Investor & analyst event

156 Pages·2015·5.03 MB·English

by  Gary Thompson

Provident Financial plc
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Investor & Analyst Event –April 2015
Provident Financial plc
Investor & Analyst Event
16 April 2015
Provident Financial plc
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Investor & Analyst Event –April 2015
Introduction
Peter Crook – Chief Executive
Provident Financial plc
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Investor & Analyst Event –April 2015
Today’s schedule
Timing Area Presenter
10.45 – 11.15 Group update Peter Crook
11-15 – 11.45 CCD – Strategy and update on home credit Mark Stevens
11.45 – 12.00 Coffee
12.00 – 13.00 CCD – Satsuma and glo (including Q&A) Hemant Patel
13.00 – 14.00 Lunch
14.00 – 15.15 Moneybarn (including Q&A) Peter Minter/Shamus Hodgson/Simon Law
15.15 – 15.30 Coffee
15.30 – 16.15 Vanquis Bank (including Q&A) Michael Lenora/Bob van Breda
16.15 – 16.30 Concluding remarks Peter Crook
16.30 – 18.00 Drinks reception
Provident Financial plc
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Investor & Analyst Event –April 2015
Leading specialist non-standard lender in the UK
High returns are available to companies with sustainable business models
1. We focus solely on serving the non-standard credit market:
–
We provide access to credit for those who might otherwise be financially excluded
–
We have over 130 years of experience in serving non-standard consumers
2. We lend responsibly, meeting the specific needs of consumers in the non-standard market:
–
We offer simple and transparent products with no hidden charges
–
We have bespoke underwriting procedures to assess affordability and manage credit risk
3. We have a tailored business model to serve non-standard consumers:
–
We maintain close contact with our customers throughout our relationship with them
–
We have active and personalised approaches to dealing with customers who get into financial
difficulty, including a range of forbearance measures
4. We have a robust funding model:
–
We have short-duration assets funded by a diverse range of longer duration liabilities
Provident Financial plc
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Investor & Analyst Event –April 2015
Business attributes
We apply exacting standards in allocating capital to organic and acquisition opportunities
1. High returns
2. Sustainable business
3. Growth potential
4. Strong market position
5. Good management and cultural fit
Provident Financial plc
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Investor & Analyst Event –April 2015
Robust financial model
Alignment of dividend policy, gearing and growth
High returns businesses
Dividend Gearing Growth
policy ≤ 3.5x versus covenant Supports receivables growth
Cover ≥ 1.25x of 5.0x of £230m+
Provident Financial plc
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Investor & Analyst Event –April 2015
Our businesses
High return businesses with attractive growth potential
Product Established Profit ROA1 Growth potential
Credit cards 2002 £151m2 c.15%2 Continued strong medium-term
growth potential
High returns business with large
Home credit 1880 £104m2,3 c.18%2,3 market share but limited growth
potential
CCD Online loans Start-up Strong growth potential
in 2013
Guarantor loans 2014 Pilot
Established business with strong
Vehicle finance 1992 £15m4 c.13%4
growth potential
1 Profit before interest after tax as a percentage of average receivables
2 Based on the year ended 31 December 2014
3 Profits and returns for CCD as a whole
4 Based on pro forma results for the year ended 31 December 2014 after applying the group’s lower cost of funding to pre-acquisition results
Provident Financial plc
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Investor & Analyst Event –April 2015
Delivering consistent shareholder value
Strong financial performance and shareholder returns
Earnings per share
140 ›
We have generated strong, profitable growth
120
since demerger and through the crisis
100
ecn › Adopted a progressive dividend policy since
eP 80
2011 based on distributing up to 80% of post-
60
tax earnings
40
2009 2010 2011 2012 2013 2014
›
We have maintained our gearing level below
Dividends per share
100 the maximum target level of 3.5 times
90
›
Current market capitalisation of c.£4.3bn:
80
e
cn 70 – Generated TSR of around £25 per share
e
P
60
post demerger (annualised: c.19%)
50
40 – We generate sufficient capital to support
2009 2010 2011 2012 2013 2014
planned growth and business
Gearing
development without compromising our
5
progressive dividend policy
4
3
s
e
m
iT 2
1
-
2009 2010 2011 2012 2013 2014*
* Pro forma gearing, excluding the acquisition of Moneybarn
Provident Financial plc
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Investor & Analyst Event –April 2015
The UK non-standard credit market
Uncertainty remains as to the future size and shape of the UK non-standard credit market
but this provides the group with significant opportunity
Pre-2000 2000-2007 2007-2012 2012 onwards
Expansion of Underlying issues emerge Post crunch short-term fix Regulated future
access to credit
14
• Secured and overdraft lending rapidly • Regulators take action on
curtailed, unsecured lenders exit inappropriate payday model
12 • Non-standard consumers have few • New online model emerges
options to fill remaining real with more transparent pricing
)
n
b underlying credit needs and sustainable repayment
£
( schedules
s 10 • Payday lending emerges to offer short-
e
cn Pre 2000 term fix for consumers without • Limit to friends and family
a
v increased help from friends/family capacity and alternatives
d • Large > £12bn annual non-standard
a encourages growth of
s 8 unsecured instalment market develops
so guarantor loans
r served by mainstream and specialist branch
g
d and direct/phone models • Potential to grow back towards
e
ru 6 • Low headline prices with significant add-ons including PPI pre-credit crisis levels of
ce c.£10bn as supply returns
sn • Consumers typically borrowing a few thousand pounds over a
u
d few years, often via brokers
e 4
ta 2000 –2007
m
it • Unsecured credit withdrawn progressively as issues arise with
s
E mainstream and specialist models including high loss rates
2
• Strong growth in secured lending on the back of rapid house price
inflation. Together with strong growth in overdraft availability helps
to fill the gap
-
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Traditional sub-prime unsecured instalment loans New style online non-standard instalment loans Payday loans
Source: PFG analysis based on Datamonitor, OFT, FCA, CMA, BBA, FLA, statutory filings, company announcements and press
Provident Financial plc
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Investor & Analyst Event –April 2015
The UK non-standard credit market
The group’s businesses serve a large part of the non-standard market
£150,000
Mortgage
£75,000
£25,000 Secured
Car finance 2ndcharge
£5,000 Unsecured loan/guarantor
Rent to own
e £2,500
z
i
s Credit card
£1,000 Logbook/Bill of sale
n
a Short-term unsecured loan Authorised
ol £500 Mail order credit overdraft
l Payday loan Home credit cash loan
a
c £350 Unauthorised
i
p overdraft
y
T
£250
Pawn/Sale
£150
& buy back
Home credit shopping
£100
vouchers
£50 <1 1-3 6 1 year 18 2 years 3 years 4 years 15 years 25 years None/
month months months months revolving
Cash-based Asset-based Typical contractual term of credit