Vanquis Banking Group PLC · LSE:VANQ
Vanquis Banking — Provident Financial — H1 2004 Earnings Presentation
44 slides from Vanquis Banking's earnings presentation, September 2004
Slide 1: Interim results to 30 June 2004
Interim results to 30 June 2004 87.2 82.0 74.7 70.2 63.6 65.1 61.0 54.7 47.5 41.1 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Pre-exceptional, pre-goodwill amortisation profit before tax (£m).
Slide 2: Our presentation today
Provident Financial Our presentation today > Highlights & divisional results – Robin Ashton > Operational review > International – David Swann > UK consumer credit – Chris Johnstone > Motor insurance – John Harnett > Regulation – John Harnett > Outlook – Robin Ashton > Q&A
Slide 3: Highlights
Provident Financial Highlights up 6.3% to up 6.1% to up 4.2% to £87.2 million 24.28p 13.65p PBT* EPS* DPS *Stated before goodwill amortisation
Slide 4: Highlights
Provident Financial Highlights > Group – good results > International – excellent performance > UK consumer credit > UK home credit – reducing profits in competitive market > Yes Car Credit – results impacted by Q2 slowdown > Vanquis Bank – progressing as scheduled > Motor insurance – profits better
Slide 5: Divisional results
Provident Financial Divisional results Half-year ended 30 June 2004 2003 change £m £m % International 15.4 8.7 77.1 UK consumer credit 60.5 62.3 (3.1) Motor insurance 16.6 14.7 13.4 Central costs (5.3) (3.7) (42.5) Profit before tax* 87.2 82.0 6.3 Tax rate 29.5% 29.5% - Earnings per share* 24.28p 22
Slide 6: International: 2004 interim results
Provident Financial International: 2004 interim results 15.4 8.7 £m 0.1 (2.5) (4.4) (7.0) Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Profit before tax for the six months to June (£m)
Slide 7: International: 2004 interim results
International International: 2004 interim results 2004 2003 2003 change FX adjusted %* Customer numbers (m) 1.38 1.08 - 28 Credit issued (£m) 189 162 147 29 Collections (£m) 252 221 201 25 Turnover (£m) 104.2 90.1 81.5 28 Bad debt (£m) 22.0 19.9 18.1 (22) MAT bad debt as a % of credit issued 10.3% 1
Slide 8: Customer numbers (`000)
International Customer numbers (`000) 885 +18% Poland 750 Czech Republic 561 416 184 206 212 220 +4% 164 98 3 32 2 24 1998 1999 2000 2001 2002 2003 2004 1998 1999 2000 2001 2002 2003 2004 Hungary Slovakia 185 +132% 80 39 75 +94% 1 27 1 12 1998 1999 2000 2001 2002 2003 2004 1998 1999 2000 2001 2002 2
Slide 9: Credit issued (£m)
International Credit issued (£m) 111 +18% Poland 95 Czech Republic 73 63 31 33 32 33 +3% 21 18 4 4 0 0 1998 1999 2000 2001 2002 2003 2004 1998 1999 2000 2001 2002 2003 2004 Hungary Slovakia 34 +135% 15 6 10 +71% 4 2 0 0 1998 1999 2000 2001 2002 2003 2004 1998 1999 2000 2001 2002 2003 2004 6 months t
Slide 10: Half-year profits (£m)
International Half-year profits (£m) 16.1 +42% Poland Czech Republic 11.4 4.4 4.0 4.3 +7% 1.9 0.9 0.8 (0.6) (1.4) (3.4) (0.4) (1.4) (1.4) 1998 1999 2000 2001 2002 2003 2004 1998 1999 2000 2001 2002 2003 2004 Hungary Slovakia 1.5 (0.8) (1.6) (1.6) (0.5) (1.0) (1.0) (0.9) +9% 1998 1999 2000 2001 2002
Slide 11: Hungary: locations at June 2004
International Hungary: locations at June 2004 Sárospatak Kazincbarcika Ózd Miskolc Kisvárda Mátészalka Salgótarján Eger Balassagyarmat Csenger Tiszavasvári Rétság Gyöngyös Mezőkövesd Mosonmagyaróvár Polgár Nyíregyháza Vác Hatvan Komárom Esztergom Füzesabony Sopron Győr Észak Pest Hajdúböszörmény Kap
Slide 12: Hungary: costs and profit as a % of revenue (MAT)
International Hungary: costs and profit as a % of revenue (MAT) Costs* 300 263 Profit 250 200 163 150 132 110 96 100 50 4 0 -50 J02 D02 J03 D03 J04 -100 -32 -10 -63 -150 -200 -163 * Commission, bad debt, interest, expenses
Slide 13: Hungary: profit and loss account
International Hungary: profit and loss account 2004 2003 2003 change £m £m FX %* adjusted Turnover 17.2 6.3 6.0 187 Operating costs 11.4 6.1 5.7 (100) Bad debt 2.7 1.2 1.2 (135) Bad debt % of credit issued (MAT) 8.0% 8.0% - - Interest payable 1.6 0.6 0.6 (185) Profit/(loss) 1.5 (1.6) (1.5) 196 Profi
Slide 14: Hungary: market potential
International Hungary: market potential > Fast growing, profitable business > Estimated 500,000 customer home credit market at maturity > PF target : 250,000 customers > PF target : £15 million pre-tax profit per annum at maturity
Slide 15: Mexico: pilot progress
International Mexico: pilot progress > Progressing well - performing as expected > 4 branches open in Puebla area > 117 employees > 367 agents > 14,000 customers > Credit issued for half-year £1 million > Start-up loss for half-year £1.2 million
Slide 16: UK consumer credit: 2004 interim results
Provident Financial UK consumer credit: 2004 interim results
Slide 17: UK consumer credit: 2004 interim results
Provident Financial UK consumer credit: 2004 interim results Profit before tax 2004 2003 change £m £m % UK home credit 60.1 61.2 (1.7) Yes Car Credit 5.0 4.5 9.4 Vanquis Bank – credit card (4.6) (3.4) (38.9) 60.5 62.3 (3.1) 6 months to 30 June
Slide 18: Home credit: customers & credit issued
UK consumer credit Home credit: customers & credit issued `000 £m 1800 1000 1600 900 1400 800 1200 700 600 1000 500 800 400 600 300 400 200 200 100 0 0 92 93 94 95 96 97 98 99 00 01 02 03 FY to June 04 Customer numbers ('000) Credit issued (£m)
Slide 19: Home credit: market conditions in H1 2004
UK consumer credit Home credit: market conditions in H1 2004 > Factors influencing reduction in credit issued & customers: External – customers better off – wider choice of credit products – credit card offers targeted at lower income customers Internal – certain recruitment channels scaled back > F
Slide 20: Home credit: 2004 interim results
UK consumer credit Home credit: 2004 interim results 2004 2003 change % Customer numbers (m) 1,525 1,608 (5.2) Credit issued (£m) 373 390 (4.5) Collections (£m) 647 660 (1.9) Turnover (£m) 235.6 239.2 (1.5) Bad debt (£m) 52.4 51.2 (2.4) Bad debt % of credit issued (MAT) 9.9% 9.7% Operating costs (£m
Slide 21: Home credit: improving performance
UK consumer credit Home credit: improving performance > Retain position as best value, lowest cost home credit provider > Focus on recruiting and retaining quality customers > Eliminate unprofitable customer recruitment channels > Product innovation – plastic card > Tight cost control > Extract best
Slide 22: Yes Car Credit: overview
UK consumer credit Yes Car Credit: overview > 2 new branches opened > Sales growth in the first half of the year but reduction in the second quarter > Lower levels of customer enquiries in Q2, 2004 > Sales pattern mirrors statistics for the used car credit market
Slide 23: Yes Car Credit: industry sales trends
UK consumer credit Yes Car Credit: industry sales trends Value of credit issued: % year-on-year growth 15 10 5 0 -5 Jan-04 Feb-04 Mar-04 Apr-04 May-04 -10 -15 -20 New car finance Used car finance Source: FLA monthly statistics
Slide 24: Yes Car Credit: 2004 interim results
UK consumer credit Yes Car Credit: 2004 interim results 2004 2003 change % Cars sold 20,400 17,600 16 Cars financed in-house 20,400 15,800 29 % financed in-house 100 90 - Customer receivables (£m) 282 204 38 Turnover (£m) 148 123 20 Bad debt charge as % of average customer receivables (MAT) 17.1% 14
Slide 25: Vanquis Bank: overview
UK consumer credit Vanquis Bank: overview > Market opportunity > Differentiated offer > Testing a variety of products > Collecting data on attractiveness and financial characteristics
Slide 26: Vanquis Bank: progress
UK consumer credit Vanquis Bank: progress > Progressing as scheduled > Cards in issue 48,000 > Net receivables £12.2m > Turnover £2.3m > Net loss £4.6m
Slide 27: Motor insurance: 2004 interim results
Provident Financial Motor insurance: 2004 interim results `000 Policyholders £m 900 PBT (MAT) 40 800 35 700 30 600 25 500 20 400 15 300 200 10 100 5 0 0 June June June June June June June June June June June 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Slide 28: Motor insurance: 2004 interim results
Motor insurance Motor insurance: 2004 interim results 2004 2003 change £m £m % Gross written premiums 82.2 106.6 (22.9) Gross earned premiums 85.6 115.5 (25.9) Costs 80.9 113.1 28.5 Underwriting profit 4.7 2.4 98.7 Combined ratio 94% 98% - Investment income 11.9 12.3 (3.2) Profit before tax 16.6 14.
Slide 29: Regulation
Provident Financial Regulation > Revision of EU Consumer Credit Directive: – first reading complete – long, slow process – no material issues > UK White Paper on Consumer Credit: – expected to be included in November Queen’s speech – bill in 2005
Slide 30: Super-complaint
Provident Financial Super-complaint > NCC super-complaint received 14 June 2004 – captive customers – no choice – uncompetitive market – lending practices unfair > Our response – market competitive – customers not vulnerable – cross section of average & below average income families – customers have
Slide 31: Group prospects for 2004
Provident Financial Group prospects for 2004 > International – excellent prospects > UK consumer credit > UK home credit – reduction in volume & profits > Yes Car Credit – 3 new branches in H2, but sales outlook harder to predict > Vanquis Bank – decision at preliminary announcement > Motor insuranc
Slide 32: Questions & answers
PROVIDENT FINANCIAL
Slide 33: Provident Financial
PROVIDENT FINANCIAL
Slide 34: Appendices
Provident Financial Appendices
Slide 35: Country profit/(loss) before tax
International Appendix Country profit/(loss) before tax 2004 2003 change £m £m £m Poland 16.1 11.4 4.7 Czech Republic 4.3 4.0 0.3 Hungary 1.5 (1.6) 3.1 Slovakia (0.9) (1.0) 0.1 Mexico (1.2) - (1.2) Divisional overhead (4.4) (4.1) (0.3) Profit 15.4 8.7 6.7 6 months ended 30 June
Slide 36: Poland: key statistics
International Appendix Poland: key statistics 2004 2003 2003 change FX adjusted %* Customer numbers (‘000) 885 750 - 17.9 Credit issued £111.3m £107.2m £94.7m 17.5 Average credit issued per customer (MAT) £286 £336 £319 (10.3) Collections £149.3m £150.0m £132.5m 12.6 Net receivables at June £138.2m
Slide 37: Poland: profit and loss account
International Appendix Poland: profit and loss account 2004 2003 2003 change £m £m FX adjusted %* £m Turnover 63.3 62.5 55.2 14.8 Operating costs 28.4 30.0 26.6 (7.3) Bad debt 13.8 13.8 12.2 (12.8) Bad debt % of credit issued (MAT) 10.6% 10.2% - - Interest payable 5.0 7.3 6.4 23.1 Profit 16.1 11.4 1
Slide 38: Czech Republic: key statistics
International Appendix Czech Republic: key statistics 2004 2003 2003 change FX adjusted %* Customer numbers (‘000) 220 212 - 3.9 Credit issued £32.6m £33.5m £31.8m 2.5 Average credit issued per customer (MAT) £337 £339 £338 (0.3) Collections £50.4m £50.4m £48.0m 5.1 Net receivables at June £40.4m £4
Slide 39: Czech Republic: profit and loss account
International Appendix Czech Republic: profit and loss account 2004 2003 2003 change £m £m FX adjusted %* £m Turnover 19.1 19.1 18.2 4.8 Operating costs 9.5 9.4 8.8 (6.4) Bad debt 4.1 4.4 4.3 2.6 Bad debt % of credit issued (MAT) 10.9% 12.4% - - Interest payable 1.2 1.3 1.3 7.6 Profit 4.3 4.0 3.8 13
Slide 40: Hungary: key statistics
International Appendix Hungary: key statistics 2004 2003 2003 change FX adjusted %* Customer numbers (‘000) 185 80 - 131.8 Credit issued £34.2m £15.4m £14.6m 134.8 Average credit issued per customer (MAT) £476 £481 £468 1.7 Collections £40.4m £15.5m £14.6m 176.5 Net receivables at June £31.2m £11.6m
Slide 41: Slovakia: key statistics
International Appendix Slovakia: key statistics 2004 2003 2003 change FX adjusted %* Customer numbers (‘000) 75 39 - 93.5 Credit issued £9.5m £5.5m £5.5m 70.7 Average credit issued per customer (MAT) £318 £356 £373 (14.7%) Collections £10.8m £5.5m £5.5m 95.9% Net receivables at June £8.7m £4.3m £4.1
Slide 42: Slovakia: profit and loss account
International Appendix Slovakia: profit and loss account 2004 2003 2003 change £m £m FX adjusted %* £m Turnover 4.2 2.2 2.2 93.6 Operating costs 3.4 2.5 2.6 (35.5) Bad debt 1.3 0.4 0.4 (188.3) Bad debt % of credit issued (MAT) 10.7 8.0 - - Interest payable 0.4 0.3 0.3 (76.4) Profit/(loss) (0.9) (1.0
Slide 43: Central European market potential
International Appendix Central European market potential Poland Czech Hungary Slovakia Total Population (million) 39 10 10 5 64 Target customers (000) 1,000 250 250 125 1,625 Current customers (000) 885 220 185 75 1,365 Target annual credit issued per customer (£) 400 400 400 270 390 Target annual p
Slide 44: Provident Financial
PROVIDENT FINANCIAL