Slide 1: Transaction Capital Results Presentation
TRANSACTION CAPITAL RESULTS PRESENTATION FOR THE HALF YEAR ENDED 31 MARCH 1
Slide 2: Group Highlights
GROUP HIGHLIGHTS 2019 RESULTS FOR THE HALF YEAR ENDED 31 MARCH 2
Slide 3: Financial Highlights
FINANCIAL HIGHLIGHTS HY19 COMPARED TO HY18 CEO: Terry Kier, 12-year group tenure CEO: David Hurwitz, 14-year group tenure CEO: Dave McAlpin, 11-year group tenure R211 MILLION R10.1BILLION R363 MILLION 59.4 CPS R134 MILLION R1.7 BILLION HEADLINE GROSS LOANS HEADLINE HEADLINE EARNINGS HEADLINE PURCHAS
Slide 4: Group Portfolio Mix
GROUP PORTFOLIO MIX COMPOSITION OF EARNINGS 5% 6% 37% 2019 58% 38% 2018 56% SA Taxi TCRS GEO Rm Rm Growth Headline earnings 2019 2018 2019 SA Taxi¹ 211 173 ▲22% TCRS¹ 134 119 ▲13% Group executive office (GEO) 18 18 - Total 363 310 ▲17% Cents per share 59.4 50.8 ▲17% Financial ratios exclude once-off
Slide 5: Transaction Capital 5 Year Performance
TRANSACTION CAPITAL 5 YEAR PERFORMANCE CAGR HY14 – HY19: HY Headline earnings per share (HEPS) ▲19% 1 780 1 705 Interim dividend per share ▲35% Total shareholder return ▲32% 1 509 1 185 900 525 37 26 10 31 12 15 43 21 51 27 59 6 2014 2015 2016 2017 2018 2019 Interim dividend per share (cps) HY core
Slide 6: TCRS Strategic Highlights
TCRS STRATEGIC HIGHLIGHTS DELIVERING ON GROWTH TCRS Acquisition of non-performing loans as a principal Transaction Capital Specialised Credit established • 254 portfolios owned with face value R23.5bn • Focusing on capital deployment to originate or acquire • 13 portfolios acquired for R404m in SA;
Slide 7: SA Taxi Strategic Highlights
SA TAXI STRATEGIC HIGHLIGHTS DELIVERING ON GROWTH SA TAXI Ownership transaction between SA Taxi & SANTACO Insurance operations • Finalised on 6 Feb 2019 • Broadened client base • SANTACO acquired 25% stake in SA Taxi for R1.7bn › Financed by SA Taxi & open market clients • Alignment with minibus tax
Slide 8: Transaction Capital Mission Statement
TRANSACTION CAPITAL MISSION STATEMENT As a listed entity, to extend our track record of high-quality earnings growth, TRANSACTION CAPITAL IS Our capital management approach supports the sustainable delivery of growth we identify opportunities to leverage AN ACTIVE INVESTOR through an optimal balance
Slide 9: Transaction Capital Business Model
TRANSACTION CAPITAL BUSINESS MODEL CAPITAL INPUTS CAPITAL OUTCOMES Intellectual capital Intellectual capital Specialist credit risk management skills in Market-leading & socially relevant business alternative asset classes, active strategic 1 2 platforms with scale & resilience, intervention & effec
Slide 10: Transaction Capital Group Structure 2014
TRANSACTION CAPITAL GROUP STRUCTURE 2014 TRANSACTION CAPITAL SA TAXI 2014 TRANSACTION CAPITAL RISK SERVICES 2014 SERVICES CAPITAL SOLUTIONS Provider of finance & insurance to the minibus taxi community Collection services (SA) Acquisition of consumer based • Contingency non-performing loans Alternat
Slide 11: Transaction Capital Group Structure 2019
TRANSACTION CAPITAL GROUP STRUCTURE 2019 EXPANDING ITS TOTAL ADDRESSABLE MARKET & EARNINGS BASE TRANSACTION CAPITAL SA TAXI 2019 TRANSACTION CAPITAL RISK SERVICES 2019 SERVICES CAPITAL SOLUTIONS Provider of finance, insurance & other services delivering shared value for the industry Collection servi
Slide 12: Transaction Capital Risk Services
TRANSACTION CAPITAL RISK SERVICES 2019 RESULTS FOR THE HALF YEAR ENDED 31 MARCH 12
Slide 13: Environment & Market Context: South Africa
ENVIRONMENT & MARKET CONTEXT | SOUTH AFRICA DEFENSIVELY POSITIONED IN A CHALLENGING CONSUMER CREDIT ENVIRONMENT MACRO- & SOCIO-ECONOMIC ENVIRONMENT IN SOUTH AFRICA CREDIT REHABILITATION IS A CRUCIAL ELEMENT IN GROWING AN INCLUSIVE ECONOMY 10.2 MILLION (~40%) NON-PERFORMING CREDIT CONSUMERS² TRANSACT
Slide 14: Australian Consumer Credit Environment
ENVIRONMENT & MARKET CONTEXT | AUSTRALIA AUSTRALIAN CONSUMER CREDIT ENVIRONMENT AUSTRALIAN CONSUMER EMPLOYED BUT HIGHLY LEVERAGED AUSTRALIAN DEBT COLLECTION ENVIRONMENT • 5.0% unemployment (January 2019) • Banking Royal Commission driving: • Household debt to disposable income > 199%, exacerbated by
Slide 15: TCRS Market Positioning: Diversified Business Model
TCRS MARKET POSITIONING DIVERSIFIED BUSINESS MODEL TCRS’s business model video telestration as reported at HY19 | http://www.transactioncapital.co.za/risk.php 15
Slide 16: Diversification Supports Performance in Varying Market Conditions
TCRS MARKET POSITIONING DIVERSIFIED BUSINESS MODEL SERVICES VALUE ADDED SERVICES TRANSACTIONAL SERVICES CONTINGENCY & FFS COLLECTION SERVICES 24% 11% Insurance MARKET CONDITIONS & REDUCES CONCENTRATION RISK DIVERSIFICATION SUPPORTS PERFORMANCE IN VARYING AUSTRALIA 25% Public sector Insurance Utiliti
Slide 17: TCRS Market Positioning: Diversified by Geography
TCRS MARKET POSITIONING DIVERSIFIED BY GEOGRAPHY | UNIQUE COMPARED TO GLOBALLY LISTED PEERS UNITED STATES & EUROPE EUROPE Acquirer of NPL portfolios as principal Acquirer of NPL portfolios as principal THAILAND Acquirer of NPL portfolios as principal Contingency & FFS collector BRAZIL Acquirer of NP
Slide 18: TCRS Competitive Advantages
TCRS MARKET POSITIONING COMPETITIVE ADVANTAGES TCRS’s PROPRIETARY DATA • Database of South Africa’s distressed consumers • Continuously enriched (with collection & ContactAbility results) REPUTATION OF PERFORMANCE ANALYTICS • Only local listed industry participant • Predictive & layered voice analyt
Slide 19: TCRS Strategic Growth Initiatives to Create Value
TCRS STRATEGIC GROWTH INITIATIVES TO CREATE VALUE DELIVERING ON GROWTH SERVICES VALUE ADDED SERVICES TRANSACTIONAL SERVICES CONTINGENCY & FFS COLLECTION SERVICES SOUTH AFRICA: • Adjacent sectors: Insurance, telcos, education • Apply data & analytics skills to grow direct sales • Creation of a paymen
Slide 20: Acquisition of Non-Performing Loans as a Principal
TCRS STRATEGIC GROWTH INITIATIVES TO CREATE VALUE ACQUISITION OF NON-PERFORMING LOANS AS A PRINCIPAL GROWTH TRAJECTORY COLLECTION MULTIPLE VINTAGE PERFORMANCE¹ TO SUPPORT FUTURE POSITIVE PERFORMANCE AS AT 31 MARCH 2019 3 597 2015 2.0 1.7 3.7 2 226 Rand million 1 624 2016 1.4 2.6 4.0 2017 1.0 2.0 3.0
Slide 21: Opportunity to Enter Fragmented International Specialised Credit Market
TCRS STRATEGIC INITIATIVES TO CREATE VALUE OPPORTUNITY TO ENTER FRAGMENTED SEGMENT OF INTERNATIONAL SPECIALISED CREDIT MARKET EUROPEAN DISTRESSED DEBT & SPECIALISED CREDIT MARKET • High levels of competition • Many participants of scale (credit management platforms, private equity funds & asset mana
Slide 22: TCRS Strategic Growth Initiatives: Investment Approach
TCRS STRATEGIC GROWTH INITIATIVES TO CREATE VALUE OPPORTUNITY TO ENTER FRAGMENTED SEGMENT OF INTERNATIONAL SPECIALISED CREDIT MARKET TCRS’s INVESTMENT DIVERSIFICATION SUPPORTS PERFORMANCE APPROACH IN VARYING MARKET CONDITIONS • Alongside founders to leverage off their European experience & • Portfol
Slide 23: TCRS 5 Year Performance
TCRS 5 YEAR PERFORMANCE CAGR HY14 to HY19: HY Headline earnings¹ ▲21% 255 HY EBITDA ▲28% 186 143 134 119 97 93 84 74 70 61 51 1 727 1 030 1 201 1 624 2 226 3,597 561 523 795 571 930 2014 2015 2016 2017 2018 2019 Purchased book debts (Rm) Estimated remaining collections² (Rm) HY EBITDA (excluding Tra
Slide 24: TCRS Financial Performance
TCRS FINANCIAL PERFORMANCE • Headline earnings ▲13% to R134m • EBITDA ▲37% to R255m 81.0 • Revenue from collection services ▲18% 80.3 80.5 › Challenging environment to grow contingency & FFS revenue in SA › Growing revenue from adjacent sectors › Insurance, telecommunications & public sector 48 44 c
Slide 25: SA Taxi
SA TAXI 2019 RESULTS FOR THE HALF YEAR ENDED 31 MARCH 25
Slide 26: Minibus Taxi Industry Environment & Market Context
ENVIRONMENT & MARKET CONTEXT MINIBUS TAXI INDUSTRY IS RESILIENT, DEFENSIVE & GROWING DESPITE SA’S ECONOMIC CLIMATE TRAIN < 800 000 ▼ 20% PUBLIC TRANSPORT COMMUTERS RELY COMMUTER TRIPS DAILY ON MINIBUS TAXI GIVEN ITS ACCESSIBILITY, MINIBUS TAXI AFFORDABILITY, RELIABILITY & FLEXIBILITY RECEIVES 44% OV
Slide 27: Environment for Minibus Taxi Operators
ENVIRONMENT FOR MINIBUS TAXI OPERATORS MINIBUS TAXI OPERATORS REMAIN RESILIENT IN A CHALLENGING ECONOMIC ENVIRONMENT CHALLENGING ENVIRONMENT STRUCTURAL ELEMENTS SUPPORT INDUSTRY RESILIENCE VEHICLE PRICES DOMINANT & GROWING MODE OF PUBLIC TRANSPORT R444 200¹ JH ▲~R2 300 (Competitively priced; conveni
Slide 28: Fuel Price Increases Partially Absorbed Through Fare Increases
ENVIRONMENT FOR MINIBUS TAXI OPERATORS FUEL PRICE INCREASES PARTIALLY ABSORBED BY COMMUTERS THROUGH FARE INCREASES IN 2018 FURTHER INCREASES CURRENTLY UNDER CONSIDERATION BY INDUSTRY FARES DETERMINED BY EACH ASSOCIATION PER ROUTE • The industry ensures operators remain profitable MPUMALANGA • Demand
Slide 29: Minibus Taxi Is the Preferred Mode of Public Transport
ENVIRONMENT FOR MINIBUS TAXI OPERATORS MINIBUS TAXI IS THE PREFERRED MODE OF PUBLIC TRANSPORT DUE TO COMPETITIVE PRICING, ACCESSIBILITY & RELIABILITY SHORT DISTANCE ROUTE | SOWETO TO JOHANNESBURG: 23KM LONG DISTANCE ROUTE | JHB TO DURBAN: 595KM Minibus Minibus Bus - Bus - taxi Train Bus BRT Uber tax
Slide 30: SA Taxi Vertically Integrated Business Model
SA TAXI VERTICALLY INTEGRATED BUSINESS MODEL BUSINESS PLATFORM SERVICING MINIBUS TAXI OPERATORS ACROSS THE VALUE CHAIN SA Taxi’s business model video telestration as reported at FY18 | http://www.transactioncapital.co.za/taxi.php 30
Slide 31: SA Taxi Market Positioning
SA TAXI MARKET POSITIONING VERTICALLY INTEGRATED BUSINESS MODEL TO PROVIDE FINANCE, INSURANCE & OTHER SERVICES THAT ENABLE THE SUSTAINABILITY OF THE MINIBUS TAXI INDUSTRY CONNECTED SERVICES BLACK ELITE ~14 000 ~6.5 MILLION FUEL REWARDS PROGRAMME CARDS LITRES OF FUEL Launched April 2018 DISTRIBUTED P
Slide 32: SA Taxi Strategic Growth Initiatives to Create Value
SA TAXI STRATEGIC GROWTH INITIATIVES TO CREATE VALUE DELIVERING ON GROWTH TO PROVIDE FINANCE, INSURANCE & OTHER SERVICES THAT ENABLE THE SUSTAINABILITY OF THE MINIBUS TAXI INDUSTRY CONNECTED SERVICES • Further rewards programmes under consideration • Broaden SA Taxi’s total addressable market • Init
Slide 33: SA Taxi 5 Year Performance
SA TAXI 5 YEAR PERFORMANCE CAGR HY14 to HY19: Non-interest revenue composition: HY Headline earnings¹ ▲23% ▲ to 37% (HY19) from 24% (HY14) Gross loans & advances ▲12% NPL ratio ▼10% Recovery on repossession: 211 Credit loss ratio ▼10% ▲ to >75% (HY19) from <65% (HY12) HY gross written premium² ▲23%
Slide 34: SA Taxi Financial Performance
SA TAXI FINANCIAL PERFORMANCE • SA Taxi headline earnings ▲31% to R230m 50.1 • TC’s attributable portion ▲22% to R211m 46.1 › Despite consolidating only 81.4% (previously 98.5%) 46.5 › All organic growth › Settled approximately ~R1bn of interest bearing debt on 6 Feb 2019 yielding o ~R55m after tax
Slide 35: SA Taxi Credit Performance
SA TAXI CREDIT PERFORMANCE • Gross loans & advances ▲14% to R10.1bn 17.2 17.9 › Number of loans originated ▲9% 17.2 › Rand value of loans originated ▲15% › Toyota vehicle prices: o ▲2.5% since FY18; ▲4.5% since HY18 • NPL ratio at 17.9% (FY18: 17.7%) › Challenging operating environment o Petrol pric
Slide 36: SA Taxi Impact
SA TAXI IMPACT DELIVERING SHARED VALUE FOR THE INDUSTRY SME EMPOWERMENT ECONOMIC TRANSFORMATION & INCLUSIVE GROWTH BLACK DEVELOPMENTAL CREDIT ACHIEVING INCLUSIVE GROWTH OWNED SMEs 100% OWNEDWOMEN UNDER THE SMEs¹ 25% AGE OF 35 YEARS¹ 21% R1.9 BILLION LOANS ORIGINATED R23.8 BILLION LOANS ORIGINATED SU
Slide 37: SA Taxi Operational Performance
SA TAXI OPERATIONAL PERFORMANCE SA TAXI OPERATOR PROFILE CREDIT PROFILE OF LOANS ON BOOK 1.2 3.9 YEARS 71 MONTHS 39% VEHICLES PER CUSTOMER AVERAGE AGE OF VEHICLE AVERAGE LOAN TERM1 AVERAGE APPROVAL RATE 47 YEARS 87% >R6 000 48 MONTHS AVERAGE AGE OF OWNER TOYOTA VEHICLES MINIMUM MONTHLY OPERATOR PROF
Slide 38: Capital Management
CAPITAL MANAGEMENT 2019 RESULTS FOR THE HALF YEAR ENDED 31 MARCH 38
Slide 39: Capital Management
CAPITAL MANAGEMENT PERFORMANCE • Debt free & liquid TC holding company balance sheet 33.9 › Excess cash of ~R1bn 35.5 31.9 27.0 › Capacity to continue investing in organic & acquisitive opportunities 21.0 • Capital adequacy ▲to 33.9% (HY18: 31.9%) 15.0 › 30.1% equity; 3.8% subordinated debt 3.4 3.6
Slide 40: Funding Philosophy
FUNDING PHILOSOPHY INNOVATIVE ENGAGED DEBT INVESTORS JUDICIOUS RISK MITIGATION OPTIMAL CAPITAL STRUCTURES THINKING • Recurring investment by debt investors • Optimal liquidity management between asset & • Proactively managing valuable capital & funds raised motivated by performance, the ease of liab
Slide 41: Shareholding, Dividend & Board
SHAREHOLDING, DIVIDEND & BOARD • Dividends growing faster than earnings, CAGR of 35% since HY14 › Interim dividend per share ▲29% to 27cps 6% › Total dividend cover of 2.2 times (HY18: 2.4 times) 32% • Foreign institutional ownership ▲to 17% › HY18:15% 31 March 2019 › HY17: 5% 38% • Focus on improvi
Slide 42: Conclusion
CONCLUSION 2019 RESULTS FOR THE HALF YEAR ENDED 31 MARCH 42
Slide 43: Investment Case
INVESTMENT CASE COMPELLING & UNIQUE AS WE EXECUTE ON OUR STRATEGY • Two well established, autonomous & unique financial services businesses: SA Taxi & TCRS • Positioned in attractive market segments occupying leading market positions • Highly defensive businesses able to withstand difficult economic
Slide 44: Investment Case Continued
INVESTMENT CASE CONTINUED COMPELLING & UNIQUE AS WE EXECUTE ON OUR STRATEGY • Identify, assess, develop & partner with entrepreneurial, innovative & experienced founders, owners LED BY AN EXPERIENCED & managers of businesses ENTREPRENEURIAL • Ownership culture OWNER-MANAGER TEAM • Empowered, entrepr
Slide 45: Investment Case Continued
INVESTMENT CASE CONTINUED COMPELLING & UNIQUE AS WE EXECUTE ON OUR STRATEGY • Value-led investment approach TO GENERATE RISK-ADJUSTED • Seeking investment outcome that combines: INTEREST RETURNS & CAPITAL › Attractive risk-adjusted interest returns from our asset portfolios APPRECIATION › Enhanced b
Slide 46: Questions
QUESTIONS 46
Slide 47: Disclaimer
DISCLAIMER 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 transactions d