Nutun Limited · JSE:NTU
Nutun — Transaction Capital — FY2012 Earnings Presentation
40 slides from Nutun's earnings presentation, Nov 29, 2012
Slide 1: Annual results to 30 September 2012
Annual results to 30 September 2012 2012 29 November 2012
Slide 2: Agenda
Agenda o Group financial highlights o Environment o Strategy o Divisional review o Group review o Financial review o Conclusion o Addendum 1 – Group profile o Addendum 2 – KPIs
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 o Total income ▲21% from R3.6 billion to R4.4 billion o Non-interest revenue ▲17% from R1.8 billion to R2.1 billion o Gross loans & advances ▲34% from R7.3 billion to R9.8 billion o Normalised headline earnings ▲31% from R323 million to R424 million o Normalised HEPS ▲17%
Slide 5: Environment
Environment Group Divisional Group Financial financial Environment Strategy Conclusion Addenda review review review highlights 5
Slide 6: Environment
Environment o Declining GDP growth in RSA: 2.6% for financial year o Steady consumer economy: retail & motor o Fractious socio political milieu o Downgrades of sovereign credit ratings o Competitive financial services industry in pursuit of market share, technological edge, & non-interest & transact
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 Employees: 4,697 Normalised headline earnings (H/E)¹: R424m Lending Services Total income: R3,094m Normalised H/E: R299m Total income: R1,256m Normalised H/E: R131m Asset-backed lending Unsecured lending Credit services Payment services Incom
Slide 11: Divisional review – Asset Backed Lending: SA Taxi
Divisional review – Asset Backed Lending: SA Taxi o Sector outlook • Minibus taxi SMEs: dominant public transport in RSA; estimated c.200,000 vehicles; c.130,000 licensed; c 60,000 financed; 22,649 by SA Taxi as development financier; market opportunity in renewal of aging fleet o Operations • 19% g
Slide 12: Divisional review – Unsecured Lending: Bayport
Divisional review – Unsecured Lending: Bayport o Sector outlook • Rapid unsecured growth (predominantly LSM’s 6-10) caused by post NCA structural shift • Unsecured credit growth correlates with housing & entry level vehicle expenditure but disposable income growth increased discretionary retail sale
Slide 13: Divisional review – Unsecured Lending: Bayport
Divisional review – Unsecured Lending: Bayport o Operations • Low market share enables Bayport to navigate & respond tactically to negative sector trends & developments • Single digit approval rates determined by: capital rationing; affordability; limiting exposure to new or high risk clients; most
Slide 14: Divisional review – Credit Services: MBD CS
Divisional review – Credit Services: MBD CS o Sector outlook • Fragmented industry: 2,000 registered debt collection agencies & 14,500 registered debt collectors • 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 o Sector outlook • 94% of the 88% of working SA adults that are banked, access their accounts via ATMs o Operations • Active fleet of 4,381 ATMs (c.16% of the SA ATM market) with c.45% in rural / peri-urban areas. R28.6 billion cash disbursed in 2012 • V
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 o Strengthening board composition & processes o Clarifying direction & interventions from group executive office o Refining group & subsidiary strategic focus o Improving leadership & executive calibre group wide o Substantial capital & operating investment in technology o Entrenching d
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 R7.3bn to R9.8bn 33.8% (▲34%) • Asset backed R5.0b (▲20%) 28.2% • Unsecured R4.7b (▲55%) 6.5 6.1 • improved portfolio balance 22.3% o Equity ▲R1.3bn from R1.7bn to R3.0bn • retained income R381m 4.3 • capital raised R870m o NAV per sh
Slide 20: Financial performance
Financial performance o Normalised headline earnings ▲31% from 71.9% R323m to R424m • increased gross loans & advances 63.7% 62.9% • greater contribution from services • reduced gearing o Normalised HEPS ▲17% from 69.7 cps to 81.6 cps 21.9% o Net interest margin ▲ from 14.5% to 15.9% 18.6% • increas
Slide 21: Portfolio mix
Portfolio mix Normalised Rm Contribution o Improved segmental mix of headline headline earnings 2012 2011 Growth 2012 2011 earnings Asset backed lending 133 109 22% 31% 34% o Services earnings growth (34%) outpaced lending growth (21%) Unsecured lending 166 138 20% 39% 43% • Asset backed lending con
Slide 22: Asset Backed Lending – SA Taxi
Asset Backed Lending – SA Taxi 31.9% o Gross loans & advances ▲19% from R4.0bn to R4.8bn 27.5% • number of accounts ▲5% • new origination bias 92% to premium vehicles (primarily Toyota; ▲ loan size; 21.1% 15.2% 15.3% ▲ credit quality) 13.8% • ▲ write off period of repo vehicles to 6.0% 5.6% improve
Slide 23: Asset Backed Lending – SA Taxi; Rand Trust
Asset Backed Lending – SA Taxi; Rand Trust o Headline earnings ▲22% from R109m to R133m 54.1% • total income up 12% • improved net interest margin of 12.1% 44.8% • lower credit loss ratio of 5.4% 41.6% • low cost to income ratio of 44.8% o Continued investment in Taximart 12.1% • refurbishes & facil
Slide 24: Unsecured Lending – Bayport
Unsecured Lending – Bayport o Gross loans & advances 53.7% 54.3% 53.1% ▲55% from R3.0bn to R4.7bn • biased origination to existing clients (61% of value originated) • average disbursement R13,412 (NCR average R19,118) 30.6% • average term at origination 44 months (NCR average 41 months) 24.3% • aver
Slide 25: Unsecured Lending – Bayport
Unsecured Lending – Bayport 56.2% o Headline earnings ▲20% from R138m 54.3% 52.5% to R166m • total income up 33% • stable net interest margin of 21.0% • stable credit loss ratio of 13.0% • lower cost to income ratio of 52.5% o Substantial investment 24.4% • executive leadership 21.0% 21.2% • human c
Slide 26: Bayport NPL cured vintage analysis
Unsecured Lending – Bayport Bayport - NPL cured vintage analysis 30% Outstanding repayable of NPL over total original repayable Jul-09 Aug-09 Sep-09 Oct-09 25% Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 20% May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 15% Nov-10 Dec-10 Jan-11 Feb-11 10% Mar-11 Apr-11 Ma
Slide 27: Credit Services – MBD Credit Solutions; Principa
Credit Services – MBD Credit Solutions; Principa o Headline earnings ▲44% 87.3% 85.5% from R61m to R88m 84.4% • total income up 24% • improved collection efficiencies 47% • improved cost to income ratio of 84.4% 42% • lower effective tax rate 40% o Purchased book debts ▲13% from R308m to R347m • rev
Slide 28: Payment Services – Paycorp
Payment Services – Paycorp 4,381 o Headline earnings ▲16% from R37m 4,024 4,072 to R43m • strong performance from core ATM business o Active ATM fleet ▲8% from 4,072 86.4% 88.3% 86.3% to 4,381 19 • continued high uptime • active relocation to better performing sites 14 o Improved cost to income rati
Slide 29: Funding
Funding o R3,941m of debt issued 40.5% o 9 new debt investors • 4 new to group • 5 new to asset classes 32.0% o Cost of borrowing ▼ from 11.2% 22.2% to 11.0% 24.8% • recent Bayport credit margin at 165 18.5% to 350 bps 1,946 o Limited exposure to net floating rate 11.7% 11.2% 11.0% debt at R396m 859
Slide 30: Funding philosophy
Funding philosophy Diversification by funding structure o Proven wholesale funding model • direct relationships with debt capital markets 18% 24% • diversification by debt investor, funding Rated unlisted securitisation structure & credit rating Rated listed securitisation Syndicated loans • ring-fe
Slide 31: Conclusion
Conclusion Group Divisional Group Financial financial Environment Strategy Conclusion Addenda review review review highlights 31
Slide 32: 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 33: Risks
Risks o Unemployment o Endemic labour unrest o Uncertain future regulatory environment o Regulatory non-compliance by industry participants and lack of enforcement by authorities o Absence of standards on affordability Group Divisional Group Financial financial Environment Strategy Conclusion Addend
Slide 34: Outlook
Outlook o Positive momentum on strategic & operating progress • step change in organisational maturity pursuant to the listing of the group • improved governance, risk management & predictability • competitive strategies, business models, organisation design & human capabilities proven resilient in
Slide 35: Addenda
Addenda Group Divisional Group Financial financial Environment Strategy Conclusion Addenda review review review highlights 35
Slide 36: Addendum - Group Profile
Addendum 1 - Group Profile ● Transaction Capital is a non-deposit-taking financial services group active in asset backed lending, unsecured lending, credit services & payment services. The group operates in selected mass, emerging & under-served segments of the Southern African consumer & SME market
Slide 37: Addendum - Group Profile (continued)
Addendum 1 - Group Profile (continued) ● The Transaction Capital group comprises: six operating entities in four divisions. ● Asset Backed Lending Division SA Taxi SA Taxi is a leading provider of finance to the minibus tax industry, providing credit together with product insurance & other allied pr
Slide 38: Addendum - Group Profile (continued)
Addendum 1 - Group Profile (continued) ● Credit Services Division MBD Credit Solutions MBD CS is a leading provider of receivables management services in South Africa including the collection of pre- charged off accounts, charged off accounts & delinquent debt. Revenue is earned via collections on a
Slide 39: Presenters’ details
Presenters’ details o Mark J Lamberti | CEO [email protected] o David Hurwitz | CFO [email protected] o Group Investor Relations Administrator | Antony Seeff +27 (0) 11 531 5437 [email protected] o Media enquiries | Nick Roodman (Brunswick) +27 (0) 11 502 73
Slide 40: 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