Non- Standard Finance Results Announcement. March 2016

Transcription

1 Non- Standard Finance Results Announcement March 2016

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

3 2 Objectives achieved Acquisitions agreed in our three targeted sectors: Home Credit Branch Based Lending Guaranteed Loans Raised 282 million equity in two transactions Secured an 85 million debt facility with the potential to increase to 105m with loan book growth Our businesses have combined illustrative historic annualised pre-tax profits of 16 million All are capable of 20% per annum growth All are targeted on a 20% ROA

4 3 Our three divisions Home credit Branch based lending Guaranteed loans

5 4 Loansathome4u Acquired for 82.4m, a historic pro-forma P/E multiple of 12.5x Established in 1938 Currently number three in home credit market Nationwide coverage with 40 branches 92,000 customers 300 employees and 700 agents Average loan size 300 Customer is C2DE with income of 200 to 300 per week

6 5 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 %

7 6 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

8 7 Loansathome4u Adoption of more prudent accounting policies More conservative approach to recognising impairment established Net carrying value of loan book reduced upon completion from 29.9 million to 22.6 million 13,000 customers written-off reducing active customer count to 87,000 at acquisition m 31 January July 2015 At acquisition after revision to accounting policies Gross Loan Book Less: Impairment Less: Deferred Income No change to underlying cash flow

9 8 Loansathome4u Re-definition of numbers Net Loan Book at acquisition At announcement on 4 July m Following re-definition 22.6m Additional costs from strengthening management team reduce the historical annual run rate of pre-tax profits to 6.4 million Number of Customers 100,000 87,000 Future growth should be measured from this benchmark Number of Agents

10 9 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

11 10 Loansathome4u Regulatory Operating under FCA Interim Licence Application for Permanent Licence submitted to FCA on 30 June 2015 FCA Rate Cap does not apply to Home Credit specifically excluded FCA recently published Consultation Paper on Consumer Vulnerability

12 11 Loansathome4u Outlook Our customers are enjoying slightly higher incomes and lower expenditure Consumer debt levels in home credit are moderate Major market opportunity with the largest competitor having shed 879,000 customers over the last three years, or 48% of its original total 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

13 12 Everyday Loans 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 FCA Change of Control application submitted Completion due by the end of April 2016

14 13 Everyday Loans Established 2006 with top quality management team Leading branch-based unsecured lender 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

15 14 Everyday Loans Results for last twelve months to 30 June 2015 m Net receivables Revenue 42.4 Operating profit 16.2 Return on average assets 17.6% Operating margin 38.2%

16 15 Everyday Loans Outlook Leading market position Continue to pursue 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

17 16 Trusttwo 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

18 17 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

19 18 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

20 19 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 3,022 Post-tax loss (13,070)

21 20 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 1,271 1,751 3,022 Loss after tax 800 (13,870) (13,070) Loss per share (21.25p)

22 21 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 Revenue 38,298 42,446 - Adjusted operating profit 6,410 16,206 (2,684) Interest payable - (3,653) - Profit before tax 6,410 12,553 (2,684) Period end loan book 34, ,522 - Note: all figures above presented before adjustment for NSF accounting policies

23 22 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 review dividend policy in H and, subject to financial performance and funding requirements, intend to commence payment of dividends in H2 2016

24 23 Questions?