Nutun Limited · JSE:NTU
Nutun — Transaction Capital — H1 2017 Earnings Presentation
37 slides from Nutun's earnings presentation, May 2017
Slide 1: Transaction Capital Interim Results Presentation
OC Transaction Capital \ TRANSACTION CAPITAL INTERIM RESULTS PRESENTATION FOR THE HALF YEAR ENDED 31 MARCH
Slide 2: Group
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Slide 3: Group structure and HY17 financial & operational highlights
TRANSACTION CAPITAL GROUP STRUCTURE HY17 FINANCIAL & OPERATIONAL HIGHLIGHTS (HY17 compared to HY16) CEO: Terry Kier, 10-year group tenure CEO: David Hurwitz, 12-year group tenure CEO: Dave McAlpin, 9-year group tenure R144 MILLION¹ R7.8 BILLION R254 MILLION¹ 43.3 CPS R93 MILLION¹ R930 MILLION HEADLI
Slide 4: Group strategic & operational highlights
GROUP STRATEGIC & OPERATIONAL HIGHLIGHTS STRATEGIC POSITIONING DEBT CAPITAL MARKETS ACQUISITIONS OF OPERATING DIVISIONS Delivering robust organic growth Uninterrupted access to the debt capital 3 acquisitions within Transaction Capital • Occupy leading market positions markets Risk Services (TCRS) •
Slide 5: Evolution since listing
EVOLUTION SINCE LISTING MANAGEMENT INTERVENTIONS TO CREATE VALUE October 2016 Conditional share plan approved November 2016 Dividend policy amended to 2.5 to 3 times (4 to 5 times at listing) CAGR HY12 to HY17: November 2016 November 2013 HY headline earnings per share¹ ▲21% Established a R2bn domes
Slide 6: Group portfolio mix
GROUP PORTFOLIO MIX COMPOSITION OF EARNINGS POST ACQUISITIONS TO BE MORE EVENLY WEIGHTED 6% 11% 37% 33% 2017 2016 57% 56% SA Taxi TCRS GEO ACCRETIVE CASH DEPLOYMENT CONVERTING GEO CASH YIELD INTO TCRS EARNINGS Rm Growth Contribution Headline earnings 2017 2016 2017 2017 2016 SA Taxi¹ 144 118 22% 57%
Slide 7: Transaction Capital Risk Services
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Slide 8: Transaction Capital Risk Services (TCRS)
TRANSACTION CAPITAL RISK SERVICES (TCRS) 1 Innovative & bespoke TRANSACTION CAPITAL technology systems that drive superior performance RISK SERVICES IS A & efficiency TECHNOLOGY-LED, 4 Assisting its clients by accelerating Generating in-depth insights cash flow as an agent on an outsourced 2 from th
Slide 9: Environment & market context
ENVIRONMENT & MARKET CONTEXT CHALLENGING CONSUMER CREDIT ENVIRONMENT IN SOUTH AFRICA, OF THE 35 MILLION ADULTS1 THERE ARE: 9.8 MILLION NON-PERFORMING CREDIT CONSUMERS (NCR Q4 2016) 24 MILLION OVER 11 MILLION SOUTH AFRICANS DESCRIBED AS “OVER-INDEBTED” (UP FROM 5 MILLION IN 2014) CREDIT ACTIVE CONSUM
Slide 10: TCRS market positioning
TCRS MARKET POSITIONING DATA, ANALYTICS & SCALABLE TECHNOLOGY PLATFORM CAMPAIGN BUILDER MASTER DATA UNIVERSE (MDU) Data sourced from MDU Predictive analytics to for maximised determine: ContactAbility 9.2 MILLION 94% 1 in 4 • Optimised campaign • Propensity to pay UNIQUE & VALID ID NUMBERS COVERAGE
Slide 11: TCRS' evolution since listing
TCRS’ EVOLUTION SINCE LISTING MANAGEMENT INTERVENTIONS TO CREATE VALUE November 2015 December 2016 Early adoption of IFRS 9 Entered value added services market CAGR HY12 to HY17: December 2015 via 75% acquisition of Road Cover Headline earnings ▲18% TCR achieves level 3 B-BBEE rating December 2016 O
Slide 12: TCRS' diversified business model
TCRS’ DIVERSIFIED BUSINESS MODEL TCRS TARGET MARKET: R14bn UNSECURED NON-PERFORMING CONSUMER CREDIT Other fragmented Contingency & participants in fee-for-service collections addressable market (6%) We rank 1st or 2nd by our clients in 89% 71 of the 217 MANDATES 59 105 Non-performing loan value (NCR
Slide 13: Client engagement model (March 2014)
TCRS’ DIVERSIFIED BUSINESS MODEL 31 MARCH 2014 ORIGINATE MANAGE COLLECT LEAD GENERATION AND PAYMENT AND ACCOUNT MANAGEMENT COLLECTION SERVICES R16 CUSTOMER ACQUISITION BILLION Contingency & fee-for-service Telcos Telcos collections Specialist South Africa 2%10% Insurance lending 22% Insurance 16% Ot
Slide 14: Client engagement model (March 2017)
TCRS’ DIVERSIFIED BUSINESS MODEL 31 MARCH 2017 ORIGINATE MANAGE COLLECT LEAD GENERATION AND PAYMENT AND ACCOUNT MANAGEMENT COLLECTION SERVICES A$600 CUSTOMER ACQUISITION MILLION 18% Insurance 20% Public sector R14 Telcos & specialist lending Insurance Specialist Insurance AUSTRALIA² 31% Utilities an
Slide 15: TCRS financial performance
TCRS FINANCIAL PERFORMANCE • Core headline earnings ▲33% to R93m › Excludes once-off acquisition costs of R22m 82.4 81.5 80.3 › Accretive cash deployment converting cash yield into earnings • Headline earnings organic growth ▲17%¹ • Services EBITDA² organic growth ▲20%¹ • Contingency & fee-for-servi
Slide 16: TCRS purchased book debts performance
TCRS FINANCIAL PERFORMANCE PURCHASED BOOK DEBTS PERFORMANCE ESTIMATED REMAINING COLLECTIONS (ERC) VINTAGE PERFORMANCE AS AT 31 MARCH 2017 • Principal revenue ▲19% (HY16: 9%) › Purchased book debts ▲63% to R930m › 13 portfolios acquired for R210m (FY16: R184m) 2013 1.57 0.6 2.17 › Current economic co
Slide 17: TCRS operational performance
TCRS OPERATIONAL PERFORMANCE QUICK FACTS R300 MILLION ▲32% (since HY16) COLLECTED EACH MONTH REVENUE PER EMPLOYEE ~250 000 DISBURSEMENTS RESULTING FROM FOR CLIENTS EACH MONTH ~550 000 ~4.35 MILLION ~25 MILLION PAYMENTS RECEIVED EACH MONTH VOICE INTERACTIONS EACH MONTH OUTBOUND CALLS FROM THE DIALER
Slide 18: SA Taxi
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Slide 19: SA Taxi
SA TAXI 1 An innovative & pioneering business model with SA TAXI IS A VERTICALLY operations expanding throughout the financing & INTEGRATED TAXI 4 Enabling financial inclusion by asset value chain, building a proficiently securing funding from both scalable platform that can be PLATFORM UTILISING lo
Slide 20: SA Taxi impact
SA TAXI IMPACT DELIVERING A SOCIAL & COMMERCIAL BENEFIT SME EMPOWERMENT & ECONOMIC TRANSFORMATION INCLUSIVE GROWTH SA Taxi facilitates asset ownership by black owned SMEs BLACK OWNED SMEs 100% OWNEDWOMEN SMEs 20% UNDER THE AGE OF 35 YEARS 18% PROPORTION OF CUSTOMERS CLASSIFIED AS PREVIOUSLY FINANCIA
Slide 21: Minibus taxi industry is resilient & defensive
ENVIRONMENT & MARKET CONTEXT MINIBUS TAXI INDUSTRY IS RESILIENT & DEFENSIVE DESPITE SA’S ECONOMIC CLIMATE TRAIN 2 MILLION COMMUTER TRIPS DAILY PUBLIC TRANSPORT COMMUTERS ARE HEAVILY RELIANT ON MINIBUS TAXIS GOVERNMENT SUBSIDISED GIVEN THE ACCESSIBILITY & EFFICIENCY ~3 180 KM NATIONAL NETWORK • 40% o
Slide 22: Structurally demand for minibus taxi vehicles exceeds supply
ENVIRONMENT & MARKET CONTEXT STRUCTURALLY DEMAND FOR MINIBUS TAXI VEHICLES EXCEEDS SUPPLY DEMAND: AN AGEING NATIONAL FLEET IN SOUTH AFRICA THERE ARE ~200 000 MINIBUS TAXIS 70 000 - 80 000 FINANCED & INSURED 120 000 - 130 000 UNENCUMBERED & HENCE AGED ON AVERAGE OVER 9 YEARS OLD AN AGEING FLEET THAT
Slide 23: Environment for minibus taxi operators
ENVIRONMENT FOR MINIBUS TAXI OPERATORS DESPITE A CHALLENGING & LOW GROWTH SOUTH AFRICAN ECONOMIC ENVIRONMENT, ECONOMIC FACTORS AFFECTING MINIBUS TAXI OPERATORS REMAIN FAVOURABLE ECONOMIC FACTORS RESULTS For the period 1 Jan 2014 to 31 Dec 2016 STRUCTURAL ELEMENTS PROFITABLE & RESILIENT SMEs TOYOTA M
Slide 24: SA Taxi market positioning
SA TAXI MARKET POSITIONING VERTICALLY INTEGRATED BUSINESS MODEL IN SOUTH AFRICA THERE ARE ~200 000 MINIBUS TAXIS ~17 000 TO 20 000 POINT-TO-POINT TAXIS R7.8 BILLION GROSS LOANS & ADVANCES 27 142 22 058¹ ~R650 MILLION >20 000m² FINANCED VEHICLES INSURED THROUGH ANNUAL VEHICLE TURNOVER COMBINED AUTO B
Slide 25: SA Taxi evolution since listing
SA TAXI EVOLUTION SINCE LISTING MANAGEMENT INTERVENTIONS TO CREATE VALUE CAGR HY12 to HY17: Non-interest revenue Headline earnings ▲21% composition Gross loans & advances ▲12% 26% (HY12) to 32% (HY17) March 2017 Non-performing loan ratio ▼ 7% Recovery on repossession: Credit loss ratio ▼ 11% <65% (H
Slide 26: SA Taxi financial performance
SA TAXI FINANCIAL PERFORMANCE • Headline earnings¹ ▲22% to R144m › All organic growth • NIM stable at 11.0% › Funding costs ▲ by 90bps to 11.3% › ▲ foreign debt component, fully hedged to Rand 48.4 50.1 › Average interest rate is 24.9% on origination 47.7 (NCA max cap of 34%) › Anticipated ▲ interes
Slide 27: SA Taxi credit performance
SA TAXI CREDIT PERFORMANCE • Gross loans & advances ▲16% to R7.8bn › Number of loans originated ▲11% o Number of Toyota loans on book ▲11.3% o Toyota vehicle prices ▲12.5% since 1 March 2016 › Number of loans on book ▲6% o Active wind-down of Chinese vehicle portfolio › Credit granting criteria rema
Slide 28: SA Taxi credit performance: provisions
SA TAXI CREDIT PERFORMANCE IFRS 9 ADOPTION IN 2015: MORE CONSERVATIVE PROVISIONING METHODOLOGY ULTIMATE LOSS REMAINS UNCHANGED PROVISIONS Stage 1 Stage 2 Stage 3 Repo IMPAIRMENT STAGE IAS 39 Provisions IFRS 9 Provisions Construct of the book remains stable since year end Improved quality of SA Taxi’
Slide 29: SA Taxi operational performance
SA TAXI OPERATIONAL PERFORMANCE SA TAXI OPERATOR PROFILE GEOGRAPHIC DISTRIBUTION VEHICLES ON BOOK 3%2% 6% 1.2 86% 23% 3.7 YEARS >85% 6% VEHICLES TOYOTA LOANS ORIGINATED TO REPEAT AVERAGE AGE INSURED 33% PER CUSTOMER VEHICLES CUSTOMERS (HY16 TO HY17) OF VEHICLE WITH SA TAXI 8% SA TAXI CUSTOMER CREDIT
Slide 30: Capital management
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Slide 31: Capital & funding evolution since listing
CAPITAL & FUNDING EVOLUTION SINCE LISTING November 2016 Dividend policy amended to 2.5 to 3 times (compared to 4 to 5 times at listing in 2012) November 2015 November 2016 Transsec 2: Established a R2bn domestic note programme at TC group level R4bn S&P rated & listed securitisation January 2017 est
Slide 32: Capital management
CAPITAL MANAGEMENT PERFORMANCE • Uninterrupted access to the debt capital markets 41.3 › Despite political instability & SA’s sovereign rating 42.8 downgrade in April 2017 35.2 › Anticipated increasing interest rate cycle not expected to impact net interest margin 15.0 12.0 › 2018 fully funded 10.0
Slide 33: Funding philosophy
FUNDING PHILOSOPHY INNOVATION DIVERSIFICATION BY DIVERSIFICATION BY Innovation is encouraged to cultivate unorthodox thinking FUNDING STRUCTURE DEBT INVESTOR CATEGORY & develop pioneering funding solutions DIVERSIFIED & ENGAGED DEBT INVESTORS 18% 17% 1% • Diversification by geography, capital pool,
Slide 34: Shareholding
SHAREHOLDING • Accelerated bookbuild (Feb 2017) › 28.4m shares issued raising R419m › Creates capacity for further acquisition opportunities 5% 31% › Oversubscribed › Predominantly taken up by institutional investors o Institutional shareholding ▲from 26% to 31% › Directors shareholding holding ▼fro
Slide 35: Conclusion
(\« \ CONCLUSION “lt, . \\ \ \ \\\ MARCH FOR THE HALF YEAR ENDED 31
Slide 36: Investment case
INVESTMENT CASE COMPELLING & UNIQUE AS WE EXECUTE ON OUR MISSION TRANSACTION CAPITAL › Businesses occupy strong market positions › Decentralised experienced & IS LED BY SKILLED IS POSITIONED specialised leadership › Highly defensive businesses able to withstand difficult AND EXPERIENCED IN ATTRACTIV
Slide 37: 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