Vanquis Banking Group PLC · LSE:VANQ
Vanquis Banking — Provident Financial — FY2014 Earnings Presentation
35 slides from Vanquis Banking's earnings presentation, Feb 24, 2015
Slide 1: Preliminary results announcement 2014
Provident Financial plc Preliminary results announcement 2014 1 Provident Financial plc Preliminary results announcement 2014 24 February 2015
Slide 2: Today's presentation
Provident Financial plc Preliminary results announcement 2014 2 Today’s presentation 1. Highlights and business overview › Peter Crook 2. Financial review › Andrew Fisher 3. Regulation, business development and outlook › Peter Crook 4. Questions
Slide 3: Highlights and business overview
Provident Financial plc Preliminary results announcement 2014 3 Highlights and business overview Peter Crook – Chief Executive
Slide 4: Highlights
Provident Financial plc Preliminary results announcement 2014 4 Highlights Group performance supports a 15.3% dividend increase › Adjusted profit before tax up 19.5% to £234.4m1 and adjusted EPS up 18.4% to 132.6p1 › Total dividend per share up 15.3% to 98.0p supported by strong capital generation a
Slide 5: Market conditions and business positioning: Vanquis Bank UK
Provident Financial plc Preliminary results announcement 2014 5 Market conditions and business positioning Vanquis Bank – UK MARKET CONDITIONS BUSINESS POSITIONING › High demand from underserved, non- › Unchanged credit standards, supporting standard consumers for credit cards record low arrears and
Slide 6: Vanquis Bank: upgrade to UK medium-term potential
Provident Financial plc Preliminary results announcement 2014 6 Vanquis Bank Upgrade to UK medium-term potential › Revised assessment of UK medium-term potential: – Serving between 1.5m and 1.8m customers, up from previous assessment of between 1.3m and 1.5m customers – Average balance of £1,000, be
Slide 7: Market conditions and business positioning: CCD
Provident Financial plc Preliminary results announcement 2014 7 Market conditions and business positioning CCD MARKET CONDITIONS BUSINESS POSITIONING › Competitive landscape in home credit › Migration of home credit business to a unchanged smaller but leaner, better quality customer base substantial
Slide 8: Market conditions and business positioning: Moneybarn
Provident Financial plc Preliminary results announcement 2014 8 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 cust
Slide 9: Financial review
Provident Financial plc Preliminary results announcement 2014 9 Financial review Andrew Fisher – Finance Director
Slide 10: Group profit before tax
Provident Financial plc Preliminary results announcement 2014 10 Group Profit before tax 2014 2013 Change Year ended 31 December £m £m % Vanquis Bank: - UK 151.0 113.7 32.8 - Poland (10.6) (7.6) (39.5) Total Vanquis Bank 140.4 106.1 32.3 CCD 103.9 102.5 1.4 Moneybarn 5.8 - n/a Central costs (15.7) (
Slide 11: Vanquis Bank UK income statement
Provident Financial plc Preliminary results announcement 2014 11 Vanquis Bank – UK Income statement 2014 2013 Change Year ended 31 December £m £m % Customer numbers (‘000) 1,293 1,099 17.7 Year-end receivables 1,093.9 861.3 27.0 Average receivables 967.2 739.1 30.9 Revenue 465.6 378.8 22.9 Impairmen
Slide 12: Vanquis Bank UK risk-adjusted margin (RAM)
Provident Financial plc Preliminary results announcement 2014 12 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% min
Slide 13: Vanquis Bank UK risk-adjusted margin (RAM)
Provident Financial plc Preliminary results announcement 2014 13 Vanquis Bank – UK Risk-adjusted margin (RAM) 70% 60% › RAM moderated from 34.2% to 33.2% 50% over last 12 months: 40% – Delinquency at record low 34.2% 33.2% 30% – Changes to ROP product in mid-2013 20% explains 1.0% reduction › Expect
Slide 14: Vanquis Bank UK IFRS disclosures
Provident Financial plc Preliminary results announcement 2014 14 Vanquis Bank – UK IFRS 7 disclosures 2014 2013 At 31 December (% receivables) % % In order 92.1 90.7 In arrears: - Past due but not impaired - - - Impaired 7.9 9.3 Total 100.0 100.0 › Improved profile reflects arrears running at record
Slide 15: CCD business repositioning
Provident Financial plc Preliminary results announcement 2014 15 CCD Business repositioning ACTIONS OUTCOME Contraction in receivables from eliminating Tighter credit standards more marginal customers + Standardisation of arrears and collections processes Sharp improvement in margins + Roll-out of m
Slide 16: CCD income statement
Provident Financial plc Preliminary results announcement 2014 16 CCD Income statement 2014 2013 Change Year ended 31 December £m £m % Customer numbers (‘000) 1,071 1,511 (29.1) Year-end receivables 588.1 740.0 (20.5) Average receivables 598.5 725.8 (17.5) Revenue 591.1 697.1 (15.2) Impairment (177.5
Slide 17: CCD customer numbers
Provident Financial plc Preliminary results announcement 2014 17 CCD Customer numbers 10% -% › Total customer numbers reduced by 29% Cumulative change % (10%) during 2014: (20%) (30%) – 40% reduction in lower quality (40%) customers (50%) – Tighter underwriting applied to Mar-14 Jun-14 Dec-13 Dec-14
Slide 18: CCD impairment % revenue
Provident Financial plc Preliminary results announcement 2014 18 CCD Impairment % revenue 40% 38% › Annualised impairment to revenue down 36% sharply from 38.7% to 30.0% during 2014: 34% 32% – Tighter credit standards from 30% September 2013 has driven up 28% 26% quality of book 24% – Strong benefit
Slide 19: CCD IFRS disclosures
Provident Financial plc Preliminary results announcement 2014 19 CCD IFRS 7 disclosures 2014 2013 At 31 December (% receivables) % % In order 43.9 35.1 In arrears: - Past due but not impaired 11.0 13.4 - Impaired 45.1 51.5 Total 100.0 100.0 › Based on contractual arrears › Past due but not impaired
Slide 20: CCD risk-adjusted margin (RAM)
Provident Financial plc Preliminary results announcement 2014 20 CCD Risk-adjusted margin (RAM) 70% › Marked improvement in annualised RAM 65% from 58.9% to 69.1% during 2014: 60% Revenue yield +2.8% 55% Impairment % receivables +7.4% 50% RAM +10.2% 45% 40% › Revenue yield uplift reflects shorter du
Slide 21: CCD cost bridge
Provident Financial plc Preliminary results announcement 2014 21 CCD Cost bridge £m 2013 286 Phase 1 – July 2013 (8) Phase 2 – December 2013 (18) £26m Phase 3 – June 2014 (2) Agents’ commission – volume related (14) Agents’ commission – improvement in collections performance 10 Business development
Slide 22: Moneybarn income statement
Provident Financial plc Preliminary results announcement 2014 22 Moneybarn Income statement Post-acquisition1 Full-year pro forma2 2014 2014 £m £m Customer numbers (‘000) 22 22 Year-end receivables 151.7 151.7 Average receivables 143.4 135.1 Revenue 13.8 38.0 Impairment (1.2) (4.7) Revenue less impa
Slide 23: Group balance sheet
Provident Financial plc Preliminary results announcement 2014 23 Group Balance sheet 2014 2013 At 31 December £m £m Goodwill 71.2 - Acquisition intangibles 72.5 - Receivables: - Vanquis Bank UK 1,093.9 861.3 - Vanquis Bank Poland 15.5 5.3 - Home credit 583.1 738.2 - Satsuma 5.0 1.8 - Moneybarn 151.7
Slide 24: Group gearing
Provident Financial plc Preliminary results announcement 2014 24 Group Gearing 4.0 › Gearing at December 2014 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
Slide 25: Diversified funding base
Provident Financial plc Preliminary results announcement 2014 25 Group Diversified funding base At 31 December 2014 £m Banks 383 Bonds and private placements: Senior public bond 250 M&G term loan 100 Other sterling/euro medium-term notes 28 Retail bonds 260 Residual subordinated loan notes 6 Total b
Slide 26: Maturity profile of debt
Provident Financial plc Preliminary results announcement 2014 26 Group Maturity profile of debt 1,200 1,000 800 Pro-forma £m CCD/Moneybarn 600 borrowings at 31/12/14 400 200 - Mar-15 Jun-15 Mar-16 Jun-16 Mar-17 Jun-17 Mar-18 Jun-18 Sep-15 Sep-16 Sep-17 Dec-14 Dec-15 Dec-16 Dec-17 Syndicated bank fac
Slide 27: Alignment of dividend policy, gearing and growth
Provident Financial plc Preliminary results announcement 2014 27 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 £230m+
Slide 28: Strong capital generation
Provident Financial plc Preliminary results announcement 2014 28 Group Strong capital generation 2014 2013 Year ended 31 December £m £m Vanquis Bank 70.2 53.0 CCD 115.0 98.5 Moneybarn (1.3) - Central (8.4) (12.3) Capital generated1 175.5 139.2 Dividends declared (140.6) (116.8) Surplus capital retai
Slide 29: Regulation, business development and outlook
Provident Financial plc Preliminary results announcement 2014 29 Regulation, business development and outlook Peter Crook – Chief Executive
Slide 30: Regulatory update
Provident Financial plc Preliminary results announcement 2014 30 Regulatory update Group Transfer of regulation to the FCA › CCD and Moneybarn currently operating under interim permissions with window to apply for full authorisation between 1 March 2015 and 31 May 2015 › Both businesses continue to
Slide 31: Business development: Moneybarn
Provident Financial plc Preliminary results announcement 2014 31 Business development Moneybarn › Moneybarn meets the group’s exacting standards used to assess acquisitions: 1. High returns 2. Sustainable business 3. Growth potential 4. Strong market position 5. Good management and cultural
Slide 32: Business development: Satsuma
Provident Financial plc Preliminary results announcement 2014 32 Business development Satsuma › Strong business rationale: – Changing customer preferences to access credit on line – Dislocation of payday due to regulatory changes – Sustainable proposition – ‘online home credit’ – Market estimated to
Slide 33: Outlook
Provident Financial plc Preliminary results announcement 2014 33 Outlook Group › Vanquis Bank continues to deliver strong growth and financial returns resulting in an upgrade to its medium-term potential of between 1.5m and 1.8m customers › Repositioning of home credit as a smaller but leaner, bette
Slide 34: Questions
Provident Financial plc Preliminary results announcement 2014 34 Questions
Slide 35: Contact details
Provident Financial plc Preliminary results announcement 2014 35 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@providentfin