Non-Standard Finance plc Post-results roadshow May 2016
1 NON-STANDARD FINANCE – INVESTOR ROADSHOW 4 MAY 2016 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
2 NON-STANDARD FINANCE – INVESTOR ROADSHOW 4 MAY 2016 Large market with significant growth potential Market composition Estimated 12 million UK adults do not meet the lending criteria of mainstream lenders or choose not to borrow from them 100 c.8% c.15% of total work force paid minimum of total work force self-employed 80 wage and below 1 Prime c. 33 million Over 500,000 60 c.3% consumer County Court of labour force recently arrived migrants 3 Judgements 2 Estimated market size 40 Secured lending 12m to March 2014 (£bn) Unsecured lending 12m to March 2014 (£bn) Near prime c. 7 million £70 £78 20 £117 £130 Addressable population c. 12 million Non-standard Standard Non-standard Standard 0 Source: Competitor analysis, Bank of England, ONS, Euromonitor, CML, Registry Trust Limited, Management estimates Notes: 1 LFS methodology, 2013 2 Year to Q3 2014 2 2 3 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
3 NON-STANDARD FINANCE – RESULTS ANNOUNCEMENT 4 MAY 2016 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
4 NON-STANDARD FINANCE – RESULTS ANNOUNCEMENT 4 MAY 2016 Favourable business environment Income distribution Workforce in self-employed occupation Average income (£) 350,000 14.5 14.1 16,000 300,000 14.0 250,000 13.5 248,480 14,000 200,000 13.0 (£) (%) 12,000 150,000 12.5 106,003 100,000 12.0 10,000 75,236 10,764 50,000 11.5 12,993 11.0 8,000 0 2003 2005 2007 2009 2011 2013 1990 1993 1996 1999 2002 2005 2008 2011 Self employed (%) Median self-employed income Bottom 90% Top 10% Top 5% Top 1% Source: World Top Incomes database Source: Labour Force Survey ONS Economic migrant flows Net migration to the UK and migrant labour force statistics (%) 15.2 140 300,000 16.0 250,000 120 12.0 No. of people 200,000 9.3 110.8 (%) (%) 150,000 8.0 100 100,000 3.2 4.0 80 77.7 50,000 0 0.0 60 2001 2003 2005 2007 2009 2011 2013 2006 2007 2008 2009 2010 2011 2012 2013 2014 2 Net migration Foreign-born Foreign-national Recent arrival 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 2 2001 – 2011 based on revised net migration estimate, 2012 – 2013 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
5 NON-STANDARD FINANCE – RESULTS ANNOUNCEMENT 4 MAY 2016 NSF is well-placed to exploit this opportunity Two acquisitions have secured leading market positions in home credit and unsecured branch- based 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
6 NON-STANDARD FINANCE – RESULTS ANNOUNCEMENT 4 MAY 2016 2015 “A transformational year in which we achieved all the strategic objectives set out at IPO”
7 NON-STANDARD FINANCE – RESULTS ANNOUNCEMENT 4 MAY 2016 2016 “Operational improvements through diligent execution of our growth plans with the aim of initiating dividend payments in H2 2016”
8 NON-STANDARD FINANCE – RESULTS ANNOUNCEMENT 4 MAY 2016 Our three divisions Home credit Branch based lending Guaranteed loans
9 NON-STANDARD FINANCE – RESULTS ANNOUNCEMENT 4 MAY 2016 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
10 NON-STANDARD FINANCE – RESULTS ANNOUNCEMENT 4 MAY 2016 Loansathome4u’s products The examples below are per £100 borrowed Product Charges Total Payable Weekly rate APR Product name % Loan Book 2015 24 week loan £60.00 £160.00 £6.67 732.7% Ideal 5% 33 week loan £65.00 £165.00 £5.00 433.4% Popular 35% 42 week loan £68.00 £168.00 £4.00 296.8% Select 43% 50 week loan £75.00 £175.00 £3.50 254.5% Jubilee 11% 75 week loan £87.50 £187.50 £2.50 163.8% Gold 3% Hire Purchase & - - - - - 3% Vouchers
11 NON-STANDARD FINANCE – RESULTS ANNOUNCEMENT 4 MAY 2016 Loansathome4u Immediate actions Installed “best in class” controls and 1 2 Strengthened management procedures Appointed Mark Bardsley as CEO Re-written the Compliance, Regulatory, Appointed: Operations and HR procedures ‒ Risk Director – Lindsay Bainbridge Adopted more prudent approach to recognising ‒ Head of Credit Risk – Jonathan Hague 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
12 NON-STANDARD FINANCE – RESULTS ANNOUNCEMENT 4 MAY 2016 Loansathome4u Growth since acquisition Customers Strategic initiatives driving growth New office opened in Kirkcaldy with further 92,000 new openings in Ashington, Newton Aycliffe and Manchester in H1 2016 87,000 Aug-15 Feb-16 Agents Loan book 703 28.4 557 22.6 Aug-15 Feb-16 Aug-15 Dec-15
13 NON-STANDARD FINANCE – RESULTS ANNOUNCEMENT 4 MAY 2016 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
14 NON-STANDARD FINANCE – RESULTS ANNOUNCEMENT 4 MAY 2016 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
15 NON-STANDARD FINANCE – RESULTS ANNOUNCEMENT 4 MAY 2016 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
16 NON-STANDARD FINANCE – RESULTS ANNOUNCEMENT 4 MAY 2016 Everyday Loans Results for twelve months to 31 December 2015 £m Net receivables 114.6 Revenue 44.3 Adjusted operating profit 17.0 Return on average assets 16.2% Operating margin 38.3%
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