Vanquis Banking Group PLC · LSE:VANQ
Vanquis Banking — Provident Financial — Non-Deal Roadshow (November 2013)
23 slides from Vanquis Banking's roadshow presentation, November 2013
Slide 1: US Investor Roadshow November 2013
US INVESTOR ROADSHOW NOVEMBER 2013
Slide 2: Group Overview
US INVESTOR ROADSHOW GROUP OVERVIEW • FTSE 250 plc with a market capitalisation of c.£2.3bn • Leading non-standard lender providing access to credit for those who might otherwise be financially excluded • Operates through two divisions: – Consumer Credit Division (CCD) provides small-sum, short term
Slide 3: Group Strategy
US INVESTOR ROADSHOW GROUP STRATEGY 1. We focus on small-sum unsecured credit – High margins and therefore a high return on equity (ROE) is available to companies with a sustainable business model 2. Our risks are well spread – We lend small amounts to 2.7m customers who do not have much indebtednes
Slide 4: UK Non-Standard Market
US INVESTOR ROADSHOW GROUP UK NON-STANDARD MARKET • UK non-standard market comprises c.10 million and is growing due to increase in temporary, part time Prime (c.33m) and casual labour and retrenchment of prime lenders & Near Prime (c.6m) • Home-collected credit market comprises c.3 million: – Custo
Slide 5: KPIs
US INVESTOR ROADSHOW GROUP KPIS Earnings per share Dividends per share 80 100 70 80 Pence Pence 60 60 50 40 40 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Total shareholder return Gearing 50 4 40 3 30 % Times 2 20 1 10 - - 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Page 5
Slide 6: Profit Before Tax
US INVESTOR ROADSHOW GROUP PROFIT BEFORE TAX Six months ended 30 June 2013 2012 Change (restated2) £m £m % CCD 36.1 49.3 (26.8) Vanquis Bank: - UK 50.2 29.4 70.7 - Poland (3.6) (1.2) (200.0) Total Vanquis Bank 46.6 28.2 65.2 Central: - costs (6.3) (5.8) (8.6) - interest receivable/(payable) 0.1 (0.2
Slide 7: CCD Providing a Valued Community Service
US INVESTOR ROADSHOW CCD PROVIDING A VALUED COMMUNITY SERVICE • Community based model – home-collected credit business conducted face-to-face by agents who typically live in the communities they serve • Provides access to credit for those who might otherwise be financially excluded • Endorsement fro
Slide 8: CCD Business Dynamics
US INVESTOR ROADSHOW CCD BUSINESS DYNAMICS Simple, transparent • Small (typically £500), short-term (typically 1 year) and affordable (typically financial products £17 per week) unsecured loans • Fixed weekly repayments that do not change, even if payments are missed. No hidden charges, arrangement
Slide 9: CCD Market Conditions and Business Positioning
US INVESTOR ROADSHOW CCD MARKET CONDITIONS AND BUSINESS POSITIONING MARKET CONDITIONS BUSINESS POSITIONING • Competitive landscape in home-collected • Tight credit standards have remained in place credit unchanged with weak demand main driver of arrears slippage • Household disposable incomes under
Slide 10: CCD Income Statement
US INVESTOR ROADSHOW CCD INCOME STATEMENT Six months ended 30 June 2013 2012 Change (restated3) £m £m % Customer numbers (‘000) 1,668 1,771 (5.8) Period-end receivables 739.6 787.8 (6.1) Average receivables 755.2 783.5 (3.6) Revenue 365.6 351.8 3.9 Impairment (167.0) (135.4) (23.3) Revenue less impa
Slide 11: CCD Business Development
US INVESTOR ROADSHOW CCD BUSINESS DEVELOPMENT • Management team, now led by Mark Stevens, has experience and skills to deliver medium term repositioning of business • Focus on returns within the traditional home-collected credit business: – Driving greater operational effectiveness, cost efficiency
Slide 12: Vanquis Bank Revolving, Visa-Branded Credit Card
US INVESTOR ROADSHOW VANQUIS BANK REVOLVING, VISA-BRANDED CREDIT CARD Background • Developed organically, rolled-out in 2005 • Holds a banking licence and regulated by the FSA • Broke even in 2007 prior to strong profits growth through the economic downturn • Over 1 million UK customers Business mod
Slide 13: Vanquis Bank Business Dynamics
US INVESTOR ROADSHOW VANQUIS BANK BUSINESS DYNAMICS ‘Low and grow’ • Customers are introduced with a small credit limit (typically £250) strategy • Growth in balance, dependent upon performance, to average credit line of c.£1,000 Targeted customer • Typical customers are non-homeowners with an annua
Slide 14: Vanquis Bank Market Conditions and Business Positioning
US INVESTOR ROADSHOW VANQUIS BANK MARKET CONDITIONS AND BUSINESS POSITIONING MARKET CONDITIONS BUSINESS POSITIONING • Vanquis Bank is most active participant • No change to tight underwriting and credit in underserved non-standard credit card line increase criteria, supporting stable, market record
Slide 15: Vanquis Bank UK Income Statement
US INVESTOR ROADSHOW VANQUIS BANK UK INCOME STATEMENT Six months ended 30 June 2013 2012 Change £m £m % Customer numbers (‘000) 1,003 777 29.1 Period-end receivables 723.6 525.1 37.8 Average receivables 683.8 487.5 40.3 Revenue 178.0 127.7 39.4 Impairment (64.6) (45.6) (41.7) Revenue less impairment
Slide 16: Vanquis Bank Strong Growth Business
US INVESTOR ROADSHOW VANQUIS BANK STRONG GROWTH BUSINESS UK customers UK receivables 1,000 700 900 600 800 700 500 600 400 ‘000 £m 500 400 300 300 200 200 100 100 - - 2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012 UK risk-adjusted margin* UK profit before tax 40 75 30 50 % £'m 20 25 10
Slide 17: Vanquis Bank UK Medium-Term Potential
US INVESTOR ROADSHOW VANQUIS BANK UK MEDIUM-TERM POTENTIAL • Growth in Vanquis Bank over last two years has exceeded plan • Greater penetration of target market due to enhanced marketing • Demand for non-standard credit cards expected to remain strong • Revised assessment of medium-term potential: –
Slide 18: Vanquis Bank Poland
US INVESTOR ROADSHOW VANQUIS BANK POLAND • Objective of pilot is to develop a customer proposition and business model capable of growing a sizeable business delivering group’s target returns • Pilot needs to demonstrate that key elements of UK business model can be adapted to address Polish target a
Slide 19: Diversified Funding Base
US INVESTOR ROADSHOW GROUP DIVERSIFIED FUNDING BASE At 30 June 2013 £m Banks 383 Bonds and private placements: Senior public bond 250 M&G term loan 100 Other sterling/euro medium term notes 41 Retail bonds 260 US private placements/residual subordinated loan notes 44 Total bonds and private placemen
Slide 20: Alignment of Dividend Policy, Gearing and Growth
US INVESTOR ROADSHOW GROUP ALIGNMENT OF DIVIDEND POLICY, GEARING AND GROWTH High ROE businesses Dividend Gearing Growth policy ≤ 3.5x versus covenant Supports c.£160m Cover ≥ 1.25x of 5.0x receivables growth p.a Page 20
Slide 21: Q3 IMS
US INVESTOR ROADSHOW GROUP Q3 IMS • Group has overall performed in line with its internal plan in first nine months of the year • Vanquis Bank has continued to trade ahead of its internal plan: – Delivered strong growth and robust margins, supported by stable record low delinquency – Pilot credit ca
Slide 22: Investment Case
US INVESTOR ROADSHOW GROUP INVESTMENT CASE • Non-standard credit market will remain domain of specialists • Attractive business model: – Cash generative home-collected credit business with a focus on returns o Opportunities for growth from adjacent online products – Strong, profitable and capital ge
Slide 23: Contact Details
US INVESTOR ROADSHOW 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 351019 E-mail: [email protected] Website: www.providentfinanc
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