Vanquis Banking Group PLC · LSE:VANQ
Vanquis Banking — Provident Financial — FY2003 Earnings Presentation
35 slides from Vanquis Banking's earnings presentation, 2004
Slide 1: Results to 31 December 2003
Results to 31 December 2003
Slide 2: Our presentation today
Provident Financial Our presentation today > Introduction – Robin Ashton > Highlights > Strategy > Financial review & regulation – John Harnett > Operational review > Motor insurance – John Harnett > UK consumer credit – Chris Johnstone > International – David Swann > Outlook – Robin Ashton > Q&A
Slide 3: Highlights
Provident Financial Highlights up 13% to up 8.2% to up 6.8% to £206.2 million 57.54p 33.00p PBT* EPS* DPS *Stated before exceptional items and goodwill amortisation.
Slide 4: Highlights
Provident Financial Highlights > UK consumer credit > UK home credit – modest profit growth in mature market > Yes Car Credit – performed well, earnings enhancing > Credit card test – progressing to plan > Motor insurance – successfully managing down-cycle > International – excellent results > Group
Slide 5: Strategy
Provident Financial Strategy We aim to be a leading international provider of simple financial services > Serving customers earning moderate incomes > Growing by: – international expansion – broader range of credit products
Slide 6: Developing the business
Provident Financial Developing the business 1996 2003 UK consumer credit UK consumer credit UK home credit UK home credit Yes Car Credit Vanquis Bank (pilot) International Poland Czech Republic Hungary Slovakia Mexico (pilot) Motor Insurance Motor Insurance Provident Insurance Provident Insurance Co
Slide 7: Developing the business
Provident Financial Developing the business Turnover 1996 2003 Motor UK home UK home Motor insurance credit credit insurance 16% 26% International 17% 43% 74% 24% Yes Car Credit Year ended 31 December
Slide 8: Recharge of central costs
Provident Financial Recharge of central costs Profit before tax 2003 2002 £m £m UK home credit Pre-recharge 157.5 152.6 Recharge (4.9) (3.8) Reported 152.6 148.8 International Pre-recharge 31.7 10.6 Recharge (2.4) (2.0) Reported 29.3 8.6
Slide 9: Divisional results
Provident Financial Divisional results 2003 2002 change £m £m % UK consumer credit 157.1 147.9 6.2 International 29.3 8.6 239.7 Motor insurance 28.6 35.8 (20.3) Central costs (8.8) (10.9) (19.2) Businesses sold or closed - 1.0 (100.0) Profit* 206.2 182.4 13.0 Earnings per share* 57.54p 53.19p 8.2 Di
Slide 10: Profit growth
Provident Financial Profit growth 2003 2002 £m £m UK home credit 3.8 2.2 Vanquis Bank (5.6) (1.1) Yes Car Credit 11.0 0.2 UK consumer credit 9.2 1.3 International 20.7 9.7 Motor insurance (7.2) 0.7 Central costs and businesses sold 1.1 0.9 Profit growth 23.8 12.6
Slide 11: Regulation
Provident Financial Regulation > Proposal for revision of EU Consumer Credit Directive > UK White Paper on Consumer Credit published
Slide 12: White Paper
Provident Financial White Paper > Greater transparency > Government against rate ceilings > Unfair credit transactions > Dispute resolution mechanism > Tighter licensing > New rules for early settlement rebates > Tighter advertising regulation
Slide 13: Regulation
Provident Financial Regulation > Proposal for revision of EU Consumer Credit Directive > UK White Paper on Consumer Credit published > Possible NCC super-complaint – Our experience shows: > customers are very satisfied > low barriers to entry > active competition
Slide 14: Motor insurance: 2003 results
Provident Financial Motor insurance: 2003 results `000 Policyholders £m 900 PBT 40 800 35 700 30 600 25 500 20 400 15 300 200 10 100 5 0 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Slide 15: Motor insurance: overview
Motor insurance Motor insurance: overview > Cyclical downturn continues > Market premiums down, claims costs up > Continued with our policy of pricing for an adequate return > Fewer policies written – down 23% to 587,000 > Reduced operating costs > Pre-tax profit reduced by 20% to £28.6 million > 24
Slide 16: Motor insurance: 2003 results
Motor insurance Motor insurance: 2003 results 2003 2002 change £m £m % Gross written premium 188.2 242.5 (22) Gross earned premium 216.4 258.3 (16) Costs 212.4 246.9 (14) Underwriting profit 4.0 11.4 (65) Combined ratio (%) 98 96 2 Investment income 24.6 24.4 1 Profit before tax 28.6 35.8 (20) Avera
Slide 17: UK consumer credit: 2003 results
Provident Financial UK consumer credit: 2003 results
Slide 18: UK consumer credit: profit before tax
Provident Financial UK consumer credit Profit before tax 2003 2002 change £m £m % UK home credit 152.6 148.8 2.5 Yes Car Credit 11.2 0.2 - Vanquis Bank – credit card (6.7) (1.1) - 157.1 147.9 6.2 Year ended 31 December
Slide 19: Home credit: overview
UK consumer credit Home credit: overview > Long established, successful business > 1.6 million customers > Personal service that customers appreciate and value > Small loans with affordable repayments > Flexible repayment arrangements with no extra charges > Customer satisfaction of 93% > Enduring a
Slide 20: Home credit: market conditions in 2003
UK consumer credit Home credit: market conditions in 2003 > Market conditions similar to 2002 > Some customers better off > Some customers borrowing less frequently > Wider choice of credit products > Focus on achieving the best profit outcome > Balancing growth, costs and bad debt > Progress in a m
Slide 21: Home credit: 2003 results
UK consumer credit Home credit: 2003 results 2003 2002 change % Customer numbers (m) 1.61 1.63 (1.7) Credit issued (£m) 916 922 (0.7) Collections (£m) 1,320 1,299 1.6 Turnover (£m) 495.6 484.3 2.4 Bad debt (£m) 88.0 84.9 3.6 Bad debt as % of credit issued 9.6% 9.2% Operating costs (£m) 255.0 250.6 1
Slide 22: Yes Car Credit: overview
UK consumer credit Yes Car Credit: overview > Integrated into group > Performing well > All car sales now financed in-house > Increased branch network > Substantial growth > Earnings enhancing
Slide 23: Yes Car Credit: 2003 results
UK consumer credit Yes Car Credit: 2003 results 2003 2002 change Pro-forma % Cars sold 37,892 30,614 24 Cars financed in-house 36,021 22,981 57 % financed in-house 95 75 20 Customer receivables (£m) 252 163 54 Turnover (£m) 269 205 32 Bad debt charge as % of average customer receivables (MAT) 15.7%
Slide 24: Vanquis Bank: overview
UK consumer credit Vanquis Bank: overview > Distinctive offer – advantages of plastic – allows the customer to stay in control – low credit limits – higher APR but no penalties – fixed repayments – repayments weekly or fortnightly – remote and agent collection > Personal contact with customers > Col
Slide 25: Vanquis Bank: progress
UK consumer credit Vanquis Bank: progress > Cards in issue 36,800 > Net receivables £7.4m > Turnover £1.3m > Net loss £6.7m
Slide 26: International: 2003 results
Provident Financial International: 2003 results Poland Slovakia 29.3 Mexico Czech Hungary Republic 8.6 £m (1.1) (7.2) (9.0) 1999 2000 2001 2002 2003 Year ended 31 December
Slide 27: International expansion
Provident Financial International expansion UK home credit International Employees 2,939 2,967 Agents 11,764 17,213 Customers (`000’s) 1,605 1,244 Turnover £496m £191m Profit £153m £29m Year ended 31 December 2003
Slide 28: International home credit: 2003 results
International International home credit: 2003 results 2003 2002 change % Customer numbers (m) 1.24 0.96 30 Credit issued (£m) 361 287 26 Collections (£m) 464 348 34 Turnover (£m) 191.4 142.4 34 Bad debt (£m) 37.2 27.2 37 Bad debt as a % of credit issued 10.3% 9.5% Operating costs (£m) 124.9 106.6 17
Slide 29: Customer numbers
International Customer numbers (`000) 813 Poland 660 Czech Republic 504 305 189 218 223 161 72 66 0.4 10 0.1 6 1997 1998 1999 2000 2001 2002 2003 1997 1998 1999 2000 2001 2002 2003 Hungary Slovakia 143 55 27 62 10 5 1997 1998 1999 2000 2001 2002 2003 1997 1998 1999 2000 2001 2002 2003 As at 31 Decem
Slide 30: Annual profits (£m)
International Annual profits (£m) 33.1 Poland Czech Republic 16.7 8.8 6.7 5.1 2.5 (0.6) (1.5) (2.6) (2.8) (0.2) (1.1) (2.7) 0.1 1997 1998 1999 2000 2001 2002 2003 1997 1998 1999 2000 2001 2002 2003 Hungary Slovakia (2.3) (3.1) (1.9) (1.3) (2.0) (1.6) 1997 1998 1999 2000 2001 2002 2003 1997 1998 1999
Slide 31: Poland: targets and progress to date
International Poland: targets and progress to date 2002 2003 Target > Customers 660,000 813,000 1,000,000 > Issue per customer £348 £308 £400 > Gross revenue margin 52% 57% 55% > Costs as % of revenue 84% 74% 73% > Annual profit per customer £23 £45 £60 > Annual profit £16.7m £33.1m £60m
Slide 32: Czech Republic: targets and progress to date
International Czech Republic: targets and progress to date 2002 2003 Target > Customers 218,000 223,000 250,000 > Issue per customer £345 £347 £400 > Gross revenue margin 48% 53% 55% > Costs as % of revenue 85% 78% 73% > Annual profit per customer £23 £41 £60 > Annual profit £5.1m £8.8m £15m
Slide 33: Mexico: pilot commenced
International Mexico: pilot commenced > 1 branch opened in Puebla > First loan made in August 2003 > 2,600 customers > 116 agents > 40 employees > Experienced senior team > Developing well > Start-up loss for year £1.2 million
Slide 34: Group prospects for 2004
Provident Financial Group prospects for 2004 > Aiming for modest profit growth for UK home credit > Continued strong growth from Yes Car Credit > Credit card test to conclude > Lower profits - good return from motor insurance > Another very good year from international “We expect to deliver good res
Slide 35: Provident Financial
PROVIDENT FINANCIAL