Nutun Limited · JSE:NTU
Nutun — Transaction Capital — FY2020 Earnings Presentation
47 slides from Nutun's earnings presentation, November 2020
Slide 1: Appendix: 2020 Results for the Year Ended 30 September
APPENDIX 2020 RESULTS FOR THE YEAR ENDED 30 SEPTEMBER
Slide 2: Transaction Capital Positioning Statement
TRANSACTION CAPITAL 1 POSITIONING STATEMENT TRANSACTION CAPITAL is an investor in and operator of alternative Led by entrepreneurial management teams, our businesses are assets in credit related and other specialised positioned deliberately in relation to socio-economic dynamics in market verticals.
Slide 3: Compelling & Unique Investment Case
COMPELLING & UNIQUE INVESTMENT CASE 2 AGILITY & FLEXIBILITY OF THE GROUP & ITS DIVISIONS IN RESPONDING TO THE VOLATILE OPERATING ENVIRONMENT PRECIPITATED BY COVID-19 DURING FY20, DEMONSTRATES ROBUSTNESS OF TC’S BUSINESS MODEL • Two well established, autonomous & unique financial services businesses:
Slide 4: Investment Case Continued: Capital Structure and Governance
INVESTMENT CASE CONTINUED 3 COMPELLING & UNIQUE AS WE EXECUTE ON OUR STRATEGY • Conservative capital management philosophy to fund organic growth & acquisition activity • Well capitalised at holding company & divisional levels with a bespoke and • Unfettered access to liquidity & proven ability to r
Slide 5: Investment Case Continued: Meaningful Social Impact
INVESTMENT CASE CONTINUED 4 COMPELLING & UNIQUE AS WE EXECUTE ON OUR STRATEGY and the delivery of • Businesses deliberately positioned in relation to demographic and socio-economic trends, to deliver shared value, through commercial returns and meaningful positive social impact a meaningful • Enviro
Slide 6: Transaction Capital Business Model
TRANSACTION CAPITAL BUSINESS MODEL 5 CAPITAL INPUTS CAPITAL OUTCOMES 1 2 INTELLECTUAL CAPITAL Identify credit-orientated alternative Apply core skills to assess & INTELLECTUAL CAPITAL Market-leading & socially relevant business platforms with scale & asset classes, in which our core risk & mitigate
Slide 7: Transaction Capital Evolution Since Listing
TRANSACTION CAPITAL EVOLUTION SINCE LISTING 6 MANAGEMENT INTERVENTIONS TO CREATE VALUE CAGR FY12 to FY19: November 2015 November 2017 November 2019 November 2020 Headline earnings per share1 ▲23% Early adoption of IFRS 9 Dividend policy amended to 2 to 2.5 times (4 to 5 times at listing) Sunday Time
Slide 8: Appendix: WeBuyCars
APPENDIX WeBuyCars 2020 RESULTS FOR THE YEAR ENDED 30 SEPTEMBER
Slide 9: WeBuyCars Positioning Statement
WeBuyCars 8 POSITIONING STATEMENT Sellers receive a fair offer price, driven by proprietary market Entrepreneurial, founder-led & proudly South African; data (artificial intelligence) with immediate cash settlement. Is South Africa’s an innovator amongst numerous participants in the used vehicle Buy
Slide 10: Transaction Capital Subscribes for Non-Controlling 49.9% in WeBuyCars
TRANSACTION CAPITAL SUBSCRIBES FOR A NON-CONTROLLING 49.9% IN WeBuyCars 9 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 4 ¹ FOUNDERS Ca
Slide 11: Evolution of WeBuyCars into a Leading Market Participant
EVOLUTION OF WeBuyCars INTO A LEADING MARKET PARTICIPANT 10 ENTREPRENEURIAL CULTURE | INVESTMENT IN EXPANSIVE INFRASTRUCTURE | BUILDING A TRUSTED BRAND | UNIQUE E-COMMERCE TECHNOLOGY HIGHLIGHTS AS AT 31 MARCH 2020 2001 2001 - 2010 2001 • WeBuyCars founded by van der Walt brothers • Located in Pretor
Slide 12: Used Vehicle Market Context & Environment
USED VEHICLE MARKET CONTEXT & ENVIRONMENT 11 USED VEHICLE INDUSTRY IS LARGE & HIGHLY FRAGMENTED LARGE & HIGHLY FRAGMENTED MARKET WITH VARIOUS PARTICIPANTS & OPERATING MODELS Rental companies/ Dealers DEALERS | GROUPS VS INDEPENDENT dealerships/banks Stockholder Platform • Stockholders with inventory
Slide 13: E-Commerce Market Context & Environment
E-COMMERCE MARKET CONTEXT & ENVIRONMENT 12 E-COMMERCE PENETRATION IN SOUTH AFRICA IS DRIVING GROWTH ESTIMATE THAT E-COMMERCE ADOPTION IN SOUTH AFRICA HAS LEAP-FROGGED 5 YEARS DUE TO COVID-19 SIGNIFICANT OPPORTUNITY FOR E-COMMERCE DISRUPTION IN SOUTH AFRICA WeBuyCars IS WELL POSITIONED TO GROW ITS E-
Slide 14: Appendix: SA Taxi
APPENDIX SA TAXI 2020 RESULTS FOR THE YEAR ENDED 30 SEPTEMBER
Slide 15: SA Taxi Positioning Statement
SA TAXI 14 POSITIONING STATEMENT SA TAXI An innovative & pioneering business model is a vertically integrated with operations expanding throughout the financial services & asset value chain, minibus taxi platform building a scalable platform A unique blend of vehicle procurement, retail, that can be
Slide 16: SA Taxi Evolution Since Listing
SA TAXI EVOLUTION SINCE LISTING 15 MANAGEMENT INTERVENTIONS TO CREATE VALUE CAGR FY12 to FY19: Non-interest revenue composition: November 2015 July 2017 March 2018 October 2018 October 2019 Headline earnings ▲19% ▲ 32% (FY20) from 26% (FY12) Early adoption of IFRS 9 Accounting consolidation of SA Ta
Slide 17: Environment & Market Context
ENVIRONMENT & MARKET CONTEXT 16 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 < 250 000 ▼58% • 40% of South Africans use public transport
Slide 18: Environment for Minibus Taxi Operators (HY20 Pre COVID-19)
ENVIRONMENT FOR MINIBUS TAXI OPERATORS (HY20 PRE COVID-19) 17 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 REQ
Slide 19: Environment for Minibus Taxi Operators: Fare Increases
ENVIRONMENT FOR MINIBUS TAXI OPERATORS 18 FARE INCREASES IN 2020 TO SUPPORT OPERATORS PROFITABILITY FARES DETERMINED BY EACH ASSOCIATION PER ROUTE • The industry ensures operators remain profitable • Demand for minibus taxi services is relatively inelastic FARE INCREASE CONSIDERATIONS INCLUDE MPUMAL
Slide 20: Environment & Market Context
ENVIRONMENT & MARKET CONTEXT 19 INTEGRATED PUBLIC TRANSPORT NETWORK, WITH BUS & RAIL COMMUTERS RELYING ON MINIBUS TAXI INFRASTRUCTURE JOHANNESBURG Source: SA Taxi telematics data as at 11 October 2016 | National Land Transport Strategic Framework 2015
Slide 21: COVID-19 Lockdown Impact on Minibus Taxi Operators
COVID-19 LOCKDOWN IMPACT ON MINIBUS TAXI OPERATORS 20 EFFECT ON MINIBUS TAXI OPERATOR MOVEMENT | CHANGE IN BEHAVIOUR DUE TO TRAVEL & CAPACITY RESTRICTIONS SHORT DISTANCE ROUTE February - March 2020 (pre national lockdown) April 2020 (lockdown level 5) Average distance travelled¹ 100% Average distanc
Slide 22: COVID-19 Lockdown Impact on Minibus Taxi Operators
COVID-19 LOCKDOWN IMPACT ON MINIBUS TAXI OPERATORS 21 CHANGE IN BEHAVIOUR DUE TO TRAVEL & CAPACITY RESTRICTIONS LONG DISTANCE ROUTE February - March 2020 April 2020 June - August 2020 September - November 2020 (pre national lockdown) (lockdown level 5) (lockdown level 3) (lockdown level 1) Average d
Slide 23: SA Taxi Impact
SA TAXI IMPACT 22 DELIVERING SHARED VALUE FOR THE INDUSTRY SME EMPOWERMENT ECONOMIC TRANSFORMATION & INCLUSIVE GROWTH 100% 26% 18% DEVELOPMENTAL CREDIT ACHIEVING INCLUSIVE GROWTH BLACK OWNED SMEs WOMEN OWNED SMEs¹ UNDER THE AGE OF 35 YEARS¹ R2.9 billion R28.6 billion LOANS ORIGINATED CREATING LOANS
Slide 24: SA Taxi Market Positioning
SA TAXI MARKET POSITIONING 23 VERTICALLY INTEGRATED BUSINESS MODEL
Slide 25: SA Taxi Market Positioning: Developmental Credit and Finance
SA TAXI MARKET POSITIONING 24 VERTICALLY INTEGRATED BUSINESS MODEL DEVELOPMENTAL CREDIT DRIVING POSITIVE SOCIAL IMPACT SA TAXI FINANCE INCLUSIVE GROWTH | ECONOMIC TRANSFORMATION 12.2 billion 32 890 ~1.2 PROPORTION OF CUSTOMERS CLASSIFIED 80% Proportion of customer base AS PREVIOUSLY FINANCIALLY EXCL
Slide 26: Vertically Integrated Business Model (HY20 Pre COVID-19)
VERTICALLY INTEGRATED BUSINESS MODEL (HY20 PRE COVID-19) 25 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 REPOSSE
Slide 27: SA Taxi Auto Repairs
SA TAXI MARKET POSITIONING 26 VERTICALLY INTEGRATED BUSINESS MODEL SA TAXI AUTO REPAIRS | AUTOBODY SA TAXI AUTO REPAIRS ~20 000m² ~250 per month ~400 WORKSHOP INTERNAL VEHICLE EMPLOYEES FACILITIES REFURBISHMENT CAPACITY >75% ~ 4% to ~6% RECOVERY RATES ON REPOSSESSION, AVERAGE REFURBISHMENT COST¹ R
Slide 28: SA Taxi Direct
SA TAXI MARKET POSITIONING 27 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 29: Telematics & Technology, SA Taxi Protect
SA TAXI MARKET POSITIONING 28 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 30: SA Taxi Auto Parts
SA TAXI MARKET POSITIONING 29 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 31: SANTACO and SA Taxi Rewards
SA TAXI MARKET POSITIONING 30 VERTICALLY INTEGRATED BUSINESS MODEL SANTACO & SA TAXI DELIVERING SUSTAINABLE SA TAXI REWARDS BENEFITS TO SA TAXI CLIENTS & THE INDUSTRY FUEL PROGRAMME • Direct benefits for the industry resulting from ownership transaction between SA Taxi & SANTACO >10 000 CARDS ISSUED
Slide 32: SA Taxi Operational Performance
SA TAXI OPERATIONAL PERFORMANCE 31 SA TAXI OPERATOR PROFILE CREDIT PROFILE OF LOANS ON BOOK 1.2 3.8 years 71 months 35% VEHICLES PER CUSTOMER AVERAGE AGE OF VEHICLE AVERAGE LOAN TERM1 AVERAGE APPROVAL RATE 46 years 88% >R6 000 50 months AVERAGE AGE OF CUSTOMER TOYOTA VEHICLES MINIMUM MONTHLY OPERATO
Slide 33: Early Adoption of IFRS 17 Insurance Contracts
EARLY ADOPTION OF IFRS 17 | INSURANCE CONTRACTS 32 MORE CONSERVATIVE PROVISIONING METHODOLOGY INCURRED VS. EXPECTED LOSS INCURRED LOSS MODEL FORWARD LOOKING | EXPECTED LOSS MODEL 29.9 OCR IFRS 4 LRC 3.3Incurred LIC 2.2claims IBNR IFRS 17 Incurred OCR + LIC + & expected IBNR claims IFRS 4 IFRS 17 LRC
Slide 34: Appendix: Transaction Capital Risk Services
APPENDIX TRANSACTION CAPITAL RISK SERVICES 2020 RESULTS FOR THE YEAR ENDED 30 SEPTEMBER
Slide 35: Transaction Capital Risk Services Positioning
TRANSACTION CAPITAL RISK SERVICES 34 TRANSACTION CAPITAL RISK SERVICES Generating in-depth insights from the continuous is a technology-led, Innovative & bespoke technology systems collection of accurate & valuable data that drive superior performance & efficiency to develop a consolidated view of a
Slide 36: TCRS Evolution Since Listing
TCRS EVOLUTION SINCE LISTING 35 MANAGEMENT INTERVENTIONS TO CREATE VALUE CAGR 2012 to 2019: June 2015 November 2015 January 2017 December 2017 April 2020 Non-interest income ▲14% Improved penetration Early adoption of IFRS 9 Entered Australian debt recoveries market Acquisition of 100% of Accsys Dis
Slide 37: TCRS Market Positioning: Competitive Advantages
TCRS MARKET POSITIONING 36 COMPETITIVE ADVANTAGES TCRS’s PROPRIETARY DATA • Database of SA’s distressed consumers • Continuously enriched (with collection & ContactAbility results) ANALYTICS REPUTATION OF PERFORMANCE • Predictive & layered voice analytics to determine: • Only local listed industry p
Slide 38: TCRS Master Data Universe
TCRS MARKET POSITIONING 37 COMPETITIVE ADVANTAGES MASTER DATA UNIVERSE (MDU) - ENRICHED DATA ON EACH INDIVIDUAL OTHER DATA SOURCES Data from • Opportunity to Data is current, relevant CREDIT such as the PRINCIPAL monetise data Enriching the data creates an exponential effect on efficiency BUREAU & a
Slide 39: Appendix: Capital Management
APPENDIX CAPITAL MANAGEMENT 2020 RESULTS FOR THE YEAR ENDED 30 SEPTEMBER
Slide 40: Capital & Funding Evolution Since Listing
CAPITAL & FUNDING EVOLUTION SINCE LISTING 39 February June 2014 March 2015 November 2015 November 2016 November 2017 December 2018 October 2019 2012 Transsec: Over 20 funders Transsec 2: R4bn S&P Established a R2bn domestic note • Dividend policy amended Transsec 1 note holders fully Transsec 4 tap
Slide 41: Conservative Funding Philosophy
CONSERVATIVE FUNDING PHILOSOPHY 40 FUNDING PHILOSOPHY INNOVATIVE ENGAGED DEBT INVESTORS JUDICIOUS RISK MITIGATION OPTIMAL CAPITAL STRUCTURES THINKING • Recurring investment by debt investors • Optimal liquidity management between asset & liability • Proactively managing valuable capital & funds Inno
Slide 42: Diversified Debt Funding Strategy
DIVERSIFIED DEBT FUNDING STRATEGY 41 DIVERSIFICATION BY DEBT INVESTOR CATEGORY DIVERSIFICATION BY FUNDING STRUCTURE DIVERSIFICATION BY GEOGRAPHY & CAPITAL POOL & INSTRUMENT 13% 11% 13% 71% 17% 1% 35% 11% 29% 39% 24% 29% 4% 33% 10% 28% Institutional investors Warehousing facilities LOCAL Banks On-bal
Slide 43: Capital Management: Cost of Borrowing
CAPITAL MANAGEMENT 42 COST OF BORROWING 11.8% 11.3% 11.5% 11.1% 10.7% 9.6% 4.8% 4.6% 4.9% 4.4% 4.9% 4.5% 5.8% 6.7% 7.0% 6.6% 6.7% 5.1% FY15 FY16 FY17 FY18 FY19 FY20 Average repo rate during the period Cost of borrowing margin above repo rate¹ 1. Calculated using Transaction Capital’s average cost of
Slide 44: Glossary
GLOSSARY 2020 RESULTS FOR THE YEAR ENDED 30 SEPTEMBER
Slide 45: Glossary
GLOSSARY 44 AUS Australia COVID-19 The novel Coronavirus & the disease it causes ACCSYS Accsys, a 100% owned subsidiary of TCRS CPS Cents per share A vehicle inspection certification providing information on the mechanical & technical B2B Business-to-business (vehicle dealerships) DEKRA Report statu
Slide 46: Glossary
GLOSSARY 45 HEPS Headline earnings per share TC Transaction Capital JIBAR The Johannesburg Interbank Average Rate TCBS Transaction Capital Business Solutions, a 100% owned subsidiary of TCRS NPL Portfolio Non-performing consumer loan portfolios acquired by TCRS to be collected as principal TCRS Tran
Slide 47: Disclaimer
DISCLAIMER 46 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 transaction