Vanquis Banking Group PLC · LSE:VANQ
Vanquis Banking — Provident Financial — FY1998 Earnings Presentation
49 slides from Vanquis Banking's earnings presentation, 1999
Slide 1: Results for the year ended 31 December 1998
Provident Financial Results For the year ended 31 December 1998
Slide 2: Key points
Provident Financial Key points • Clear and proven strategy continues to deliver good results • Home Credit - Continuing UK growth - Developing Eastern Europe • Insurance - Profit benefitting from pricing strategy - Growth in broking customers
Slide 3: Profit growth
Provident Financial Profit growth 1998 1997 Growth Pre-tax profit 145.9 136.5 + 6.9 % Additional interest 9.1 2.0 Profit before additional interest 155.0 138.5 +11.9 %
Slide 4: Profit before tax
Provident Financial Profit before tax (£m) 1998 1997 UK home credit 136.9 128.6 International (4.7) (1.4) Insurance 19.6 13.7 Central costs (5.9) (4.4) Total 145.9 136.5
Slide 5: Home credit strategy
Home credit Strategy Revenue growth Efficiency and quality Profit growth International development
Slide 6: UK home credit profit
UK home credit Profit (£m) 1998 1997 Profit before interest 158.8 143.9 + 10.4% Interest payable (21.9) (15.3) + 43.1% Profit before tax 136.9 128.6 + 6.5%
Slide 7: Revenue growth: number of agents
UK home credit: Revenue growth Number of agents as at 31 December 12,000 10,260 10,879 9,872 10,000 9,138 8,479 8,000 6,000 4,000 2,000 0 94 95 96 97 98
Slide 8: Revenue growth: number of customers
UK home credit: Revenue growth Number of customers as at 31 December 000’s 1,494 1,500 1,413 1,322 1,207 1,134 1,000 500 0 94 95 96 97 98
Slide 9: Why does home credit continue to be popular and successful?
UK home credit Why does home credit continue to be popular and successful? • Good for customers • Good value for money • Good for communities
Slide 10: Revenue growth: credit issued
UK home credit: Revenue growth Credit issued £m year to 31 December 1000 805 800 733 670 585 600 529 400 200 0 94 95 96 97 98
Slide 11: Revenue growth: collections
UK home credit: Revenue growth Collections £m year to 31 December 1200 1,086 984 1000 909 811 800 739 600 400 200 0 94 95 96 97 98
Slide 12: Efficiency and quality: ratio of agents to staff
UK home credit: Efficiency and quality Ratio of agents : employed staff as at 31 December 5 3.9 3.9 4.1 4 3.5 3.2 3 2 1 0 94 95 96 97 98
Slide 13: Efficiency and quality: bad debt charge
UK home credit: Efficiency and quality Bad debt charge % of credit issued 8% 6.8 6.9 6.5 6.2 6.2 5.9 6% 5.5 5.6 5.1 4% 2% 0% 91 92 93 94 95 96 97 June 98 98 (Annualised)
Slide 14: Costs and profit as a % of turnover
UK home credit Costs and profit as a % of turnover 6% Interest 14% Bad Debt 22% Agents’ Commission 35% Profit 23% Overheads 1998
Slide 15: Costs and profit as a % of turnover, 1998 vs 1997
UK home credit Costs and profit as a % of turnover 6% Interest 4% 14% Bad Debt 12% 22% Agents’ Commission 22% 35% Profit 37% 23% Overheads 25% 1998 1997
Slide 16: International home credit
International home credit International development
Slide 17: International home credit: development locations
International home credit: Development Locations • Poland August 1997 • Czech Republic December 1997 • South Africa April 1998
Slide 18: Eastern Europe agents and customers
International home credit: Development Eastern Europe Agents Customers Receivables (£000’s equivalent) Poland 350 12,500 X Czech Republic 250 7,500 Y Total 600 20,000
Slide 19: Eastern Europe customer growth
International home credit: Development Eastern Europe Customers 20,000 15,000 10,000 5,000 0 Aug Sept Oct Nov Dec Jan Feb Mar April May June July Aug Sept Oct Nov Dec Jan Feb 97 97 97 97 97 98 98 98 98 98 98 98 98 98 98 98 98 99 99
Slide 20: Some comparisons
International home credit: Development Some comparisons Czech UK Poland Republic Women customers 70% 53% YY% Women agents 81% 50% YY% Average loan size £200 £103 £90 Average age (customer) 38 40 YY Overall satisfaction level 95% 92% YY% (customer)
Slide 21: International development summary
International home credit: Development Summary • Encouraging progress • Investment to double in 1999 • Profit in 2002
Slide 22: Home credit strategy
Home credit Strategy Revenue growth Efficiency and quality Profit growth International development
Slide 23: Insurance profit before tax
Insurance Provident Insurance Colonnade Insurance Brokers 1998 1997 Profit before tax (£m) 19.6 13.7 +43%
Slide 24: Insurance strategy
Insurance Strategy Specialist markets Margins Profit growth Flexible distribution
Slide 25: Insurance: specialist markets
Insurance: Specialist markets Areas of strength • Non-comprehensive • Women drivers • Second cars • Older cars
Slide 26: Insurance: motor policyholders
Insurance: Margins Motor policyholders 000’s as at 31 December 1000 800 802 800 595 600 516 477 400 200 0 94 95 96 97 98
Slide 27: Insurance: large investment fund
Insurance: Margins Large investment fund as at 31 December £m 400 298 300 296 292 300 254 200 100 0 94 95 96 97 98
Slide 28: Insurance: flexible distribution
Insurance: Flexible distribution 69% High street 31% Telephone
Slide 29: CIB policyholders
Insurance CIB policyholders [000’S] [XX] [XX] [XXX [XX] [XX] [XX] [XX] [XX] [XX] [XX] [XX] [XX] [XX] Total [XX] [XX] Colonnade Direct 1994 1995 1996 1997 1998
Slide 30: Insurance outlook
Insurance Outlook • Volumes stabilised • Premium increases feeding through • Large investment fund • Low costs 1997 1998 JUNE
Slide 31: Another good year
Provident Financial Another good year • Profit before tax up to £145.9m + 6.9% • Earnings per share up to 40.12p +15.4% • Dividend per share up to 22.50p +15.4%
Slide 32: Profit before tax
Provident Financial Profit before tax £m 160 145.9 136.5 140 118.5 120 101.1 100 81.1 80 62.5 60 40.7 40 31.7 36.2 34.1 20 9.3 10.5 10.6 11.6 21.9 30.7 41.1 47.5 54.7 61.0 0 89 90 91 92 93 94 95 96 97 98
Slide 33: Earnings per share
Provident Financial Earnings per share Pence 45 40.12 40 34.77 35 29.31 30 25.17 25 20.32 20 15.72 15 10.68 10 8.55 9.61 9.33 5 2.39 2.69 2.88 3.03 5.53 7.70 10.25 11.77 13.83 15.96 0 89 90 91 92 93 94 95 96 97 98
Slide 34: Dividend per share
Provident Financial Pence Dividend per share 25 22.50 19.50 20 16.50 14.00 15 10.25 10 8.00 4.70 5.00 5.70 5 4.10 1.40 1.60 1.70 1.85 2.38 3.25 5.50 6.50 7.75 8.90 0 89 90 91 92 93 94 95 96 97 98
Slide 35: Borrowings
Provident Financial £m Borrowings 350 315 300 246 254 250 228 199 207 200 187 168 149 149 150 100 50 0 89 90 91 92 93 94 95 96 97 98
Slide 36: Change in borrowings
Provident Financial Change in borrowings 1995 1996 1997 1998 £m £m £m £m Trading cashflow after tax 65 71 83 95 Receivables growth (28) (40) (53) (53) Insurance division dividends 14 7 - 12 Ordinary dividends paid (32) (38) (47) (54) Capital restructuring (inc ACT) - - (41) (108) Movement in borrowi
Slide 37: Outlook
Provident Financial Outlook • Continuing growth in home credit • International expansion • Insurance profit benefiting from premium increases • Board expects another good result in 1999
Slide 38: Typical loan product
Home credit Typical loan product Amount customer borrows £100 All-in service charge includes: interest, administration, weekly home service charges £59 Total fixed amount repayable £159 Contractual repayment terms - 53 weekly instalments of £3, for which the APR is 164.0
Slide 39: Cost comparison
Home credit Cost comparison Provident A high street bank £100 HOME CREDIT LOAN £100 BANK OVERDRAFT OVER 53 WEEKS OVER 52 WEEKS Administration costs £8 per month account fee included £96 pa Interest charges Interest charges at 18.8% pa included £9.40 Total charge: £59 Total charge: £105.40
Slide 40: Cost comparison
Home credit Cost comparison Provident A high street bank No charges for late repayment Unauthorised borrowing charges of £7 per day plus higher rate of interest No charges for arrears letters Cost of £25 per returned cheque 53 weekly home visits Costs of repayment - transport, included in price stam
Slide 41: Adults aged 18-64 (GB)
Home credit Adults aged 18-64 (GB) Millions % AB 7.1 21 C1 10.1 29 C2 8.1 23 D 6.3 18 E 3.1 9 Total 34.7 100
Slide 42: Current users
Home credit Current users • 3 million customers • 11% of C1, C2, D, E adults
Slide 43: Estimated market shares
Home credit Estimated market shares 5% London Scottish 16% Cattles 45% Provident 34% Others
Slide 44: Products
Home credit Products 90% 10%
Slide 45: Customers
Home credit Customers Number 1.418m Women 74% Average weekly repayment £14 Average weekly earnings £128 Unemployed 27% Owner occupiers 25%
Slide 46: Usage profile
Home credit Usage profile Provident National customers average % % Mail order 55 73 Current account 54 82 Savings account 38 65 Credit cards 16 49 High street store cards 18 34 Mortgage 17 42 Hire-purchase 11 8
Slide 47: Self employed agents
Home credit 10,756 self employed agents Women 91% Average number of years service 7 Average number of customers 131 Average weekly collection £1,895 Average weekly earnings £152
Slide 48: Long-term customer relationships
Home credit Long-term customer relationships 27% Less than 1 year 43% 1-5 years 30% 5 years +
Slide 49: Sources of new customers
Home credit Sources of new customers 7% Parents used 11% Contacted Provident 51% Recommended by friend/family 27% Canvassed Knew the agent 4%