Investor day 1 No November 2016 1 NON-STANDARD FINANCE INVESTOR - PowerPoint PPT Presentation

Investor day 1 No November 2016

1 NON-STANDARD FINANCE – INVESTOR DAY, 1 NOVEMBER 2016 John van Kuffeler Founder and Executive Chairman

2 NON-STANDARD FINANCE – INVESTOR DAY, 1 NOVEMBER 2016 Agenda 09.30 Introduction John van Kuffeler, Executive Chairman and Founder, NSF plc 09.45 Everyday Loans Danny Malone, CEO Everyday Loans 10.45 Loans at Home Mark Bardsley, CEO Loans at Home 11.45 Break 12:00 Trusttwo Richard Sharp, Managing Director, Trusttwo 12.30 Market review Miles Cresswell-Turner, Executive Director, NSF plc 12.45 Funding and accounting Nick Teunon, CFO NSF plc 13.00 Summary John van Kuffeler Lunch

3 NON-STANDARD FINANCE – INVESTOR DAY, 1 NOVEMBER 2016 Overview  In February 2015 we set out our investment case to build a sizeable player in the non-standard finance sector  20 months later we have three significant businesses with 80 offices and over 140,000 customers  Our thesis also remains on-course: - Sector is growing with no sizeable new entrants - Structural and regulatory change means that each of our chosen segments has strong growth potential - There is regulator support for a well-managed, well-capitalised group like NSF - Further opportunities may be presented through a second wave of M&A/consolidation due to: - Further regulatory constraint - Lack of available funding - Change in risk appetite from current owners We continue to make good progress towards our goal: overall loan book growth of 20% per annum and 20% return on assets in each of our operating businesses

4 NON-STANDARD FINANCE – INVESTOR DAY, 1 NOVEMBER 2016 Overview - our three divisions Branch-based lending Home credit Guaranteed loans

5 NON-STANDARD FINANCE – INVESTOR DAY, 1 NOVEMBER 2016 Overview – each division has strong growth potential Branch-based lending Home collected credit Guaranteed loans • • • Market: Market: Market: • Structural shift at market leader: First launched in 2006 £5bn of receiveables withdrawn post 2007/8 • • - Shed nearly 1m customers • Market leader dominates with 80% share • Closure of over 400 branches post-crisis - Consequent reduction in agents • No clear #2 has yet emerged - Welcome (183) - Focused on opportunities outside home • Complex product, poorly understood by - HFC (135) credit consumers - Citifinancial (90) #2 focused on other opportunities • • Attractive features for customers and - London Scottish Bank (52) • Low income earners are better off and under- regulator borrowed • Barriers to entry: • Barriers to entry: • Barriers to entry: • Branch network • Back-office and associated infrastructure • Agent network • Skilled management team • Significant investment in marketing required • Skilled management team • Proven underwriting capability and scorecard • Funds to invest in growth and technology • Everyday Loans • Loans at Home: • Trusttwo: National coverage via 39 branches • • National coverage, clear #3 • Proven and scaleable infrastructure • Experienced management team • Experienced management team • New MD hired • Proven and scaleable infrastructure • Yet to reap benefits from technology investment • Financial backing of well-capitalised parent

6 NON-STANDARD FINANCE – INVESTOR DAY, 1 NOVEMBER 2016 Overview – our key risks and how we manage them  Conduct  Training Brexit – threat or opportunity?  Quality assurance and internal audit  GDP growth much better than  Regulation expected in 3 months post-June  Building strong relationship with FCA  Nissan to invest in Sunderland,  Active regulatory affairs programme securing jobs and the local economy  Income for bottom fifth of earners up 6.2% in April 2016  Credit  Proven scorecard, continuous improvement But…  Inflation expected to rise following fall in Sterling  Strong MI and KPI monitoring  Meeting the customers face-to-face Our current view   Business strategy and operations Customers on low incomes are better-off than they have been for many years  Experienced management  Food/petrol price rises will have an impact for customers,  Strong Board oversight but this will be relatively small  If impairments do start to rise, loans are short-term and we  Liquidity can adjust our scorecard to compensate  Committed debt facilities in place until 2018 and 2019  If economy worsens, pool of potential customers should  Exploring other options to diversify our source of funding expand We do not expect a material impact from Brexit

7 NON-STANDARD FINANCE – INVESTOR DAY, 1 NOVEMBER 2016 Overview – progress to-date  Phase one of our plan is now complete:  NSF is a significant player in the non-standard segment: - #1 in branch-based unsecured lending - #3 in home credit - Over 140,000 customers - Over 80 branches - Over 500 employees - Combined loan book of £147m at 30 June 16 (£169m after fair value adjustments)  H1 16 saw strong loan book growth in all three businesses: - Everyday Loans +17% - Loans at Home +19% - Trusttwo +28% Loans at Home branch Everyday Loans branch

8 NON-STANDARD FINANCE – INVESTOR DAY, 1 NOVEMBER 2016 Overview – future plans  Phase two will see us:  Grow Everyday Loans: - More branches planned for 2017 and 2018 - Develop new and complementary products - Manage loan book growth with appropriate control of impairment  Grow Loans at Home: - More measured pace of growth will reduce rate of impairment and temporary agent commissions - Full roll-out of hand-held technology: o Collections app being implemented before December 2016 o Lending app during H1 2017  Grow Trusttwo: - Position Trusttwo as an attractive alternative to the market leader - Expand in-house team - Invest in marketing  Put in place longer-term funding as part of a broader financial strategy

Everyday Loans Group Danny Malone CEO everyday loans for everyday living

1. Introduction everyday loans for everyday living Page 10

Agenda 1. Introduction 2. History 3. Management team 4. Regulation 5. Everyday Loans business model 6. The lending process 7. Collections 8. Impairments 9. Market overview/competitive landscape 10. Strategy for growth 11. Summary everyday loans for everyday living Page 11

1. Introduction - overview • Everyday Loans is the UK’s largest branch -based lender of unsecured loans to sub-prime borrowers • It has a network of 39 national branches (36 full branches, including Central, and three satellite branches) - Preston, Reading and Derby have opened since H1 - Manchester and Walsall scheduled to open in Q4 • By using a face-to-face model, our USP is being able to lend profitably to those customers that others can’t or won’t • Our loans are unsecured and distributed through three main channels: - Brokers 35% - Direct to brand 27% - Own book renewals and former borrowers 38% everyday loans for everyday living Page 12

1. Introduction – vision, mission and values Vision To be the most effective and easy to deal with consumer finance business in the UK Mission To double the size of the business - Everyday Loans and Trusttwo – within three - four years Values Respect for each other as employees Outstanding customer service and outcomes Total commitment and effort Attractive returns for our shareholders everyday loans for everyday living Page 13

2. History - timeline Financial crisis • Large numbers of consumer finance businesses exited the market including: 8 June 2012 4 Dec 2015 13 April Founded in 2006; o Black Horse 21 June 2016 initial £30m from Purchased by Sold to NSF 2016 o Citifinancial Full FCA Secure Trust Bank Alchemy/ for £235m Acquisition Licence granted o HFC/Beneficial in June 2012 for management (£170m equity completed o Welcome £72m (£34m equity and £65m debt) o London & Scottish / sub debt and £38m of bank debt) • Everyday Loans was the only remaining branch based consumer lender (not high cost, short-term) in the UK 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 No. of 30 26 26 26 26 27 32 34 36 36^ branches Receivables (£m) 27 41 47 54 60 67 78 89 105 114^ ^ As at 30 June 2016, incl 3 Satellites everyday loans for everyday living Page 14

2. History - timeline Full branches and employees Unsecured loan volumes (£m) 200 100 Existing and former unsecured volume (£m) 148 145 80 New borrower unsecured volume (£m) 141 136 150 129 49 118 108 106 104 104 60 29 100 23 40 19 26 15 16 15 7 11 50 33 33 31 31 30 46 27 44 26 26 26 26 20 35 30 28 29 25 24 24 25 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 H1 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 H1 2016 Branches (Full) Branch Employees Unsecured receivables and customer numbers Interest revenue as % of average net receivables £120m 60 50% 45% 43% 42% Unsecured Receivables (£m) £100m 50 37% 40% 35% 36% 36% 35% Customer numbers (RH scale) (000) 33% 33% 37.2 35.5 £80m 34.3 40 30% 29.0 25.3 £60m 24.8 30 22.9 114.4 105.2 19.9 20% 16.6 88.9 £40m 20 77.9 11.8 67.4 60.5 53.7 10% 47.3 £20m 40.9 10 27.1 0% £0m 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 H1 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 H1 2016 everyday loans for everyday living Page 15