Vanquis Banking Group PLC · LSE:VANQ
Vanquis Banking — Provident Financial — H1 2015 Earnings Presentation
30 slides from Vanquis Banking's earnings presentation, Jul 28, 2015
Slide 1: Interim results announcement 2015
Provident Financial plc Interim results announcement 2015 1 Provident Financial plc Interim results announcement 2015 28 July 2015
Slide 2: Today's presentation
Provident Financial plc Interim results announcement 2015 2 Today’s presentation 1. Highlights and business overview › Peter Crook 2. Financial review › Andrew Fisher 3. Regulation and outlook › Peter Crook 4. Questions
Slide 3: Highlights and business overview
Provident Financial plc Interim results announcement 2015 3 Highlights and business overview Peter Crook – Chief Executive
Slide 4: Highlights
Provident Financial plc Interim results announcement 2015 4 Highlights Group performance supports a 15.0% dividend increase › Adjusted profit before tax up 34.5% to £126.6m1 and adjusted EPS up 29.9% to 70.4p1 › Interim dividend per share up 15.0% to 39.2p supported by strong capital generation and
Slide 5: Market conditions and business positioning: Vanquis Bank UK
Provident Financial plc Interim results announcement 2015 5 Market conditions and business positioning Vanquis Bank – UK MARKET CONDITIONS BUSINESS POSITIONING › Strong demand from developing › Unchanged credit standards, supporting underserved, non-standard credit card record low arrears and above
Slide 6: Market conditions and business positioning: CCD
Provident Financial plc Interim results announcement 2015 6 Market conditions and business positioning CCD MARKET CONDITIONS BUSINESS POSITIONING › No discernible change in competitive › Migration of home credit business to a landscape in home credit although industry smaller but leaner, better qual
Slide 7: Market conditions and business positioning: Moneybarn
Provident Financial plc Interim results announcement 2015 7 Market conditions and business positioning Moneybarn MARKET CONDITIONS BUSINESS POSITIONING › Market supply less than half the size in › Market leadership and primacy reinforced 2007 by access to group funding › Growth supported by customer
Slide 8: Financial review
Provident Financial plc Interim results announcement 2015 8 Financial review Andrew Fisher – Finance Director
Slide 9: Group profit before tax
Provident Financial plc Interim results announcement 2015 9 Group Profit before tax 2015 2014 Change Six months ended 30 June £m £m % Vanquis Bank: - UK 88.5 68.3 29.6% - Poland (1.8) (4.6) 60.9% Total Vanquis Bank 86.7 63.7 36.1% CCD 38.0 37.0 2.7% Moneybarn 9.4 - n/a Central costs (7.5) (6.6) (13.
Slide 10: Vanquis Bank – UK income statement
Provident Financial plc Interim results announcement 2015 10 Vanquis Bank – UK Income statement 2015 2014 Change Six months ended 30 June £m £m % Customer numbers (‘000) 1,359 1,177 15.5% Period-end receivables 1,146.9 954.0 20.2% Average receivables 1,115.1 905.2 23.2% Revenue 261.1 218.4 19.6% Imp
Slide 11: Vanquis Bank – UK risk-adjusted margin (RAM)
Provident Financial plc Interim results announcement 2015 11 Vanquis Bank – UK Risk-adjusted margin (RAM) 70% 60% › Business model supports stability of RAM: 50% – ‘Low and grow’ strategy 40% 30.0% 35.0% – High credit line utilisation minimises 30% volatility of credit losses › RAM above 30% minimum
Slide 12: Vanquis Bank – UK risk-adjusted margin (RAM)
Provident Financial plc Interim results announcement 2015 12 Vanquis Bank – UK Risk-adjusted margin (RAM) 70% 60% › RAM moderated from 33.6% to 33.3% 50% over last 12 months: 40% Changes to ROP product and -0.6% 33.6% 33.3% reduction in interchange fees 30% 20% Record low delinquency +0.3% 10% RAM -
Slide 13: Vanquis Bank – UK IFRS disclosures
Provident Financial plc Interim results announcement 2015 13 Vanquis Bank – UK IFRS 7 disclosures 2015 2014 At 30 June (% receivables) % % In order 92.8 91.2 In arrears: - Past due but not impaired - - - Impaired 7.2 8.8 Total 100.0 100.0 › Improved profile reflects arrears running at record lows fo
Slide 14: CCD income statement
Provident Financial plc Interim results announcement 2015 14 CCD Income statement 2015 2014 Change Six months ended 30 June £m £m % Customer numbers (‘000) 1,011 1,252 (19.2%) Period-end receivables 497.9 607.5 (18.0%) Average receivables 511.5 632.6 (19.1%) Revenue 268.2 313.6 (14.5%) Impairment (7
Slide 15: CCD customer numbers
Provident Financial plc Interim results announcement 2015 15 CCD Customer numbers 10% (0%) › Total customer numbers reduced by 36% Cumulative change % (10%) since September 2013: (20%) (30%) – 55% reduction in lower quality (40%) customers (50%) (60%) – Tighter underwriting applied to Jun-14 Jun-15
Slide 16: CCD impairment % revenue
Provident Financial plc Interim results announcement 2015 16 CCD Impairment % revenue 40% 38% › Annualised impairment to revenue down 36% sharply from 35.2% to 22.9% over last 12 34% months: 32% 30% – Tighter credit standards from 28% 26% September 2013 has driven up 24% quality of book 22% – Strong
Slide 17: CCD IFRS disclosures
Provident Financial plc Interim results announcement 2015 17 CCD IFRS 7 disclosures 2015 2014 At 30 June (% receivables) % % In order 41.0 31.8 In arrears: - Past due but not impaired 9.9 10.3 - Impaired 49.1 57.9 Total 100.0 100.0 › Based on contractual arrears › Past due but not impaired includes
Slide 18: CCD risk-adjusted margin (RAM)
Provident Financial plc Interim results announcement 2015 18 CCD Risk-adjusted margin (RAM) 80% › Marked improvement in annualised RAM 75% from 62.9% at June 2014 to 78.2%: 70% Revenue yield +4.3% 65% 60% Impairment rate +11.0% 55% RAM +15.3% 50% 45% › Revenue yield uplift reflects shorter 40% durat
Slide 19: Moneybarn income statement
Provident Financial plc Interim results announcement 2015 19 Moneybarn Income statement 2015 20141 Change Six months ended 30 June £m £m % Customer numbers (‘000) 26 18 44.4% Period-end receivables 186.5 130.3 43.1% Average receivables 171.1 126.3 35.5% Revenue 24.2 18.0 34.4% Impairment (3.4) (2.4)
Slide 20: Group balance sheet
Provident Financial plc Interim results announcement 2015 20 Group Balance sheet 2015 2014 At 30 June £m £m Goodwill 71.2 - Acquisition intangibles 68.8 - Receivables: - Vanquis Bank UK 1,146.9 954.0 - Vanquis Bank Poland - 9.3 - Home credit (including glo) 486.3 605.1 - Satsuma 11.6 2.4 - Moneybarn
Slide 21: Group gearing
Provident Financial plc Interim results announcement 2015 21 Group Gearing 4.0 › Gearing at June 2015 of 2.4 times versus banking covenant of 5.0 times 3.0 › Strong capital generation has consistently funded dividends and growth and 2.0 resulted in modest reduction in gearing › Reduction in last 12
Slide 22: Diversified funding base
Provident Financial plc Interim results announcement 2015 22 Group Diversified funding base At 30 June 2015 £m Banks 383 Bonds and private placements: Senior public bond 250 M&G term loan 100 Other sterling/euro medium-term notes 27 Retail bonds 320 Total bonds and private placements 697 Vanquis Ban
Slide 23: Maturity profile of debt
Provident Financial plc Interim results announcement 2015 23 Group Maturity profile of debt 1,200 1,000 800 Pro-forma £m CCD/Moneybarn 600 borrowings at 30/06/15 400 200 - Dec-15 Mar-16 Dec-16 Mar-17 Dec-17 Mar-18 Jun-15 Jun-16 Jun-17 Sep-17 Jun-18 Sep-15 Sep-16 Syndicated bank facilities Bonds Priv
Slide 24: Alignment of dividend policy, gearing and growth
Provident Financial plc Interim results announcement 2015 24 Group Alignment of dividend policy, gearing and growth High returns businesses Dividend Gearing Growth policy ≤ 3.5x versus covenant Supports receivables growth Cover ≥ 1.25x of 5.0x of £260m+
Slide 25: Strong capital generation
Provident Financial plc Interim results announcement 2015 25 Group Strong capital generation 2015 2014 12 months ended 30 June £m £m Vanquis Bank 90.8 65.3 CCD 84.0 100.3 Moneybarn - - Central (5.0) (12.7) Capital generated1 169.8 152.9 Dividends declared (148.9) (123.4) Surplus capital retained 20.
Slide 26: Regulation and outlook
Provident Financial plc Interim results announcement 2015 26 Regulation and outlook Peter Crook – Chief Executive
Slide 27: Regulatory update
Provident Financial plc Interim results announcement 2015 27 Regulatory update Group Transfer of regulation to the FCA › CCD and Moneybarn submitted their applications for full authorisation prior to 31 May 2015 deadline › Vanquis Bank is already an authorised firm but submitted its application for
Slide 28: Outlook
Provident Financial plc Interim results announcement 2015 28 Outlook Group › Vanquis Bank will continue to generate strong growth and margins through developing the under-served, non-standard UK credit market › Repositioning of home credit as a smaller but leaner, better quality business focused on
Slide 29: Questions
Provident Financial plc Interim results announcement 2015 29 Questions
Slide 30: Contact details
Provident Financial plc Interim results announcement 2015 30 Contact details Provident Financial plc No. 1 Godwin Street Bradford BD1 2SU United Kingdom Contact: Gary Thompson – Group Financial Controller and Head of Investor Relations Telephone: +44 (0)1274 351351 E-mail: investors@providentfinanci