Management Roadshow Presentation
Transcript of Management Roadshow Presentation
Accessing the growth in South Africa’s emerging financial sectorMay 2012
Disclaimer
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN
1. This document has been prepared by Transaction Capital Proprietary Limited (“Transaction Capital” or the “Company”) and comprises the slides for a presentation to syndicate research analysts concerning Transaction Capital, its subsidiaries and associates (together with Transaction Capital, the “TC Group”), the proposed offering by Transaction Capital, of its ordinary shares (the “Offer”) and the proposed listing on the securities exchange operated by the JSE Limited.
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Disclaimer (continued)
7. This document may contain certain “forward‐looking statements” regarding beliefs or expectations of the TC Group, its directors and other members of its senior management about the TC Group’s financial condition, results of operations, cash flow, strategy and business and the transactions described in this document. Forward‐looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The words “believe”, “expect”, “anticipate”, “intend”, “estimate”, “forecast”, “project”, “will”, “may”, “should” and similar expressions identify forward‐looking statements but are not the exclusive means of identifying such statements. Such forward‐looking statements are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside the control of the TC Group and are difficult to predict, that may cause the actual results, performance, achievements or developments of the TC Group or the industries in which it operates to differ materially from any future results, performance, achievements or developments expressed by or implied from the forward‐looking statements. Each member of the TC Group expressly disclaims any obligation or undertaking to provide or disseminate any updates or revisions to any forward‐looking statements contained in this document.
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Agenda
Description Page
1. Transaction Capital overview 52. Investor value proposition 83. Conclusion 27
Transaction Capital – providing focused financial services to the growing Southern African market
Financial information as at 30 September 2011(a)
5
(a) Group Executive Office contributes R34m to income and R(19)m to PBT(b) Excludes discontinued operations (Mortgage Capital)Note: Income defined as interest and other similar income plus non‐interest revenue throughout the document
LendingIncome R2,499m
PBT R332m
ServicesIncome R1,072m(b)
PBT R141m(b)
Transaction Capital (Pty) LimitedLoan book R6,720m Income R3,606m(a) Profit Before Tax (“PBT”) R454m(a)
Employees: 4,305 Group; 43 Head Office
Asset‐backed lendingLoan book R4,011mIncome R1,092m
PBT R137m
Unsecured lending Loan book R2,635mIncome R1,407m
PBT R195m
Credit servicesEBITDA R109mIncome R635m PBT R91m
Payment servicesEBITDA R108mIncome R437mPBT R50m
Provider of working capital through invoice discounting & commercial debtors management(57 Employees)
Financier of independent SME minibus taxi operators(354 Employees)
Provider of unsecured personal loans to emerging middle income clients(964 Employees)
Collector of distressed accounts receivables (agency & principal) (2,451 Employees)
Credit risk consultancy services & software resellers (FICO)(67 Employees)
ATM Solutions: owner & operator of off‐bank premises ATMs and EFT terminalsDrawCard: early stage developer and issuer of pre‐paid debit card products(369 Employees)
Evolution of Transaction Capital
6
Entrepreneurial shareholders identified & acquired businesses operating in alternative segments
With a view to driving asset & profit growth, businesses were operated independently by founder managers (often minorities) with directive short‐term oversight by the controlling shareholders
A formidable debt capital markets team ensured adequate funding, from a variety of capital pools, which were attracted to focused assets & bespoke structures
As the entities achieved traction & various degrees of organisational maturity, it became clear that their agglomeration within a group could result in scale efficiencies & incremental value creation
Transaction Capital was formed in late 2006 & comprised 13 companies by end FY2008, its first full financial year
In June 2008 Lamberti was appointed Executive Chairperson, introducing discipline & best practice to strategy, structure, leadership, risk management, reporting, governance & compliance, while driving performance, evaluating the efficacy of the portfolio & staffing a corporate office
In pursuit of a coherent non‐deposit taking lending & services group, 6 companies were sold/wound down, 5 bought/started & 5 merged resulting in a 4 division, 6 company group. Of the 6 incumbent CEOs, 4 were appointed during this period
Significant effort and expenditure was devoted to the qualitative & quantitative improvement of leadership, the stabilisation of information systems, & the establishment of intra group collaboration processes
From the start of the 2011 financial year Transaction Capital embarked on a new phase of its development, with strategies & plans to deliver predictable high quality earnings growth & superior comparative performance, based on an embedded sustainability & societal relevance.
Entrepreneurial roots Consolidation for scale Performance for value
Phase I Phase II Phase III
2007 – 2010 2011 +1990 – 2006
Entrepreneurial record of identifying & developing alternative asset classes
Businesses which have achieved scale & strong positions in selected segments in the South African financial services sector
A deep understanding of credit risk & the development of specialist risk assessment practices resulting from a focus on niche markets for almost a decade
A diversified flow of interest & non‐interest income generated by complementary lending and services businesses
A highly qualified & experienced professional leadership group Proven expertise in debt capital funding Focused customer propositions, distribution channels &
specialised expertise are key drivers of the businesses’ performance
Societal relevance in the development & empowerment of emerging consumers and businesses
Core competencies & Capabilities
Seek out new growth opportunities to leverage existing capabilities & cross sell
Sustain long‐term funding structures to support the group’s growth
Invest in skills a & information technology to create stakeholder value & to manage & mitigate risk
Enhance returns through operational excellence, intra‐group value creation & governance
Target, consummate & integrate accretive acquisitions
Transaction Capital’s strategic priorities
Agenda
Description Page
1. Transaction Capital overview 52. Investor value proposition 83. Conclusion 27
(1.1)%(6.7)%
(0.6)%
32.5%
(15.0)%
(5.0)%
5.0%
15.0%
25.0%
35.0%
Banks Non‐bank vehiclefinanciers
Retailers Other creditproviders
Growth rates in share of new credit (avg 2011 vs. avg of 2010)
4.2
2.8
2.9 3.2
3.2
3.1
2.9
1.4
3.5 3.7 4.0
3.6
3.2
3.3
3.1
3.1
1.3 2.
3
3.5 4.
5
5.7 6.0
4.5
3.0
0.8 1.
9 2.4
4.7 5.
6
6.9
3.6
2.8
LSM 1 LSM 2 LSM 3 LSM 4 LSM 5 LSM 6 LSM 7 LSM 8
Adults (m
)
1994 2000 2005 2010
Supportive backdrop indicates growthpotential in TC’s businesses
8Source: South African Advertising Research Foundation, SARB, NCR, CBM
Ongoing migration through the LSMs
New credit granted (2010 vs 2011) driven by specialist lenders
(81.0)% (32.1)% (17.2)% 46.9% 75.0% 122.6% 24.1% 100.0%
Credit demand remains robust
Positive trends in household indebtedness
0.0
15.0
30.0
45.0
60.0
75.0
90.0
0
4
8
12
16
20
2004 2005 2006 2007 2008 2009 2010 2011
Debt servicing cost‐to‐income ratio (RHS)Insolvencies (smoothed)Household debt‐to‐income ratio (RHS)
(%)
(R'00)
(20)
0
20
40
60
80
100
120
(5)%
0%
5%
10%
15%
20%
25%
30%
Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11
(R'bn)
Unsecured lending Quarterly yoy growth in millions of consumers seeking credit
A specialised portfolioBusiness model centering on control & value accretive collaboration without diluting divisional focus
9
Board of directors – Direction & Governance
Group executive office – Growth, sustainability and management
Strategy & portfolio
Financial structure & capital management
Risk criteria & management
Executive calibre, development &
succession
Accounting & budgetary control
Divisions – Operating performance
Asset‐backed lending Unsecured lending Credit services Payment services
Group accretive value creation processesCollaboration forumsBest practice bench‐marking, skills transfer and functional co‐ordination through Information, communication and technology
forum Human capital forum Credit forum BBBEE champions forum
Shared servicesProvision of services at lower cost than can otherwise be obtained Debt capital markets Internal audit Compliance Disaster recovery
Inter divisional transactions PIC Solutions: Consulting to SA Taxi; Bayport;
ATM Solutions MBD CS: Collections and back up service
provider to SA Taxi; Bayport
Investor relations & public relations
Active intervention
Vehicle finance leases
91%
Repossessions5%
Discount invoices
4%
10
Asset‐backed lending: SA Taxi / Rand Trust
Business*
Specialised lender to minibus taxi operators with c. 34% market share of financed minibus taxis, with c. 22,000 loans
Lending to small and medium enterprises (SMEs) Distributes through a national network of affiliated and non‐affiliated dealerships Maintains legal ownership of vehicle Maximum risk exposure of loan to value base of c. 85%
Market*
Growth drivers
Taxis account for 80% of all public transport trips, with c. 19m minibus taxi commuters c. 220,000 vehicles on the road, c. 65,000 thereof are financed Industry regulated by the Ministry of Transport
Specialist provider of working capital finance to SMEs– Acquires invoices at a discount for its own account– Manages commercial debtors on behalf of clients
Proprietary credit assessment process and administration techniques Targets small debtors books not typically served by traditional banks Discounted invoices of R176m as at 31 March 2012
Rand Trust
SA Taxi
Profit drivers Increase in number of vehicles requiring financing Impairments as a result of reduction in vehicle quality are being addressed Taximart refurbishes repossessed taxis to enhance their value ahead of sale
Growing urbanisation and increased use of public transport Government incentives in place to encourage the replacement of old taxi vehicles
– Taxi Recapitalisation Program Access to cheaper Chinese vehicles has grown the market Origination of new business from higher quality existing clients Management of refurbishment and re‐sale of repossessed vehicles
*Market data based on management estimates
Differentiating factors / core competencies
Sole focus on minibus taxi industry with an in‐depth understanding of the industry, client base & credit dynamics
Credit scoring methodology combining taxi route profitability analysis, traditional individual credit scoring & the vehicle collateral value allowing SA Taxi to provide finance to those not traditionally served by more mainstream financing players
Focus on increased efficiency & greater through put at Taximart as a key part of the loss & risk mitigation strategy
Collections methodologies designed specifically for the taxi industry including the ability to repossess efficiently
Income PBT Assets
30% 30% 47%
Contribution Analysis, 30 September 2011
R 1,092m R 137m R 4,683m
Loans and advances (31‐Mar‐12)
PBT development (R’m)
R 4,370m
206
103 137
72 75
2009A 2010A 2011A 1H11 1H12
2009 2010 2011 1H11 1H12
Non‐performing loans % 22.3% 21.1% 27.5% 24.1% 29.4%
Provision % Gross loans and advances 2.2% 2.9% 4.2% 3.8% 4.1%
Non‐performing loan coverage 10.0% 13.8% 15.2% 16.0% 14.1%
Credit loss ratio 2.5% 3.9% 6.0% 5.7% 5.8%
Impairment provision % repossessions 17.4% 21.6% 29.7% 22.9% 29.1%
Asset‐backed lendingAsset Quality & Key metrics
11
Loan book – SA Taxi Origination – SA Taxi2009 2010 2011 1H11 1H12
Value of vehicle loans originated (R’m) 1,102 1,325 1,415 862 784
New/existing client (vehicle loans, value) 76/24 76/24 77/23 78/22 77/23
New (non‐repo) vehicle originations (R’m) 1,120 1,182 1,058 665 581
% Premium / Entry Level (new vehicle disbursements, value) 84/16 69/31 79/21 77/23 90/10
Rand Trust
2009 2010 2011 1H11 1H12
Net loan portfolio (R’m) 55 137 135 125 176
Growth n/a 149% (1)% n/a 41%
Average debtor days outstanding 45 45 41 51 44
2009 2010 2011 1H11 1H12
Total number of loans (vehicles) 18,222 20,914 21,673 21,896 21,896
Gross loans and advances (R’m) 3,027 3,807 4,045 4,093 4,375
Impairment provision (R’m) (68) (111) (169) (158) (181)
Loans and advances (R’m) 2,959 3,696 3,876 3,936 4,194
Growth n/a 25% 5% n/a 7%
% Leases / Repossessions (Loans and advances, value) 98/2 96/4 96/4 95/5 95/5
% Premium / Entry Level (gross loans and advances, value) 82/18 77/23 78/22 77/23 80/20
Financial – SA Taxi2009 2010 2011 1H11 1H12
Net interest margin 13% 11% 12% 12% 12%
Cost‐to‐income 39% 54% 42% 43% 43%
Net interest income 351 369 494 249 259
Non‐interest revenue 93 142 156 77 89
PBT (R’m) 206 103 137 72 75Equity plus Group debt less goodwill % Total assets less cash and goodwill
10% 10% 18% 14% 19%
Credit performance – SA Taxi
129 195
76 97
8 monthsto 30 Sep2010 A
2011A 1H11 1H12
12
Unsecured lending: Bayport
Growing demand for unsecured credit in SA due to economic growth & tightening asset backed credit Historical payment record allows increased exposure to current customer base driving improved credit
quality Debt consolidation products driving up average loan sizes & term Opportunity to cross sell through existing product distribution channels i.e. to cellular clients Well legislated maturing market stimulating growth
Business*
Growth driversBa
yport
Interest rate levels impact the net interest margin achieved Contribution of non‐interest revenue, such as insurance commissions & fees Risk adjusted yield is impacted by impairments
Profit drivers
Unsecured loans to the emerging middle‐income consumer segment Platform of 57 branches & 33 kiosks in South African post offices 1,953 mobile sales consultants working on commission Credit approval is relatively fast due to centralised process Most collections are done through debit orders, supported by 3 call centres Acquired by Transaction Capital in February 2010, however TC founders involved since 2006 Bayport has an asset backed note program (Bayport Securitisation (RF) Limited), listed on the JSE
SA’s unsecured lending market amounted to R113 billion as at December 2011 Bayport is estimated to have a 3% market share (Q4 2011)(a) Major competitors are African Bank, Capitec, Old Mutual & the big 4 South African retail banks Traditional SA retail banks also focus on Bayport’s selected market, but are less specialised
Market*
Growth through targeting selected risk segments Distribution model combining mobile consultants & branch network to access clients & provide a
direct personalised service Credit risk management through in depth understanding of market & risk dynamics Existing clients are targeted for cross‐selling e.g. cellular & insurance products
Differentiating factors / core competencies
Loans and advances (31‐Mar‐12)
Retail loans92%
Cellular subscription agreements
8%
PBT development (R’m)
Income PBT Assets
Contribution Analysis, 30 September 2011
39% 43% 35%
R 1,407m R 195m R 3,523m
R 3,274m
*Market data based on management estimates(a) Bayport loan book at 31 March 2012
2009 2010 2011 1H11 1H12Net interest margin n/a 24%* 21% 21% 21%
Cost‐to‐income n/a 56%* 54% 53% 55%
Net interest income n/a 270 * 524 233 356
Non‐interest revenue n/a 358 * 609 278 337
PBT (R’m) n/a 129* 195 76 97 Equity plus Group debt less goodwill % Total assets less cash and goodwill n/a 25%* 32% 34% 34%
Unsecured lendingAsset Quality & Key metrics
13
Loan book
* Includes financials from 1 February 2010 to 31 September 2010Note: All numbers for 2010 include period from 1 October 2009 to 31 September 2010 unless otherwise indicated.
Unsecured lending, vintage curve
2009 2010 2011 1H11 1H12
Number of loans 136,957 202,943 257,879 229,988 288,021
Gross loans and advances (R’m) n/a 1,977 3,026 2,499 3,836
Growth % n/a n/a 53% n/a 54%
Average loan balance n/a 9,739 11,725 10,867 12,935
Average remaining term (months, value) 25 27 25 26 28
% Retail loans / Cellular (loans and advances, value) 92/8 93/7 91/9 92/8 92/8
Number of agents 1,496 1,671 1,575 1,539 1,953
Origination2009 2010 2011 1H11 1H12
Number of loans originated (units) 98,471 126,763 155,887 76,570 99,196Disbursements (R’m) 836 1,325 1,850 895 1,356Growth % n/a 58% 40% n/a 52%Approval rate % 17% 16% 17% 17% 12%Average disbursement 8,488 10,451 11,869 11,687 13,667Average term (months, value) 35 36 35 34 43 New/existing client (value) 72/28 60/40 52/48 51/49 42/58
Credit performance
2009 2010 2011 1H11 1H12Non‐performing loans % gross loans and advances n/a 22.0%* 24.3% 21.3% 28.2%
Provision % Gross loans and advances n/a 11.8%* 12.9% 11.8% 15.2%
Provision % Non‐performing loans n/a 53.6%* 53.2% 55.6% 53.8%
Credit loss ratio n/a 13.2%* 13.0% 14.5% 12.6%
Financial
Collections principal38%
Revenue agency44%
Other18%
14
Credit services: MBDCS / PIC Solutions
One of SA’s leading providers of outsourced accounts receivable collections by AUM Agency books worth R14bn and principal books of R8bn as at 31 March 2012 Collections infrastructure with over 2,159 collections agents in 9 call centres IT infrastructure provides full contingency, back‐up & disaster recovery processes Customers include blue chip banks, retailers, telecom companies & parastatals MBD Credit Solutions (Pty) Limited has an SQ2 service rating from Global Credit Ratings
Accounts receivable collections management is a fragmented market in SA Majority of competitors are smaller than MBDCS
Experience in agency portfolios leveraged to better manage principal portfolios Agency growth comes through attracting new clients Portfolio acquisitions drive the principal book Focus on sectors traditionally not core, in particular public sector & commercial collections
Business*
Market*
Growth drivers
PIC Solutions
MBD
CS
A specialist in the provision of consumer credit risk consultancy and analytics Long term relationships with many blue‐chip banks and retailers Also a non‐exclusive distributor of the FICO (Fair Isaac) software in Africa and the Middle
Rand value collected per individual debtor Staff productivity & turnover rates determine efficiencies Economies of scale expected as the book grows Increase the size of the agency book Discounts on purchase of acquired portfolios & collection levels drive the returns thereon
Profit drivers
Achieved significant scale in a fragmented market with high standard of governance Specialist proprietary technology‐driven collections strategy & infrastructure Insight gained from managing agency & owned portfolios informs pricing decisions on principal
portfolio acquisitions
Differentiating factors / core competencies
Income PBT EBITDA(a)
Contribution Analysis, 30 September 2011
18% 20% 50%
R 635m R 91m R109m
Non‐interest revenue (31‐Mar‐12)
EBITDA development (R’m)
R 365m
(a) Contribution to Services EBITDA*Market data based on management estimates
113 99 109
50 58
2009A 2010A 2011A 1H11 1H12
2009 2010 2011 1H11 1H12
Number of agency clients 40 47 45 46 49
Number of employees 2,926 2,814 2,518 2,456 2,410
Credit servicesKey metrics and financial information
Operational
2009 2010 2011 1H11 1H12
AUM (R’bn) 20.3 23.5 22.4 22.2 21.8
Agency (R’bn) 13.4 15.4 13.4 13.5 12.0
Principal (R’bn) 6.9 8.1 9.0 8.7 9.8
Cost‐to‐income 84% 87% 85% 86% 85%
Non‐interest revenue (R’m) 584 608 632 296 365
PBT (R’m) 92 76 91 40 54
EBITDA 113 99 109 50 58
Financial
2009 2010 2011 1H11 1H12
Purchased book debt (R’m) 249 244 308 274 318
Average fair value of principal portfolio (R’m) 206 248 263 258 310
Principal revenue as % of average fair value of principal portfolio 104% 84% 84% 79% 91%
Agency/Principal collections revenue split (%) 57/43 60/40 58/42 60/40 53/47
Performance
15
16
Payment services: Paycorp
Paycorp One of SA’s largest payments businesses independent of a bank group Owns an independent infrastructure network and transaction switch Strong market position as a provider of pre‐paid debit cards & has an early stage POS terminal
business (EFTPOS)
ATM Solutions A leading independent owner, deployer & operator of off‐premise ATMs in Africa ATM Solutions currently owns and operates 4,178 ATMs, which it estimates to comprise 24% of all
off‐bank premise ATMs and 17% of all South African ATMs ATM’s located typically in underserved areas, viewed by banks as unattractive due to lower
transaction volumes ATM Solution’s low cost efficiencies make outsourcing attractive to banks Partnerships with eight Southern African banks
Early stage business DrawCard: Visa‐certified provider of stored value prepaid card solutions
Increasing demand for ATM access in underserved areas Increase in retail penetration results in growing number of POS transactions Banks continue to outsource ATM services, esp. off‐site DrawCard and EFTPOS are coming off a low base in high demand markets
Business*
Growth drivers
Paycorp
Transaction volumes and associated fees Reduction in ATM bombings Investment in early stage businesses provides growth opportunities
Profit drivers
c. 26,728 ATMs in SA, c. 8,000 located in bank branches & remainder situated offsite POS terminals are ubiquitous throughout the retail industry Market*
Low cost operator of ATMs facilitating the provision of services to lower volume, under‐served areas
Understanding of the entire payments cycle, through “ecosystem” of payments businesses Largest 3rd party independent financial switch with robust back office systems DrawCard leverages off ATM Solutions’ expertise and technology in card issuance
Differentiating factors/ core competencies
Income PBT EBITDA(a)
Contribution Analysis, 30 September 2011
12% 11% 50%
R 437m R 50m R108m
EBITDA development (R’m)
(a) Contribution to Services EBITDA*Market data based on management estimates
99 109 108
5469
2009A 2010A 2011A 1H11 1H12
2009 2010 2011 1H11 1H12
Number of active ATMs 3,812 4,024 4,072 3,957 4,178
Payment servicesKey metrics and financial information
Operational
2009 2010 2011 1H11 1H12
Cost‐to‐income 85% 86% 88% 88% 83%
Non‐interest revenue 365 404 428 216 230
PBT (R’m) 54 55 50 26 37
EBITDA (R’m) 99 109 108 54 69
Financial
2009 2010 2011 1H11 1H12
ATM disbursements (R’bn) 19.2 22.6 25.1 12.6 14.1
ATM revenue (R’m) 299 351 384 193 214
Disbursements per active ATM (R’m) 5.0 5.6 6.2 3.2 3.4
Value of Drawcard transactions (R’m) 519 740 945 515 487
Performance
17
A proven wholesale funding model
No exposure to short‐term debt instruments
“Positive liquidity mismatch”: asset shorter than debt durations.
Direct relationships allow debt investors a deep understanding of the Group
Successfully raised debt through the volatile capital market cycles of 2008 and 2009
R16bn raised from 2006 to March 2012
18
Access to capital
Capital structure
Equity allocated per asset class according to capital market appetite, credit rating and risk based business requirement
Ring‐fenced funding structures allow investor diversification, no co‐mingling of risk, and leveraging capital optimally
Available debt facilities and cash (31‐Mar‐12)
R 2,617m
Asset‐backed lending51%
Unsecured lending28%
Credit Services12%
Payment Services
6%
Group Executive Office3%
Capital structure (R’m) Year end 30 SeptemberSix months ended 31
March
Futuregrowth investment (24 April 2012)
Post Futuregrowthinvestment (24 April 2012)2009 2010 2011 2011 2012
Non‐subordinated debt capital 3 062 5 263 5 868 5 804 6 703 (28) 6 675
Subordinated debt capital 431 1 151 1 602 1 339 1 648 (190) 1 458
Interest bearing liabilities 3 492 6 414 7 469 7 143 8 351 (218) 8 133
Equity 1 028 1 378 1 709 1 502 2 106 201 2 307
Equity and Subordinated debt capital 1 459 2 529 3 311 2 841 3 754 11 3 765
Equity % 70% 54% 52% 53% 56% 61%
Subordinated debt capital % 30% 46% 48% 47% 44% 39%
Total assets 4 951 8 653 10 056 9 508 11 550 (17) 11 533
Less: Goodwill (515) (932) (930) (932) (930) (930)
Less: Cash and cash equivalents (369) (575) (696) (589) (1 090) (1 090)
Total assets less Goodwill and cash and cash equivalents 4 067 7 146 8 430 7 987 9 530 (17) 9 513
Equity and Subordinated debt capital less Goodwill 944 1 597 2 381 1 909 2 824 11 2 835
Equity and Subordinated debt capital less Goodwill % Total assets less Goodwill and cash and cash equivalents
23% 22% 28% 24% 30% 30%
Interest bearing liabilities % Total assets 71% 74% 74% 75% 72% 71%
0
500
1 000
1 500
2 000
2 500
3 000
3 500
2009 2010 2011 1H11 1H12
(R'm)
Asset backed lending Unsecured lending Credit Services Payment Services Group Executive Office
Diversified funding base
19
Committed funds as at 31 March 2012
Credit rating StructureFunder
Debt issued by division
2,178
Aa2.za Moody's,
28%
A (RSA) GCR, 29%
Ba1.za Moody's,
2%
Not rated, 42%
Specialised asset
managers and debt funds, 25%
JSE listed, 29%
Life insurance companies,
23%
Banks, 10%
Development finance
institutions, 9%
Traditional asset
managers, 5%
Rated unlisted
securitisation, 31%
Rated listed securitisation
, 32%
Syndicated loans, 20%
Structured finance, 17%
2,900
1,655
2,740
1,894
Pre‐IPO transactions
EthosPre‐IPO investment
FuturegrowthSanlam
ConvertiblePre‐IPO cash investment Convertible bond converted pre‐IPO
Date of investment 30‐Mar‐12 30‐Mar‐12 24‐Apr‐12* Expected at IPO
Size R100 million R143 million R197 million R35 million
Terms
– Subscribed for R12,048,092 shares at a maximum price of R8.30 per share and a minimum price of R7.90 per share
– If IPO price is less or equal to R8.30, the subscription price is R7.90
– If the IPO price is between R8.30 and R8.70, the subscription price is at a R0.40 discount to the IPO price
– If the IPO price is greater than R8.70, the subscription price is R8.30
– Subscribed for 18,072,189 shares at R7.90
– Subscribed for 24,871,337 shares at R7.93
– Convertible bond had the right to convert at 10% discount to IPO price – Convertible maturity in July 2016
– Option to convert in equity at IPO at 10% discount to IPO price
– Futuregrowth had an option to convert debt to equity during the period from IPO date to 120 days thereafter at a 10% discount to listing price. In order to achieve certainly at the time of IPO, TC incentivized Futuregrowth to invest new capital of R143m and allowed them to convert a R197m convertible bond at an average price of R7.93 per share
Holding pre‐IPO 9.9% 8.1% 0.0%
Holding post‐IPO 9.0% 7.3% 0.8%
Lock‐up 180 days
Non‐binding written indication to TC that Futuregrowthintends to hold the shares for an extended period and that the shares have been placed into funds which can hold equity securities and Futuregrowth is therefore
under no obligation to reduce its shareholding
60 days post conversion
* Convertible loan originally entered into on August 2011 and converted into equity on April 2012
20
Delivering strong financial performance with a growth track record
21
Year ended 30 September Six month ended 31 March
(R’m unless specified otherwise) 2009 2010 % movement 2011 % movement 1H11 1H12 % movement
Performance
Interest and other similar income 739 1,217 65% 1,785 47% 835 1,034 24%
Non‐interest revenue 1,116 1,554 39% 1,821 17% 883 1,021 16%
Total income 1,855 2,771 49% 3,606 30% 1,718 2,055 20%
Profit before tax 364 324 (11)% 454 40% 179 240 35%
Headline earnings 237 212 (10)% 297 40% 123 171 39%
Headline earnings from continuing operations 238 214 (10)% 322 51% 123 171 39%
Net interest margin 12% 13% 9% 14% 14% 14% 15% 8%
Cost‐to‐income ratio % 71% 72% 2% 64% (11)% 66% 64% (3)%
ROA % 5.3% 3.2% (39)% 3.6% 13% 2.9% 3.5% 20%
ROTA % 5.8% 3.6% (38)% 4.0% 12% 3.2% 3.8% 19%
ROE % 25.3% 15.5% (39)% 21.9% 42% 17.9% 19.7% 10%
ROTE % 52.5% 38.2% (27)% 64.4% 68% 58.8% 44.4% (24)%
Delivering strong financial performance with a growth track record (continued)
22
Year ended 30 September Six month ended 31 March
(R’m unless specified otherwise) 2009 2010 % movement 2011 % movement 1H11 1H12 % movement
Status
Total assets 4,951 8,653 75% 10,056 16% 9,508 11,550 21%
Loans and advances 3,154 5,716 81% 6,720 18% 6,396 7,717 21%
Cash and cash equivalents 369 575 56% 696 21% 589 1,090 85%
Interest bearing liabilities 3,492 6,414 84% 7,469 16% 7,143 8,351 17%
‐ Subordinated debt capital 431 1,151 167% 1,602 39% 1,339 1,648 23%
Total equity 1,028 1,378 34% 1,709 24% 1,502 2,106 40%
Capital adequacy ratio % 23% 22% (4)% 28% 26% 24% 30% 24%
Share data
HEPS (cents) 56.2 47.6 (15)% 64.2 35% 26.8 36.2 35%
HEPS from continuing operations (cents) 56.6 47.9 (15)% 69.6 45% 26.8 36.2 35%
TNAV (cents)(1) 107.3 79.6 (26)% 141.7 78% 103.5 213.0 106%
NAV per share (cents)(1) 232.1 293.2 26% 347.4 18% 314.0 405.6 29%
Number of shares (000)(1) 420,876 455,085 8% 471,176 4% 462,812 502,833 9%
Weighted average number of shares (000) 420,982 445,427 6% 462,492 4% 460,706 473,432 3%(1) Post the Futuregrowth investment at 24 April 2012:
Number of shares (‘000): 530,605TNAV per share (cents): 243.0NAV per share (cents): 425.4
Entrepreneurial rootsProven entrepreneurial record
Mark Lamberti, Chief Executive Officer
30 years experience as an executive or non‐executive director on the boards of various public companies Served 19 years as the architect and CEO of Massmart Holdings Limited & remains non‐executive Chairman of the Board Mark’s achievements have been widely acknowledged throughout his career, most notably as the 2001 winner of the Ernst & Young South Africa’s Best Entrepreneur Award and the 2004
winner of the Italian South African Businessman of the Year Award B Com (Unisa), MBA (Wits), PPL (Harvard)
23
Steven Kark, CEO Paycorp
In 1999 he co‐founded the ATM Solutions Group (now Paycorp Holdings), winning the KPMG Unlisted Company of the Year Award in 2003 Merged the ATM Solutions Group (now Paycorp Holdings) with the Jawno, Mendelowitz, Rossi portfolio to form Transaction Capital in 2006 Recipient of the Investec Jewish Entrepreneur of the Year Award in 2001, Steven is the chairman of the Association of System Operators (ASO), a member of the Young Presidents
Organisation (YPO) and a founder board member of the ATM Industry Association (ATMIA) Africa B Com (Wits), PG Dip Bus Admin (Thames, London)
Jonathan Jawno, Deputy Chief Executive Officer
Co‐founded financial services entity Stratvest in 1995 with Michael Mendelowitz Executive at African Bank Investments Limited (ABIL) since 1997, when ABIL acquired 50% of Stratvest From 2002 onwards, together with Rossi & Mendelowitz acquired and grew the group of companies that merged with the ATM Solutions Group (now Paycorp Holdings) to form
Transaction Capital in 2006 B Com (UCT), G Dip Acc (UCT), CA (SA)
Michael Mendelowitz, Chief Investment Officer
Co‐founded financial services entity Stratvest in 1995 with Jonathan Jawno. Proven track record of identifying niche owner‐managed companies within the financial services sector From 2002 onwards, together with Rossi and Jawno acquired and grew the group of companies that merged with the ATM Solutions Group (now Paycorp Holdings) to form Transaction
Capital in 2006 Joint‐Chief Executive Officer of Nisela from 1997 to 2002 B Com (UCT), G Dip Acc (UCT), CA(SA)
Robert Rossi, Executive Director
Founded Miners Credit Guarantee (MCG) in 1991 to provide credit card type facilities to mine workers. In 1999 Theta Investments acquired a 50% stake in MCG Rob assumed executive roles at MCG and Theta and was subsequently responsible for the establishment, acquisition, growth and operations of several of the businesses owned by ABIL
(during 2003 MCG was integrated into ABIL and Rob sold his remaining shares to ABIL) Together with Jawno and Mendelowitz, acquired the group of companies that merged with the ATM Solutions Group (now Paycorp Holdings) to form Transaction Capital in 2006 BSc Mech. Eng (Wits), G.D.E. Ind Eng (Wits), B Proc (Unisa)
Emphasis on and investment in leadership development Objective psychographic assessments
360 degree feedback
Feedback from direct reports
Rated on performance and potential
Alignment & succession achieved through proprietary process
Active redeployment for quality and development (Since 2008 5 CEOs replaced within the operations and 46 of top 70 in different positions)
Qualified Executive LeadershipDepth of education, expertise & experience
24
“Top 50” Top 50 is 74 Mainly Group Executive Committee members & their direct reports Number of degrees 148 (31 CA’s) Average age 42Compensation Average fixed compensation R1.6m Variable compensation on earnings growth & specific qualitative factors Share purchase scheme: valuation based on weighted basket of listed
peers; vesting in 2 through 5 years from issuance date; 3.2% of TC Group owned through scheme
Recruited, developed and retained a highly qualified management team
Jonathan Jawno, Deputy CEO (45) Co‐founder of
Transaction Capital B Com (UCT), CA (SA)
David Hurwitz, CFO (40) Joined TC in 2005 B Com (Wits), H Dip Tax
(Wits); CA (SA)
Michael Mendelowitz, CIO
(46) Co‐founder of Transaction Capital B Com (UCT), CA (SA)
Charl van der Walt, CEO MBD CS (46) Joined MDB on its
inception in 2000 B Acc (Hon)
(Potchefstroom), CA (SA)
Steven Kark, CEO Paycorp (38) Co‐founded
Kanderlane (now Paycorp) & later Transaction Capital
B Com (Wits), PDBA (Thames)
Stuart Stone, CEO Bayport (42) Co‐Founded Bayport
in 2004 B Com (UCT), Post‐Grad
Dip Acc; CA (SA)
Terry Kier, CEO SA Taxi (45) Joined TC in 2007 Appointed CEO SA Taxi in
2010 BA (Hons), PDM (Wits)
Mark Lamberti, CEO (61) Appointed CEO &
invested in TC in 2008 B Com (Unisa), MBA
(Wits); PPL (Harvard)
Experienced Independent DirectorsA sound governance & compliance framework
Accounting and Tax RiskIT Risk
Credit RiskOperational RiskCompliance RiskInsurance and Assurance Risk
People RiskTransformation Risk
Members
Risks
Board
Committees
Audit Committee Asset & Liability Committee
Risk & Compliance Committee
Nominations & Remuneration Committee
Risks Reputational Risk Sustainability Risk
Funding and Capital Risk
25
2 2 3
# of Independent directors
2
Reputation RiskStakeholder Relations Risk
Social & Ethics Committee
2
Strategic RiskNew Business RiskAcquisition Risk
Executive Committee
n/a
Key: Independent Non‐Executive Director Non‐Executive Director
Mark Lamberti (Chair)Jonathan JawnoDavid HurwitzMichael MendelowitzSteven KarkTerry KierStuart StoneCharl van der Walt
Invitees:Mark Herskovits
Jonathan Jawno (Chair)Christopher Seabrooke David WoollamMark LambertiTim JacobsStephen WilliamsonDavid HurwitzMark Herskovits
Invitees:Matthew Symanowitz
Brenda Madumise (Chair)Phumzile Langeni Mark Lamberti Laura Acres
Dumisani Tabata (Chair)Phumzile Langeni Christopher SeabrookeShaun Zagnoev
Invitees:Mark LambertiMichael MendelowitzJonathan JawnoLaura Acres
David Woollam (Chair) Phumzile Langeni Shaun Zagnoev
Invitees:Christopher Seabrooke Mark LambertiJonathan JawnoDavid HurwitzTiaan de JagerZelda van Heerden
David Woollam (Chair) Christopher Seabrooke Mark LambertiJonathan JawnoDavid HurwitzTiaan de JagerTimothy JacobsDawid SpangenbergStephen WilliamsonIan WoodRoberto RossiCharl van der WaltZelda van Heerden
Invitees:Matthew Symanowitz
Agenda
Description Page
1. Transaction Capital overview 52. Investor value proposition 83. Conclusion 27
… under the guidance of experienced management operating within a robust governance framework.
… delivering strong financial performance …
… sustained by an established and diversified funding
position …
… with a focus on asset quality and risk management …
… from a portfolio of specialised financial services
businesses …
The Transaction Capital investor value proposition
A supportive macro economic backdrop for growth and
returns …
27
1
2
3
4
5
6
28
Q&A
29
Appendix
Delivering strong financial performance with a growth track record
30(a) Includes financials for Unsecured lending from 1 February 2010 to 31 September 2010
(R’m) 30 Sep 2009 Growth % 30 Sep 2010(a) Growth % 30 Sep 2011 1H11 1H12 Growth %Statement of comprehensive income Interest and other similar income 739 65% 1,217 47% 1,785 835 1,034 24%Interest and other similar expense (403) 51% (608) 31% (798) (375) (443) 18%Net interest income 336 81% 608 62% 987 459 591 29%Impairment of loans and advances (66) 323% (278) 104% (566) (278) (337) 21%Risk adjusted net interest revenue 270 22% 330 27% 421 181 254 40%Non‐interest revenue 1,116 39% 1,554 17% 1,821 883 1,021 16%Direct and indirect costs (1,027) 51% (1,555) 15% (1,788) (885) (1,035) 17%Income from associates 6 (190)% (5) (100)% ‐ ‐ ‐ n/aProfit before tax 364 (11)% 324 40% 454 179 240 35%Income tax expense (106) (10)% (95) 14% (108) (45) (56) 24%Profit from continuing operations 258 (12)% 229 51% 346 134 184 38%Loss from discontinued operation (2) 160% (4) 1648% (70) ‐ ‐ n/aProfit for the year 257 (13)% 225 23% 276 134 184 38%Non‐controlling interests 21 14% 24 8% 26 10 13 33%Profit attributable to ordinary equity holders of the parent 236 (15)% 201 25% 250 124 171 39%Statement of financial positionAssetsLoans and advances 3,154 81% 5,716 18% 6,720 6,396 7,717 21%Purchased book debts 249 (2)% 244 26% 308 274 318 16%Property and equipment 261 11% 290 (4)% 279 282 292 4%Inventories 48 336% 209 (25)% 156 235 171 (27)%Goodwill and intangibles 525 85% 972 (0)% 970 974 968 (1)%Other assets and receivables 7,143 71% 12,201 33% 1,623 1,346 2,084 55%Total assets 4,951 75% 8,653 16% 10,056 9,508 11,550 21%LiabilitiesInterest bearing liabilities 3,492 84% 6,414 16% 7,469 7,143 8,351 17%‐ Senior 3,061 72% 5,263 11% 5,867 5,804 6,703 17%‐ Subordinated and other 431 167% 1,151 39% 1,602 1,339 1,645 16%
Other liabilities and payables 431 99% 860 2% 878 862 1,093 27%Total liabilities 3,923 85% 7,274 15% 8,347 8,006 9,444 18%Equity 1,028 34% 1,378 24% 1,709 1,502 2,106 40%