plan details
PROVIDENT FINANCIAL Yes Car Credit Improvement plan > Increase sales More effective advertising and better conversion of enquiries to sales > Increase gross Improved risk based pricing margin and savings on vehicle purchasing and preparation > Reduce impairment Provide better quality car, and charge
Slide 20: Yes Car Credit prospects for H2 2005
PROVIDENT FINANCIAL Yes Car Credit Prospects for H2 2005 > Period of re-building > Closely monitor improvement plan > Trading losses of £15m to £20m expected for 2005 > Strategic review to conclude in next six months
Slide 21: Vanquis Bank overview H1 2005
PROVIDENT FINANCIAL Vanquis Bank Overview H1 2005 > Differentiated offer to non-standard customers > Expanded infrastructure > Increased rate of customer recruitment > Cards in issue 113,000 > Performed well
Slide 22: Vanquis Bank 2005 interim results
PROVIDENT FINANCIAL Vanquis Bank 2005 interim results 2005 2004 £m £m Cards in issue (number) 113,000 48,000 Net customer receivables 42.0 12.1 Revenue 7.2 2.0 Net loss (7.2) (4.8) 6 months to 30 June
Slide 23: Vanquis Bank prospects for H2 2005
PROVIDENT FINANCIAL Vanquis Bank Prospects for H2 2005 > Continue to grow cardholders and customer receivables > Tightening underwriting standards > Start-up losses of about £15 million in 2005 > Substantially reduced loss in 2006 > Profit in 2007
Slide 24: International: Central Europe and Mexico
PROVIDENT FINANCIAL International Central Europe and Mexico
Slide 25: International overview H1 2005
PROVIDENT FINANCIAL International Overview H1 2005 > Division continues to grow rapidly > Excellent results > Central Europe – higher impairment charge in Poland offset by favourable exchange rates > Good performance from Hungary and Czech Republic > Mexico – expanding quickly and performing well
Slide 26: International 2005 interim results
PROVIDENT FINANCIAL International 2005 interim results FX adjusted 2005 2004 2004 Change £m £m £m %* Customer numbers (000) 1,626 1,380 - 18 Credit issued 246.8 188.5 213.9 15 Average customer receivables 267.5 188.6 211.1 27 Revenue 171.5 122.1 139.0 23 Impairment (71.7) (46.3) (52.9) (36) Interest
Slide 27: Central Europe overview H1 2005
PROVIDENT FINANCIAL Central Europe Overview H1 2005 > Strong growth in customers and credit issued > Polish growth slowed to focus on managing collections and impairment charge > Hungary and Czech Republic performing well > FX benefits > Excellent result from the central European business
Slide 28: Central Europe 2005 interim results
PROVIDENT FINANCIAL Central Europe 2005 interim results FX Adjusted 2005 2004 2004 Change £m £m £m %* Customer numbers (000) 1,563 1,366 - 14 Credit issued 240.6 187.5 212.9 13 Average customer receivables 264.4 188.2 210.6 26 Revenue 168.5 121.6 138.6 22 Impairment (70.7) (46.2) (52.8) (34) Interes
Slide 29: Mexico overview H1 2005
PROVIDENT FINANCIAL Mexico Overview H1 2005 > Good progress made > Opened nine new branches > Agent numbers rose by 568 to 1,192 in H1 > Customer numbers increased from 35,000 to 63,000 in H1 > £6.2 million of credit issued > Collections and credit quality developed to plan > Performing as anticipat
Slide 30: Mexico current locations
PROVIDENT FINANCIAL Mexico Current locations
Slide 31: International prospects for H2 2005
PROVIDENT FINANCIAL International Prospects for H2 2005 > Strong divisional results for the year > Good performance from central Europe > Mexico will further expand in the Puebla-Veracruz region > Start-up losses of about £5 million in Mexico for 2005 > Division to continue to deliver strong growth
Slide 32: Motor insurance overview H1 2005
PROVIDENT FINANCIAL Motor insurance Overview H1 2005 > Conditions steady > Prices for our risks in the market broadly stable > Policyholder numbers steady at 498,000 > Favourable claims costs > Continues to deliver excellent results
Slide 33: Motor insurance 2005 interim results
PROVIDENT FINANCIAL Motor insurance 2005 interim results 2005 2004 Change £m £m % Gross written premium 82.0 83.6 (1.9) Gross earned premium 80.9 85.6 (5.5) Costs (68.6) (80.9) 15.2 Underwriting profit 12.3 4.7 161.7 Combined ratio (%) 85% 94% - Investment income 10.8 11.9 (9.2) Profit before tax 23
Slide 34: Motor insurance prospects for H2 2005
PROVIDENT FINANCIAL Motor insurance Prospects for H2 2005 > Pricing conditions are expected to remain stable > Policyholder numbers steady > Continued favourable trends in claims costs > Expected to deliver excellent results for the year
Slide 35: Group prospects for 2005
PROVIDENT FINANCIAL Group Prospects for 2005 “We expect good performances for the majority of the group in 2005 with growth offset by the trading losses at Yes Car Credit”
Slide 36: Questions
PROVIDENT FINANCIAL Questions
Slide 37: Appendices
PROVIDENT FINANCIAL Appendices
Slide 38: Sterling exchange rates: 2004 & 2005
PROVIDENT FINANCIAL Sterling exchange rates: 2004 & 2005 Appendix Polish Czech Hungarian Slovak euro Mexican zloty crown forint crown peso Average exchange rate 5.96 43.80 360.06 56.24 1.46 20.73 during 6 months to 30 June 2005 Exchange rate as at 6.05 45.09 371.83 57.63 1.51 19.60 30 June 2005 Aver
Slide 39: Poland
PROVIDENT FINANCIAL Poland Appendix FX Adjusted 2005 2004 2004 Change £m £m £m %* Customer numbers (000) 950 886 - 7 Credit issued 138.0 111.2 131.1 5 Revenue 100.4 75.2 88.7 13 Impairment (47.6) (30.1) (35.3) (35) Interest (5.3) (5.0) (5.8) 9 Costs (33.2) (27.6) (32.6) (2) Profit before tax 14.3 12
Slide 40: Czech Republic
PROVIDENT FINANCIAL Czech Republic Appendix FX Adjusted 2005 2004 2004 Change £m £m £m %* Customer numbers (000) 229 220 - 4 Credit issued 37.7 32.6 35.8 5 Revenue 26.1 22.2 24.4 7 Impairment (7.3) (7.9) (8.7) 16 Interest (1.0) (1.2) (1.3) 23 Costs (11.1) (9.1) (10.2) (9) Profit before tax 6.7 4.0 4
Slide 41: Hungary
PROVIDENT FINANCIAL Hungary Appendix FX Adjusted 2005 2004 2004 Change £m £m £m %* Customer numbers (000) 274 185 - 48 Credit issued 49.3 34.2 35.9 37 Revenue 33.0 19.5 20.5 61 Impairment (10.8) (5.7) (6.1) (77) Interest (2.4) (1.6) (1.7) (41) Costs (14.7) (11.0) (11.6) (27) Profit before tax 5.1 1.
Slide 42: Slovakia
PROVIDENT FINANCIAL Slovakia Appendix FX Adjusted 2005 2004 2004 Change £m £m £m %* Customer numbers (000) 110 75 - 47 Credit issued 15.6 9.5 10.1 54 Revenue 9.0 4.7 5.0 80 Impairment (5.0) (2.5) (2.7) (85) Interest (0.7) (0.4) (0.5) (40) Costs (4.4) (3.2) (3.3) (33) Profit before tax (1.1) (1.4) (1
Slide 43: Mexico
PROVIDENT FINANCIAL Mexico Appendix FX Adjusted 2005 2004 2004 Change £m £m £m %* Customer numbers (000) 63 14 - 350 Credit issued 6.2 1.0 1.0 520 Revenue 3.0 0.5 0.4 650 Impairment (1.0) (0.1) (0.1) (900) Interest (0.3) (0.1) (0.1) (200) Costs (3.2) (1.4) (1.2) (167) Profit before tax (1.5) (1.1) (
Slide 44: PROVIDENT PROVIDENT FINANCIAL FINANCIAL
PROVIDENT PROVIDENTFINANCIAL FINANCIAL