Non-Standard Finance plc. Post-results roadshow May 2016

Transcription

1 Non-Standard Finance plc Post-results roadshow May 2016

2 1 NON-STANDARD FINANCE INVESTOR ROADSHOW A compelling investment case 1. Non-standard finance is a large segment of the UK economy with significant growth potential 2. High barriers to entry exist (regulation and compliance, significant funding requirements, established infrastructure and management expertise) 3. Current business environment provides a positive backdrop 4. NSF is well-capitalised and has secured leading positions in home credit and branch-based lending and has a major opportunity in guaranteed loans 5. Current trading performance confirms strong growth while operational leverage offers further potential to outperform 6. Recent share price weakness creates an attractive investment opportunity

3 2 NON-STANDARD FINANCE INVESTOR ROADSHOW Large market with significant growth potential Market composition 100 Estimated 12 million UK adults do not meet the lending criteria of mainstream lenders or choose not to borrow from them 80 c.8% of total work force paid minimum wage and below 1 c.15% of total work force self-employed 60 Prime c. 33 million Over 500,000 consumer County Court Judgements 2 c.3% of labour force recently arrived migrants 3 40 Estimated market size Secured lending 12m to March 2014 ( bn) Unsecured lending 12m to March 2014 ( bn) Near prime c. 7 million 20 Addressable population c. 12 million Non-standard Standard Non-standard Standard Source: Competitor analysis, Bank of England, ONS, Euromonitor, CML, Registry Trust Limited, Management estimates Notes: 1 LFS methodology, Year to Q Latest estimate as at 2013 N O N - S T A N D A R D F I N A N C E P L C 2

4 3 Significant barriers to entry Consumer credit is strictly regulated by the FCA Loansathome4U, Everyday Loans and Trusttwo are operating under FCA Interim Licences NSF s acquisition of Everyday Loans already approved by FCA Full licensing expected in 2016 Access to capital is key to long-term success Raised 282 million equity in two transactions with a blue-chip investor base Secured an 85 million debt facility with the potential to increase to 105m with loan book growth The financial crisis prompted a reduction in supply with the withdrawal by many providers, reducing the pool of expertise to operate in the non-standard finance market NSF has secured a highly experienced management team

5 No. of people 4 Favourable business environment Income distribution Workforce in self-employed occupation ( ) Average income ( ) 350, , , , , ,000 50, Bottom 90% Top 10% Top 5% Top 1% Source: World Top Incomes database Economic migrant flows Net migration to the UK and migrant labour force statistics (%) 300, , , , ,000 50, , ,003 75,236 12, (%) 8.0 Net migration Foreign-born Foreign-national Recent arrival (%) , Self employed (%) Source: Labour Force Survey ONS (%) Median self-employed income Bank credit (100 = Jan-06) Other credit (100 = Jan-06) Source: Bank of England Notes: 1 Calculated based on a weekly inflation-adjusted median income of 207 per week (in 2013), assuming 52 weeks in the year based on revised net migration estimate, based on original net migration estimate 3 MFIs lending includes sterling credit card lending, sterling overdrafts and other unsecured sterling loans and advances to individuals; Other consumer credit lenders' comprise non-bank credit grantors and specialist mortgage lenders extending consumer credit, which includes second charge mortgages 16,000 14,000 12,000 10,000 8,

6 5 NSF is well-placed to exploit this opportunity Two acquisitions have secured leading market positions in home credit and unsecured branchbased lending with a major opportunity in guaranteed loans Highly experienced management team led by John van Kuffeler NSF now has a robust platform with national coverage: Total loan book of c. 140m Pro forma 2015 revenue of over 80m Pro forma 2015 PBT of c 16m Modest level of gearing with headroom to fund substantial loan book growth Strong current trading underpins targeted growth rates 20% loan book growth 20% ROA Aspiration to initiate dividend payments in H2 2016

7 A transformational year in which we achieved all the strategic objectives set out at IPO

8 Operational improvements through diligent execution of our growth plans with the aim of initiating dividend payments in H2 2016

9 8 Our three divisions Home credit Branch based lending Guaranteed loans

10 9 Loansathome4u Acquired for 82.4m, a historic pro-forma P/E multiple of 12.5x Established in 1938 with a top 3 position in terms of customers: c.1.0m c.0.2m c.0.1m Others c.0.5m Nationwide coverage with 40 branches 300 employees and 750 agents Average loan size 300, net receiveables of 28.4m Customer is C2DE with income of 200 to 300 per week

11 10 Loansathome4u s products The examples below are per 100 borrowed Product Charges Total Payable Weekly rate APR Product name % Loan Book week loan % Ideal 5% 33 week loan % Popular 35% 42 week loan % Select 43% 50 week loan % Jubilee 11% 75 week loan % Gold 3% Hire Purchase & Vouchers %

12 11 Loansathome4u Immediate actions 1 Strengthened management Appointed Mark Bardsley as CEO Appointed: Risk Director Lindsay Bainbridge Head of Credit Risk Jonathan Hague 2 Installed best in class controls and procedures Re-written the Compliance, Regulatory, Operations and HR procedures Adopted more prudent approach to recognising impairment Interim Compliance Director Paul Gill Commercial Director Chris Graham Finance Director Jono Gillespie National Operations Manager Neil Lewis Head of Central Operations David Thompson

13 12 Loansathome4u Growth since acquisition Strategic initiatives driving growth Customers New office opened in Kirkcaldy with further new openings in Ashington, Newton Aycliffe and Manchester in H ,000 92,000 Aug-15 Feb-16 Agents Loan book Aug-15 Feb-16 Aug-15 Dec-15

14 13 Loansathome4u Outlook Our customers are enjoying slightly higher incomes and lower expenditure Consumer debt levels in home credit are moderate and impairments steady Major market opportunity with the largest competitor having shed 879,000 customers over the last three years, or 48% of its original total Achieving receiveables growth of 20% with ROA of 20% plus Will benefit from operational gearing as growth accelerates Opportunity to raise additional debt against Loansathome4u loan book Medium term target is to double the number of customers and receivables

15 14 Everyday Loans Transaction summary Acquisition signed and agreed on 4th December 2015 Enterprise value of 235m funded by: Placing and open offer: 160m 20m of additional equity to be issued to STB as part of the consideration at completion Debt: 85m facility with c. 65m expected to be drawn on day 1, and potential to increase to 105m as loan book grows Completion on 13 th April 2016

16 15 Everyday Loans Business overview Established 2006 with top quality management team Leading branch-based unsecured lender with 114m receiveables Nationwide coverage with 36 offices Key differential is face-to-face meetings in branch 35,000 customers 300 employees Loans of 1,000 to 15,000 at 19.9% to 199% APR Average loan size is 3,300 over 31 months with monthly repayments of 189 Average customer annual income is approx. 24,000

17 16 Everyday Loans Results for twelve months to 31 December 2015 m Net receivables Revenue 44.3 Adjusted operating profit 17.0 Return on average assets 16.2% Operating margin 38.3%

18 17 Everyday Loans Market background In 2006, the six largest branch-based lenders had 5.3bn receiveables Following the financial crisis, all closed their branch-based networks and these receiveables have reduced to 0.3bn Everyday Loans is serving a credit-starved market and is growing at 26% Only competitor of any size is Oakham with 20m of receiveables

19 18 Everyday Loans Outlook Leading market position in a large underserved market Continue with c. 20%+ growth rate on existing business Return to higher APR products with higher margins Programme of new branch openings Medium term target is to double the number of customers and receivables

20 19 Trusttwo Business overview Established in 2014 An up-and-coming new entrant in the guaranteed loan market 2,000 customers Net receivables approximately 8m today Customers generally young limited or impaired credit Loan is guaranteed by family member or friend

21 20 Trusttwo Future plans Hire senior management Increase APR from 39.9% to 49.9% Start major growth phase to benefit from estimated 20% growth per annum Medium term target of 50m receivables at 20% ROA

22 21 Non-Standard Finance overall outlook Benign market conditions for our customer base with marginally higher income and lower outgoings Targeting loan book growth of around 20% for all three divisions Enhanced risk-based pricing as customer base grows Additional debt funding for Loansathome4u to support loan book growth Intend to commence payment of dividends at Interim 2016, subject to financial performance and funding requirements

23 22 NSF has substantial institutional support Cornerstone long-only investors: Invesco Woodford Marathon Growth funds: Tosca GLG JO Hambro Other long-only investors Jupiter Legal & General Standard Life Aviva British Steel Pension Fund City of Bradford Metropolitan DC Wealth managers Quilter Cheviot Hargreave Hale

24 23 Appendices

25 24 1. Non-Standard Finance financial results for period to 31 Dec 2015 Statutory financials for the period to 31 Dec 2015 include: 13 months non-trading IPO costs Costs of two large transactions Non-cash accounting adjustments Only five months trading from one acquisition

26 25 1. Non-Standard Finance results for the period to 31 Dec Adjusted operating profits for Loansathome4u (5 months) 2,143 Central costs (since IPO) (2,684) Exceptional restructuring costs (593) Fees and costs of acquisitions (5,542) Non-cash accounting adjustments (9,486) Pre-tax and interest loss (16,162) Interest 70 Tax credit 2,561 Post-tax loss (13,531)

27 26 1. Non-Standard Finance results for the period to 31 Dec Before fair value adjustments, amortisation of acquired intangible and exceptional items Fair value adjustments, amortisation of acquired intangible and exceptional items Period from incorporation to 31 December 2015 Revenue 14,657 (5,456) 9,201 Cost of sales (3,858) - (3,858) Administrative expenses (11,340) (4,030) (13,370) Adjusted operating loss (541) (9,486) (10,027) Exceptional costs - (6,135) (6,135) Net interest income and charges Loss before tax (471) (15,621) (16,092) Tax 737 1,824 2,561 Loss after tax 266 (13,797) (13,531) Loss per share (22.0p)

28 27 2. Illustrative enlarged group results Illustrative enlarged group results include: Loansathome4u to 31 January 2015 Everyday Loans twelve months to 30 June 2015 NSF central costs to 31 December 2015 Estimated interest costs on 65m debt 000 Loansathome4u 12 months to 31 Jan 15 Everyday Loans 12 months to 30 Jun 15 Central costs 8 Jul 14 to 31 Dec 15 Illustrative enlarged group Revenue 38,298 42,446-80,744 Adjusted operating profit 6,410 16,206 (2,684) 19,932 Interest payable - (3,653) - (3,653) Profit before tax 6,410 12,553 (2,684) 16,279 Period end loan book 34, , ,144 Note: all figures above presented before adjustment for NSF accounting policies