Nutun Limited · JSE:NTU
Nutun — Transaction Capital — H1 2013 Earnings Presentation
38 slides from Nutun's earnings presentation, May 7, 2013
Slide 1: Interim results to 31 March 2013
Interim results to 31 March 2013 2013 07 May 2013
Slide 2: Agenda
Agenda • Group financial highlights • Environment • Strategy • Divisional review • Group review • Financial review • Conclusion • Addendum 1 – Data sheet
Slide 3: Group financial highlights
Group financial highlights Group Divisional Group Financial financial Environment Strategy Conclusion Addenda review review review highlights 3
Slide 4: Group financial highlights
Group financial highlights Results reflect the impact of R870m of new equity issued during February 2012 and on the June 2012 JSE listing • Total income ▲22% from R2.1 billion to R2.5 billion • Non-interest revenue ▲16% from R1.0 billion to R1.2 billion • Gross loans & advances ▲27% from R8.5 billio
Slide 5: Environment
Environment Group Divisional Group Financial financial Environment Strategy Conclusion Addenda review review review highlights 5
Slide 6: Environment
Environment • Q4 2012: labour unrest in mining & agriculture; reduced 4th quarter employment; GDP growth 2.2% (2.5% for 2012) • Q1 2013: downgrade by Fitch; unemployment & higher food, fuel & administered prices softening consumer economy; slower retail & vehicle sales growth; R/$ weakness; business
Slide 7: Strategy
Strategy Group Divisional Group Financial financial Environment Strategy Conclusion Addenda review review review highlights 7
Slide 8: Strategy
Strategy ● Transaction Capital is a Group of separate businesses. The rationale for them being in the same group is that they: o transact in similar markets o with similar counterparties o utilising similar specialised financial, credit risk & payments expertise ● Transaction Capital therefore has t
Slide 9: Divisional review
Divisional review Group Divisional Group Financial financial Environment Strategy Conclusion Addenda review review review highlights 9
Slide 10: Divisional review – Structure
Divisional review – Structure Transaction Capital Limited – six months to 31 March 2013 Employees: 5,102 Headline earnings : R233m Lending Services Total income: R1,842m Headline earnings: R157m Total income: R661m Headline earnings : R71m Asset-backed lending Unsecured lending Credit services Payme
Slide 11: Divisional review – Asset-backed lending: SA Taxi
Divisional review – Asset-backed lending: SA Taxi • Sector outlook o Minibus taxi SMEs: dominant public transport in RSA; estimated c.200,000 vehicles; c 60,000 financed; 23,320 by SA Taxi as development financier; market opportunity in renewal of aging fleet • Operations o Gross loans & advances ▲
Slide 12: Divisional review – Unsecured lending: Bayport
Divisional review – Unsecured lending: Bayport • Sector outlook o “High growth rate slowing as market penetration deepens & credit providers signal caution: no bubble but cautious origination essential regarding: new/existing clients; affordability; risk bands” o Unsecured book YOY growth (value): Q
Slide 13: Divisional review – Unsecured lending: Bayport
Divisional review – Unsecured lending: Bayport • Operations o Gross loans & advances ▲ 40% to R5.4bn; earnings ▲ 29% to R89m o Origination levels determined by: capital rationing; risk appetite; affordability; limiting exposure to new or high risk clients o Credit criteria tightened & disbursement l
Slide 14: Divisional review – Credit services: MBD CS
Divisional review – Credit services: MBD CS • Sector outlook o Fragmented industry: 2,000 registered debt collection agencies & 14,500 registered debt collectors o Major credit providers continue to outsource collections & sell charged off receivables portfolios for improved cash, earnings, credit s
Slide 15: Divisional review – Payment services: Paycorp
Divisional review – Payment services: Paycorp • Sector outlook o Volume & values continue to grow o Growth stimulated by issuing SASSA payment cards to social beneficiaries • Operations o Earnings ▲17% to R28m o Innovation in ATM security curtailed vandalism & facilitated deployment to higher risk a
Slide 16: Group review
Group review Group Divisional Group Financial financial Environment Strategy Conclusion Addenda review review review highlights 16
Slide 17: Group Review
Group Review • Continuous direction of & intervention in subsidiaries: strategy; structure; executive calibre & development; credit & risk policies and practices; monitoring & corrective action on operational performance; encouraging collaboration • Produced first annual integrated report • Successf
Slide 18: Financial review
Financial review Group Divisional Group Financial financial Environment Strategy Conclusion Addenda review review review highlights 18
Slide 19: Financial position
Financial position o Strong growth of gross loans & advances from R8.5bn to R10.8bn 34.4 (▲27%) 30.0 • Asset-backed R5.3bn (▲17%) • Unsecured R5.4bn (▲40%) 23.9 • Balanced asset portfolio 6.5 • slowing rate of growth in unsecured lending 5.6 o Equity R3.2bn (▲51%) 4.5 o NAV per share 527.6 cps (▲30%
Slide 20: Financial performance
Financial performance 65.9 o Headline earnings ▲36% from R171m to 64.2 60.8 R233m • increased gross loans & advances • improved net interest margin • 9% ▲ in EBITDA from services o HEPS ▲11% from 36.1 cps to 39.9 cps 19.6 on increased number of shares 17.9 15.6 o Net interest margin ▲ from 15.1% to
Slide 21: Portfolio mix
Portfolio mix Rm Growth Contribution o Maintained segmental mix of headline Headline earnings 2013 2012 2011 2013 2012 2013 2012 2011 earnings Asset-backed lending 68 58 52 17% 12% 29% 34% 42% • Asset backed lending contribution ▼ from 34% to 29% Unsecured lending 89 69 54 29% 28% 38% 40% 44% • Unse
Slide 22: Asset-backed lending – SA Taxi
Asset-backed lending – SA Taxi o Gross loans & advances ▲17% from R4.4bn to R5.1bn 34.0 29.4 • number of accounts ▲7% • new origination bias 96% to premium 24.1 vehicles (primarily Toyota; ▲ loan size; ▲ credit quality) 16.0 • ▲ write off period of repo vehicles to 15.0 14.1 improve quality & curb c
Slide 23: Asset-backed lending – SA Taxi; Rand Trust
Asset-backed lending – SA Taxi; Rand Trust 47.1 o Headline earnings ▲17% from R58m to R68m 42.9 43.4 • total income up 14% • improved net interest margin to 12.2% • SA Taxi: lower credit loss ratio of 5.1% • Low cost to income ratio of 47.1% o Continued investment in Taximart • refurbishment facilit
Slide 24: Unsecured lending – Bayport
Unsecured lending – Bayport 58.6 o Gross loans & advances ▲40% from 55.5 R3.8bn to R5.4bn 52.0 • slowing and cautious rate of growth • biased origination to existing clients (66% of value originated) 30.6 • average disbursement R14,866 28.2 (NCR average R18,000) 21.3 • average term at origination 47
Slide 25: Unsecured lending – Bayport
Unsecured lending – Bayport o Headline earnings ▲29% from R69m to 54.8 R89m 53.0 51.5 • total income ▲ 38% • stable net interest margin at 20.6% • increased credit loss ratio of 14.2% on increased provisions • lower cost to income ratio of 51.5% o Substantial investment • executive leadership 20.6 2
Slide 26: Unsecured lending – Bayport
Unsecured lending – Bayport o Recent vintages stacking above historical vintages, but still at profitable levels o Reflective of higher levels of default identified in Q2 o Addressed via more conservative provisioning and a tightening of credit criteria Group Divisional Group Financial financial Env
Slide 27: Credit services – MBD Credit Solutions; Principa Decisions
Credit services – MBD Credit Solutions; Principa Decisions o Headline earnings ▲10% from R39m to 86.3 84.9 R43m 84.4 • earnings growth lagging large purchases of book debts 47 48 • total income up 7% 40 • improved cost to income ratio of 84.4% • lower effective tax rate • challenging collections env
Slide 28: Payment services – Paycorp
Payment services – Paycorp o Headline earnings ▲17% from R24m 4,522 to R28m 4,179 3,957 • strong performance from core ATM 87.6 business 83.6 84.9 o Active ATM fleet ▲8% from 4,179 12.1 to 4,522 10.6 • continued high network uptime levels 8.4 • active relocation to better performing sites 9 • 23% in
Slide 29: Funding
Funding o Continued support from debt capital 35.7 markets – R2.4bn of debt issued 33.7 33.9 • Unsecured lending: R1.2bn 28.0 • Asset-backed lending: R1.1bn o New debt investors: • 3 new to group 19.1 • 3 new to asset classes 1,221 13.9 o Cost of borrowing ▼ from 11.1% 900 to 10.6% 544 11.0 11.1 o L
Slide 30: Funding philosophy
Funding philosophy Diversification by funding structure o Proven wholesale funding model 15% Rated unlisted • “positive liquidity mismatch” between 23% securitisation asset & liability cash flows Rated listed • direct relationships with debt capital securitisation markets Syndicated loans • diversif
Slide 31: Shareholding
Shareholding 31 March 2013 o The number and percentage held by institutional investors ▲ from 10% to 6% 11% 9% o Current share scheme to be replaced by Share Appreciation Rights scheme 11% (seek shareholder approval in next few months) 59% 10% 5% Directors of Transaction Capital and its subsidiaries
Slide 32: Conclusion
Conclusion Group Divisional Group Financial financial Environment Strategy Conclusion Addenda review review review highlights 32
Slide 33: The Transaction Capital scorecard
The Transaction Capital scorecard Macro-economic o Positioned to service growing middle class backdrop for growth o Counter-cyclical opportunities such as collections management, book buying o Complementary & collaborative portfolio of strategically aligned niche financial services businesses with S
Slide 34: Risks
Risks • Soft consumer economy: unemployment; inflation; lower borrowing capacity; lower real wage increases; rates • Labour unrest • Uncertain regulatory environment • Regulatory non-compliance by some industry participants & lack of enforcement by authorities • Absence of standards on affordability
Slide 35: Outlook
Outlook • Challenging socio-economic & regulatory environment • Major industry participants will behave responsibly (low probability of banking or financial instability) • Transaction Capital will: o provide innovative solutions to clients’ needs o exercise discipline in the control of costs & asset
Slide 36: Addenda
Addenda Group Divisional Group Financial financial Environment Strategy Conclusion Addenda review review review highlights 36
Slide 37: Presenter’s details
Presenter’s details o Mark J Lamberti | CEO [email protected] o David Hurwitz | CFO [email protected] o Group Investor Relations Manager | Phillipe Welthagen +27 (0) 11 531 5004 [email protected] o Media enquiries | Nick Roodman, Byron Kennedy (Brunswick)
Slide 38: Disclaimer
Disclaimer This presentation may contain certain "forward-looking statements" regarding beliefs or expectations of the TC Group, its directors and other members of its senior management about the TC Group's financial condition, results of operations, cash flow, strategy and business and the transact