Provident Financial Holdings, Inc. · NASDAQ:PROV
Provident Financial — FY2016 Earnings Presentation
40 slides from Provident Financial's earnings presentation, February 2017
Slide 1: Understanding the big picture and our customers' needs
Understanding the big picture and our customers’ needs 2016 preliminary results
Slide 2: Today's presentation
2 2016 preliminary results | Provident Financial plc Today’s presentation Today’s presentation > Highlights and business overview Peter Crook > Financial review Andrew Fisher > Concluding remarks Peter Crook > Questions
Slide 3: Highlights and business overview
3 2016 preliminary results | Provident Financial plc Highlights and business overview Peter Crook – Chief Executive business overview Highlights and
Slide 4: Highlights
4 2016 preliminary results | Provident Financial plc Highlights Strong performance supports a 12.1% dividend increase business overview Highlights and > Adjusted profit before tax1 up 14.1% to £334.1m and adjusted basic EPS1 up 9.2% to 177.5p > Total dividend per share up 12.1% to 134.6p fully suppo
Slide 5: Market conditions and business positioning: Vanquis Bank
5 2016 preliminary results | Provident Financial plc Market conditions and business positioning Vanquis Bank business overview Highlights and Market conditions Business positioning > Strong demand from developing the underserved, non- > Initiatives in place to expand credit card distribution and sta
Slide 6: Market conditions and business positioning: Home credit
6 2016 preliminary results | Provident Financial plc Market conditions and business positioning Home credit business overview Highlights and Market conditions Business positioning > No discernible change in the competitive landscape in > Home credit business is continuing to evolve and home credit a
Slide 7: Home credit: proposed changes to the operating model
7 2016 preliminary results | Provident Financial plc Home credit Proposed changes to the operating model business overview Highlights and > Repositioning of home credit has been successful in maintaining profits and increasing returns in a mature market: - Successful deployment of hand-held technolo
Slide 8: Market conditions and business positioning: Satsuma
8 2016 preliminary results | Provident Financial plc Market conditions and business positioning Satsuma business overview Highlights and Market conditions Business positioning > Changing customer preferences and dislocation from > Drive to further develop underwriting, cost effective payday regulati
Slide 9: Market conditions and business positioning: Moneybarn
9 2016 preliminary results | Provident Financial plc Market conditions and business positioning Moneybarn business overview Highlights and Market conditions Business positioning > Market supply remains below levels in 2007 > Market leadership and primacy reinforced by access to group funding and bro
Slide 10: Brexit
10 2016 preliminary results | Provident Financial plc Brexit PFG is well positioned to trade through any economic slowdown Economic risk PFG dynamic business overview Highlights and Rising unemployment • Vanquis Bank has not changed its credit standards since 2009 and maintains strict discipline ove
Slide 11: Financial review
11 2016 preliminary results | Provident Financial plc Financial review Andrew Fisher – Finance Director Financial review
Slide 12: Group results summary
12 2016 preliminary results | Provident Financial plc Group Results summary Financial review Year ended 31 December 2016 2015 Change £m £m % Vanquis Bank: - UK 204.5 185.5 10.2 - Poland1 - (1.8) 100.0 Total Vanquis Bank 204.5 183.7 11.3 CCD 115.2 105.4 9.3 Moneybarn 31.1 21.3 46.0 Central costs (16.
Slide 13: Vanquis Bank results
13 2016 preliminary results | Provident Financial plc Vanquis Bank Results Financial review Year ended 31 December 2016 2015 Change £m £m % Customer numbers (‘000) 1,545 1,421 8.7 Year-end receivables 1,424.7 1,252.0 13.8 Average receivables 1,307.0 1,157.1 13.0 Revenue 583.7 538.6 8.4 Impairment (1
Slide 14: Vanquis Bank customer numbers
14 2016 preliminary results | Provident Financial plc Vanquis Bank Customer numbers Financial review > New account bookings of 406k, 27k lower than 2015: Customer numbers and new account bookings (‘000) 1,800 400 - Reduction of 43k from face-to-face following 1,600 350 decision to curtail this chann
Slide 15: Vanquis Bank receivables
15 2016 preliminary results | Provident Financial plc Vanquis Bank Receivables Financial review Receivables (£m) 1,500 > Receivables growth of 13.8% during 2016: 500 1,250 - Growth in customer numbers of 8.7% Receivables growth 400 Receivables 1,000 300 - Good performance from the credit line increa
Slide 16: Vanquis Bank risk-adjusted margin (RAM)
16 2016 preliminary results | Provident Financial plc Vanquis Bank Risk-adjusted margin (RAM) Financial review > Business model supports stability of RAM: 70% - ‘Low and grow’ strategy 60% - High credit line utilisation significantly reduces 50% volatility of credit losses 40% 30.0% 35.0% > Vanquis
Slide 17: Vanquis Bank risk-adjusted margin (RAM)
17 2016 preliminary results | Provident Financial plc Vanquis Bank Risk-adjusted margin (RAM) Financial review > RAM moderated from 32.8% to 32.2% over last 12 70% months: 60% Reduction in delinquency 50% through to September 2016 +1.3% Lower interest yield and 40% default fees -0.9% 32.8% 30% 32.4%
Slide 18: Vanquis Bank arrears profile
18 2016 preliminary results | Provident Financial plc Vanquis Bank Arrears profile Financial review At 31 December (% receivables) 2016 2015 In order 94.0 93.3 In arrears: - Past due but not impaired - - - Impaired 6.0 6.7 Total 100.0 100.0 > Improved profile reflects arrears running at record lows
Slide 19: CCD results
19 2016 preliminary results | Provident Financial plc CCD Results Financial review Year ended 31 December 2016 2015 Change £m £m % Customer numbers (‘000) 862 948 (9.1) Year-end receivables 584.8 545.1 7.3 Average receivables 508.7 499.5 1.8 Revenue 518.8 517.4 0.3 Impairment (120.0) (106.6) (12.6)
Slide 20: CCD customer numbers
20 2016 preliminary results | Provident Financial plc CCD Customer numbers Financial review > Repositioning of home credit as a smaller, better- 1,600 quality business: 1,400 - Tighter credit standards Customer numbers (000) 1,200 1,000 - Curtailed recruitment of more marginal 800 customers 600 400
Slide 21: CCD receivables
21 2016 preliminary results | Provident Financial plc CCD Receivables Financial review > Demand and customer confidence remain robust 10% > Year end receivables 7.3% higher than 2015: Year-on-year receivables movement 5% (0%) - 9% increase in sales during 2016 (5%) (10%) - Focus on good quality exis
Slide 22: CCD risk-adjusted margin (RAM)
22 2016 preliminary results | Provident Financial plc CCD Risk-adjusted margin (RAM) Financial review > Significant expansion in RAM from repositioning of 110% home credit since 2013 100% 90% > RAM of 78.4% in 2016 versus 82.2% in 2015 80% 70% > Modest reduction in the revenue yield from 58.9% 82.2%
Slide 23: CCD arrears profile
23 2016 preliminary results | Provident Financial plc CCD Arrears profile Financial review At 31 December (% receivables) 2016 2015 In order 55.3 51.3 In arrears: - Past due but not impaired 10.9 10.7 - Impaired 33.8 38.0 Total 100.0 100.0 > Based on contractual arrears > Past due but not impaired i
Slide 24: Moneybarn results
24 2016 preliminary results | Provident Financial plc Moneybarn Results Financial review Year ended 31 December 2016 2015 Change £m £m % Customer numbers (‘000) 41 31 32.3 Year-end receivables 297.3 219.6 35.4 Average receivables 266.6 190.8 39.7 Revenue 80.7 55.3 45.9 Impairment (16.4) (8.9) (84.3)
Slide 25: Moneybarn new business volumes
25 2016 preliminary results | Provident Financial plc Moneybarn New business volumes Financial review > 2016 new business volumes of 21,500 show year- 12 on-year growth of 28.0%: Half yearly new business volumes (000) 10 - Benefit of group funding and product 8 development has reinforced primacy wit
Slide 26: Moneybarn receivables
26 2016 preliminary results | Provident Financial plc Moneybarn Receivables Financial review > Year-on-year receivables growth of 35.4% 350 300 > Average loan value reduced to £8,200 versus £8,900 in 2015 reflecting modest shift in mix to 250 lower value, higher yielding vehicles 200 £m 150 > Receiv
Slide 27: Group balance sheet
27 2016 preliminary results | Provident Financial plc Group Balance sheet At 31 December 2016 2015 Financial review £m £m Goodwill 71.2 71.2 Acquisition intangibles 57.5 65.0 Receivables: - Vanquis Bank 1,424,7 1,252.0 - Home credit 560.0 522.2 - Satsuma 18.2 12.1 - glo 6.6 10.8 - Moneybarn 297.3 21
Slide 28: Group gearing
28 2016 preliminary results | Provident Financial plc Group Gearing Financial review 4.0 > Strong capital generation has consistently funded dividends and growth 3.0 > Reduction during 2014 and 2015 reflected: - Equity raised to fund acquisition of Moneybarn in order to preserve regulatory capital l
Slide 29: Diversified funding base
29 2016 preliminary results | Provident Financial plc Group Diversified funding base At 31 December 2016 Pre renewal Post renewal1 Financial review £m £m Banks 383 450 Bonds and private placements: - Senior public bond 250 250 - M&G term loan 90 90 - Other sterling/euro medium-term notes 28 28 - Ret
Slide 30: Maturity profile of debt
30 2016 preliminary results | Provident Financial plc Group Maturity profile of debt Financial review 1,200 1,000 800 £m 600 400 200 - Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Sep-17 Sep-18 Sep-19 Mar-17 Mar-18 Mar-19 Syndicated bank facilities Bonds Private placements > Relatively low matur
Slide 31: Retail deposits programme
31 2016 preliminary results | Provident Financial plc Vanquis Bank Retail deposits programme Financial review Retail deposits maturity profile 1,000 Retail deposits outstanding (£m) 900 800 700 600 500 400 300 200 100 - 2017 2018 2019 2020 2021 > Retail deposits represent 66% of Vanquis Bank’s recei
Slide 32: Alignment of dividend policy, gearing and growth
32 2016 preliminary results | Provident Financial plc Group Alignment of dividend policy, gearing and growth Financial review High returns businesses Dividend Gearing Growth policy ≤ 3.5x versus covenant Supports receivables growth Cover ≥ 1.25x of 5.0x of £300m+
Slide 33: Strong capital generation
33 2016 preliminary results | Provident Financial plc Group Strong capital generation Year ended 31 December Financial review 2016 2015 £m £m Vanquis Bank 152.2 143.5 CCD 80.1 65.1 Moneybarn 7.2 0.2 Central (6.3) (18.9) Capital generated1 233.2 189.9 Dividends declared (195.7) (174.4) Surplus capita
Slide 34: Concluding remarks
34 2016 preliminary results | Provident Financial plc Concluding remarks Peter Crook – Chief Executive Concluding remarks
Slide 35: Regulation
35 2016 preliminary results | Provident Financial plc Regulation Group Concluding remarks Transfer of regulation to the FCA > Vanquis Bank and Moneybarn are fully authorised by the FCA > CCD continues to operate under an interim permission, consistent with other sizeable firms in the home credit mar
Slide 36: Business case
36 2016 preliminary results | Provident Financial plc Business case PFG is well placed to continue to deliver excellent returns to shareholders Concluding remarks PFG Group ROA EPS growth > Market leader in non-standard credit with sustainable 15.3% 14.7% business models > Good mix of businesses wit
Slide 37: Capital Markets Day
37 2016 preliminary results | Provident Financial plc Capital Markets Day Group Concluding remarks > Capital Markets Day being held on 4 April 2017 > Updates will be provided on all of the group’s businesses > Key areas of focus will be: - The proposed enhancements to the home credit operating model
Slide 38: Outlook
38 2016 preliminary results | Provident Financial plc Outlook Group Concluding remarks > Vanquis Bank continues to deliver a strong financial performance: - Strong new account booking momentum and good pipeline of initiatives to further augment growth in 2017 and beyond - Performance of the recently
Slide 39: Questions
39 2016 preliminary results | Provident Financial plc Questions Peter Crook – Chief Executive Questions Andrew Fisher – Finance Director
Slide 40: Contact details
40 2016 preliminary results | Provident Financial plc Contact details Group Contact details Provident Financial plc No.1 Godwin Street Bradford BD1 2SU Contacts: Gary Thompson – Group Financial Controller and Head of Investor Relations Vicki Turner – Senior Group Finance and Investor Relations Manag