Earnings Presentation - Year ended December 2019 10:30 GMT 6 March 2020 - New Day
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Earnings Presentation
Year ended December 2019
Replay Replay passcode 6 March 2020
0207 136 9233 96348337#
0800 032 9687 10:30 GMT
Confidential
Disclaimer
This presentation has been prepared by NewDay Cards Limited on behalf of NewDay Group (Jersey) baskets and calculations may differ significantly from any ratios or figures which are contained in this
Limited (the “Company”) on a confidential basis solely for information purposes. For the purposes of this Presentation. In particular, references to EBITDA leverage and EBITDA interest cover contained in this
notice, the presentation that follows shall mean and include the slides that follow, the oral presentation of Presentation have been calculated (subject to certain adjustments) in accordance with IFRS as in force as
the slides by the Company or any person on behalf of the Company, any question and answer sessions at 31 December 2019 (or, in respect of periods ending prior to 31 December 2019, IFRS at the relevant
that follows the oral presentation, printed copies of this document and any materials distributed at, or in time). As a result, such figures will differ significantly from the calculation of Consolidated Senior Secured
connection with the presentation (collectively, this “Presentation”). By attending the meeting at which this Net Leverage Ratio and Fixed Charge Corporate Debt Coverage Ratio (as defined under the terms of the
Presentation is made, or by reading this Presentation, you will be deemed to have (i) agreed to the Senior Secured Debt and Revolving Credit Facility).
following restrictions and made the following undertakings and (ii) acknowledged that you understand the
legal and regulatory sanctions attached to the misuse, disclosure or improper circulation of this This Presentation may contain forward-looking statements. All statements other than statements of
Presentation. historical fact included in this Presentation are forward-looking statements. Forward-looking statements
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BondCo plc). Due to rounding, numbers presented throughout this Presentation may not add up precisely “can have,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,” “project,” “should,” “target,” “will,”
to the totals indicated and percentages may not precisely reflect the absolute figures for the same reason. “would” and other words and terms of similar meaning or the negative thereof. Such forward-looking
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of the Company together with its subsidiaries and subsidiary undertakings (the “Group”). Certain financial Company’s control that could cause the Company’s actual results, performance or achievements to be
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warranty by the Company, any member of the Group, any of their respective affiliates, advisors or Presentation and are subject to change without notice. None of the Company, any member of the Group,
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an investment decision. or its contents or otherwise arising in connection with this Presentation, or any action taken by you or any
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References to Adjusted EBITDA throughout this Presentation are references to “Consolidated EBITDA” as
defined in the legal documentation relating to the £425m Senior Secured Notes issued by NewDay This Presentation is not for publication, release or distribution in any jurisdiction where to do so would
BondCo plc on 25 January 2017 (the Senior Secured Debt) and the Super Senior Revolving Credit Facility constitute a violation of the relevant laws of such jurisdiction nor should it be taken or transmitted into such
entered into by the Company on 25 January 2017 (the Revolving Credit Facility) based on IFRS as in force jurisdiction.
as at 31 December 2019 (or, in respect of periods ending prior to 31 December 2019, IFRS at the relevant
time). However, all ratios, baskets and calculations required under the terms of the Senior Secured Debt
and Revolving Credit Facility are based on IFRS as in force as at 25 January 2017. As a result, such ratios,
Confidential 1
Agenda
1 Business update John Hourican (CEO)
2 Portfolio performance Ian Corfield (CCO)
3 Credit performance Rob Holt (CCCO)
4 Financial results Paul Sheriff (CFO)
5 Q&A
Confidential 2
Financial highlights
Strong, controlled growth driving 75% increase in EBITDA
Strong, controlled receivables growth across all portfolios Controlled acquisition levels at 1.2m new accounts per annum
↑15%
3,026 1,204 1,199
113 15 21
2,623
66
1,160 UPL UPL
992 733 752
Co-brand Co-brand
Own-brand Own-brand
1,566 1,753
456 426
2018 2019 2018 2019
Closing receivables (£m) New accounts (k)
Significant RAI growth driving RAM increase EBITDA increase leading to improvement in bond metrics
13.0% EBITDA EBITDA
12.4%
↑75% Leverage Interest cover
↑24%
RAI Impact of
358 144 funding
RAM
289 crossover 4.5x
3.5x
82
2.6x
1.9x
2018 2019 2018 2019 2018 2019 2018 2019
EBITDA Leverage and EBITDA interest cover ratios
are calculated in accordance with prevailing IFRS as
opposed to 25/01/17 as per the terms of the Senior
Risk adjusted income (£m) Adjusted EBITDA (£m) Secured Debt and Revolving Credit Facility
Confidential 3
Business highlights
£5.8bn
(2018: £5.0bn)
125m
(2018: 107m)
total spend (of which £2.0bn through transactions
digital channels (2018: £1.7bn)) processed
2.3m
(2018: 1.4m)
98%
digital transactions for
app downloads to date servicing
+66
(2018: 64)
Net Promoter Score
Confidential 4
Trusted brands Our brands Our retail partners Confidential 5
How we deliver our vision
Opportunity
Driving high standards for our
customers, colleagues and
community through our Manifesto
Enablers
Leveraging a leading digital platform
Evolving with our
customers to
address changing
needs
The way our customers apply, Acquiring new customers and
spend and pay is changing, and creating long-term relationships
technology is opening up
previously inaccessible
e-commerce opportunities as well Outcomes
as facilitating new data insights.
Delivering strong controlled growth
and high predictability
Confidential 6
Market overview
Our business Market trends
Total outstanding UK Total retail spend (£) NewDay spend (£)
consumer credit receivables c1.5% total retail
spend
£225bn 299bn 306bn 312bn 318bn
2.7bn
3.3bn
3.8bn
2.4bn
Revolving credit 1.7bn 2.0bn
52bn 60bn 68bn 75bn 0.9bn 1.2bn
2016 2017 2018 2019 2016 2017 2018 2019
Total credit card Online Offline Online Offline
receivables 4% compound annual growth rate 21% compound annual growth rate
£73bn
Payment volumes
NewDay
£2.9bn
11.0bn
10.0bn
39 bn
total
3.2bn
12%
year on year increase
transactions
in total credit and debit
card payments as cash
65% 15.1bn
declines 16%
of adults in the UK have a
credit card Credit card Debit card
Cash Other
Confidential 7
Driving high standards for our customers,
colleagues and community through our Manifesto
Our purpose is to help people be better with credit,
guided by four clear principles. These principles
bring the Customer Manifesto to life for our
customers, colleagues and retail partners
Welcoming Understanding Our Customer Manifesto in action for our
customers
2.0m 1.2m £27m
customers helped to New customers we Given back to
improve responsibly said customers through
their credit score “yes” to rewards
Knowing Rewarding We’ve helped customers with their credit
questions in ways that work for them:
111m
self-service transactions
2.8m conversations
Confidential 8
Leveraging a leading digital platform
In 2019 we continued our journey to becoming the UK’s leading digitally
enabled consumer finance provider
November 2019
PIN online
Mobile AI-mediated chat October 2019
for most of our Own- Immediate digital advice
Co-brand Point-of-Sale
brand customers, with a of PIN to reduce
Mobile based loyalty acquisitions in-house
September 2019 operational costs and
growing number of chats
allowing customers to ensure customers use
now being fulfilled by Collections support their cards
redeem their points August 2019
Bots Customer messaging
and spend within the
mobile app Digital functionality for and a helpful straight
July 2019 BTs and MTs through frictionless
Straight through end-to- digital payment journey
Open Banking layer end digital journey for
April 2019
Account access APIs to balance transfers and
Credit limit meet PSD2 regulation money transfers Digital, tablet-based
February 2019 management
eCRM
acquisition platform has
Chatbot launched
Digital management for increased in-store
January 2019 customers who exceed Digital delivery of flexibility and reduced
Young Fashion mobile their credit limit marketing offers in
first proposition initial Launch of a flexible and acquisition friction
servicing journeys
launch fully configurable
NewPay platform for
AO.com
Winner of UK IT Percentage of
2.3m 4.7 +70 Industry Award for 77% digital transactions
mobile app combined app Net Easy Score the use of Cloud of accounts for servicing
technology originated online
downloads to date store rating
98%
Confidential 9Acquiring new customers that create long-term
relationships
2018 2019
Acquiringnewcustomers
£(119)m £(96)m
(adjusted EBITDA)
Acquiring new
customers
2018 2019
Creating long-term Long-termrelationships
relationships £201m £240m
(adjusted EBITDA)
Confidential 10Own-brand
Continued new account generation and receivables growth Ongoing customer engagement in digital offering
↑12%
1.5m total app downloads
(2018: 1.1m)
456 1,753
426 1,566
customers registered for e-servicing 82%
(2018: 76%)
2018 2019 2018 2019
New accounts (k) Closing receivables (£m)
32% RAI growth; RAM increase driven by lower impairment rate Successful refinancing including further diversification
12.3%
10.8%
RAI:£154m
RAI:£203m
Total income (£m)
£577m Total ABS debt issued/sold during 2019
Impairment (£m)
461
415
RAM
Total ABS debt issued into US market
261 257
during 2019 £166m
2018 2019
Confidential 11Co-brand
Strong new account generation and receivables growth Ongoing customer engagement in digital offering
↑17%
0.7m total app downloads
(2018: 0.3m)
1,160
752 992
733
customers registered for e-servicing 50%
(2018: 40%)
2018 2019 2018 2019
New accounts (k) Closing receivables (£m)
14% RAI growth; RAM reduction driven by business mix Continued expansion of product offerings and partners
16.0% 15.4%
Total income (£m)
RAI:£156m Impairment (£m)
RAI:£137m 202
171 RAM
33 46
2018 2019
Confidential 12Credit
Reduction in impairment rate driven by Own-brand Group charge-off rate remains flat year on year
13.0%
11.6% 11.0% 11.0%
Own-brand Own-brand
Co-brand Co-brand
18.3% 15.7% 15.1%
15.6% Group Group
3.9% 4.6% 3.6% 4.4%
2018 2019 2018 2019
Impairment rate Charge-off rate
Reduction in coverage rate Group charge-off bridge
3,026
11.0% (0.1)% 0.3% (0.2)% 11.0%
2,623
15.5% 14.0%
406 425
2018 One-off Insolvencies Underlying 2019
2018 2019 performance
Gross receivables (£m) ECL Allowance (£m) Coverage rate Charge-off rate
Confidential 13Customer underwriting: New customer credit quality
Own-brand: Two or more missed payments after 6 months
15.0% • Q419 delinquency rate of 10.6%, materially improved from 11.7% in Q418
• Overall delinquency rates have remained stable over the past three
12.0%
quarters
9.0%
6.0%
3.0%
0.0%
Q418 Q119 Q219 Q319 Q419
(booked Q218) (booked Q318) (booked Q418) (booked Q119) (booked Q219)
Co-brand: Two or more missed payments after 6 months
5.0% • Risk is higher for online originations in Co-brand
• The portfolio continues to shift to more online business driven by Amazon
4.0%
and AO
3.0% • 70% of relevant Q419 balances were originated online, compared to 63% in
Q418
2.0%
• Online risk is increasing through a high proportion of Amazon Classic
1.0% • Blended rate has increased from 3.1% in Q418 to 3.8% in Q419
0.0%
Q418 Q119 Q219 Q319 Q419
(booked Q218) (booked Q318) (booked Q418) (booked Q119) (booked Q219)
In Store Online Blended
Confidential 14Costs
130bps decrease in underlying cost-income ratio Ongoing reduction in servicing costs as % average receivables
31.8%
30.5% 3.7%
676 3.4%
591 Income
Underlying costs
206 Underlying cost- 87 95
188
income ratio
2018 2019 2018 2019
Underlying cost-income ratio (excluding VCP and CCMS implementation costs) Servicing costs (£m) Servicing costs/average receivables
Continued investment in change and innovation projects
41 38
18
45% Customers registered for e-statements
23 (2018: 36%)
6
3 Excluded from
17
2018
13
2019
underlying
cost-income ratio Customers registered for e-servicing 59%
(2018: 50%)
VCP CCMS Strategic change spend
VCP and Change costs (£m)
VCP: Value Creation Plan – business-wide review highlighting areas for accelerated investment
CCMS: Project costs associated with CCMS implementation
Confidential 15Income statement
£m 2018 2019
Total income Impairment rate
Interest income 579 674 Strong income Impairment rate
£676m 11.6%
Cost of funds (52) (64) growth as reduction was
Fee and commission income 64 66 receivables predominantly
Total income 591 676 continued to driven by
Impairment (302) (318) (2018: £591m) build (2018: 13.0%) provision
Risk-adjusted income 289 358 movements and
Servicing costs (87) (95) credit tightening
Change costs (24) (25) since 2018
Value Creation Plan
(17) (13)
implementation costs Risk-adjusted income growth Adjusted EBITDA
Marketing and partner payments (62) (60)
24%
Collection fees 30 29 RAI growth due EBITDA
Contribution
Salaries, benefits and overheads
130
(52)
194
(59)
to higher
income and
favourable
£144m increase was
predominantly
driven by
Add back: depreciation and
movement in (2018: £82m) impairment and
amortisation 4 9 impairment rate cost
Adjusted EBITDA 82 144 favourability
Average gross receivables 2,325 2,752
Gross interest and fee yield (%) 27.7% 26.9%
Impairment (%) 13.0% 11.6%
RAM (%) 12.4% 13.0%
EBITDA leverage 3.5x 1.9x
EBITDA interest cover 2.6x 4.5x
Confidential 16Cash flow statement
£m 2018 2019
2019 cash bridge
Adjusted EBITDA 82 144
Change in impairment provision 60 18 (7)
(20)
Adjusted EBITDA excl. provision 143 163
(56)
Change in working capital (12) (7)
One-off House of Fraser payment* 15 (15)
PPI provision utilisation (20) (15)
Capital expenditure (9) (10) (15)
163 (15)
Tax paid (7) (10)
FCF available for growth and debt service 109 106
(Increase)/decrease in gross receivables (471) (423) 80
50
Net financing cash flow 403 367
FCF available for Senior Secured Debt
Adjusted Underlying Capex/Tax Investment in FCF available House of PPI FCF available
interest 41 50 EBITDA excl. working receivables for Senior Fraser for Senior
provision capital growth Secured Debt (working Secured Debt
Debt service - cash payments (31) (32) interest capital) interest
(underlying)
Net increase in cash and cash equivalents 10 18
* Year on year cash flow impacted by the payment for in-store
House of Fraser customer spend relating to the period 10/08/18
to 05/03/19 that was settled post novation of the contract to
Sports Direct in Q119. £15m of this payment related to customer
spend from 10/08/18 to 31/12/18 having a +£15m impact on 2018
working capital and a -£15m impact on 2019.
Confidential 17Funding
Diverse funding portfolio with substantial capacity for growth Funding maturity profile
3,743 30 3,743
3,594 3,594
30
294
716
922 61 384
1,425
1,360
739
658 703
468
502
275
150
Drawn: 2020 2021 2022 2023 2024
1,863 Drawn: 1,863 £3,027m
1,779 1,779 Senior Secured Debt Issued bonds Drawn VFN
£2,672m
Drawn balance sheet debt (£m)
£m 2020 2021 2022
425 425 425 425 Own-brand
Issued bonds 413 502 410
2018 2019 2018 2019 VFN 14 72 45
Commitment Drawings 427 574 454
Co-brand
Senior Secured Debt Issued bonds VFN RCF Undrawn capacity* Issued bonds 244 - 294
VFN 47 236 249
291 236 543
Balance sheet debt (£m) UPL
VFN - 77 -
Total 718 887 997
*undrawn capacity includes £30m RCF
Confidential 18Funding and Liquidity
Positive cash movement Significant VFN headroom across all portfolios (£686m)
206
184
592
Cash (£m) 520
152
134 Restricted cash (£m) 284
118
16 48
50 54
2018 2019
2018 2019
Own-brand Co-brand UPL
VFN headroom (£m)
Advance rates have remained stable year on year Healthy excess spread
Group Group
86.0% 12.6%
(2018: 85.8%) (2018: 14.0%)
Own-brand Co-brand Own-brand Co-brand
83.0% 92.3% 13.0% 11.9%
(2018: 83.2%) (2018: 91.1%) (2018: 14.5%) (2018: 13.2%)
Excess spreads shown exclude VFNs and Secondary Funding facilities as they are not directly comparable. Excess
spread figures for these facilities are broadly similar with the exception of NP Secondary Funding Facility VFN at c9%
Confidential 19Appendix Confidential
Statutory earnings
£m 2018 2019
• Senior Secured Debt interest and related costs: includes the
Adjusted EBITDA 82 144 interest charge and other costs associated with the issuance and
Senior Secured Debt interest and related costs (33) (34) servicing of Senior Secured Notes and the Revolving Credit
Customer refund provision - (0) Facility
Fair value unwind (2) 0
Depreciation and amortisation including amortisation of • Customer refund provision represents the expected costs to be
Acquisition intangibles (54) (60) refunded, net of third party contributions to customers following
Statutory (LBT)/PBT (7) 50 an operational incident which arose due to NewDay receiving
incomplete information from a third party
• Fair value unwind: reflects the amortisation of fair value
adjustments on the Group’s acquired portfolios and debt issued
• Depreciation and amortisation: includes the amortisation of the
intangible assets recognised on the acquisition of the Group by
funds advised by Cinven and CVC in January 2017
Confidential 21Contribution by segment
Own-brand income statement Co-brand income statement UPL income statement
£m 2018 2019 £m 2018 2019 £m 2018 2019
Interest income 407 457 Interest income 165 201 Interest income 8 17
Cost of funds (34) (41) Cost of funds (16) (19) Cost of funds (2) (3)
Fee and commission income 42 45 Fee and commission income 21 21 Fee and commission income - -
Total income 415 461 Total income 171 202 Total income 6 14
Impairment (261) (257) Impairment (33) (46) Impairment (8) (15)
Risk-adjusted income 154 203 Risk-adjusted income 137 156 Risk-adjusted income (2) (1)
Servicing costs (37) (43) Servicing costs (49) (51) Servicing costs (1) (1)
Change costs (13) (14) Change costs (10) (10) Change costs (2) (1)
Value Creation Plan Value Creation Plan Value Creation Plan
(8) (6) (6) (0) (0)
implementation costs (10) implementation costs implementation costs
Marketing costs (18) (14) Marketing and partner payments (43) (46) Marketing costs (0) (1)
Collection fees 18 19 Collection fees 12 11 Collection fees - -
Contribution 94 143 Contribution 41 55 Contribution (5) (5)
Average gross receivables 1,422 1,652 Average gross receivables 858 1,009 Average gross receivables 44 91
Gross interest and fee yield (%) 31.6% 30.4% Gross interest and fee yield (%) 21.7% 21.9% Gross interest and fee yield (%) 17.5% 18.2%
Impairment (%) 18.3% 15.6% Impairment (%) 3.9% 4.6% Impairment (%) 17.5% 16.0%
RAM (%) 10.8% 12.3% RAM (%) 16.0% 15.4% RAM (%) (4.1)% (1.1)%
Confidential 22Balance sheet
£m 2018 2019
Gross receivables 2,623 3,026 • Increase in receivables was driven by growth of both the
Impairment provision (406) (425) Own-brand and Co-brand open books
Other 87 109
Net receivables 2,304 2,710 • Fair value of total assets following the Acquisition in 2017
Restricted cash 50 54 introduced £396m of intangible assets, primarily relating to
Cash 134 152 the customer and retailer relationships, the brand, trade
Intangible assets 314 266 names and intellectual property. The carrying value of these
Goodwill 280 280 assets was £250m at Dec-19
Other assets 71 81
Total assets 3,152 3,542 • Other assets and other liabilities increased as operating
Asset-backed term debt 1,782 1,865 leases and related liabilities have been recognised on the
Variable funding notes 469 740 balance sheet following the adoption of IFRS 16
Senior Secured Debt 435 435
PPI provision 25 10 • Asset-backed term debt represents the term series notes
Other provisions 11 11 issued by the Own-brand and Co-brand master trust
Other liabilities* 71 86 structures
Total liabilities 2,792 3,147
Net assets 360 396
• Variable funding notes represents the debt drawn down under
the five VFNs across the Group
*Other liabilities includes capitalised debt funding fees
Confidential 23Leverage and interest ratios £m 2018 2019 Adjusted EBITDA 82 144 • Improvement to underlying ratios was driven by increasing EBITDA Senior Secured Debt 425 425 Cash (134) (152) Net corporate Senior Secured Debt 291 273 EBITDA leverage 3.5x 1.9x Senior corporate interest expense 31 32 EBITDA interest cover 2.6x 4.5x Confidential 24
Glossary
ABS: Asset-backed security RAI: Risk-adjusted income
Adjusted EBITDA: Earnings before Senior Secured Debt interest RAM: Risk-adjusted margin
(and related costs), tax, depreciation and amortisation
RCF: Revolving credit facility
Advance rate: (ABS + VFN drawn debt)/Gross receivables
Underlying cost: Costs excluding amortisation of intangibles,
CCMS: Credit Card Market Study senior secured debt interest and non-recurring change costs (such
as VCP and CCMS implementation costs)
Excess spread: Key trigger across funding vehicles, broadly
defined as interest and fee income, less net charge-offs, funding UPL: Unsecured Personal Loans
costs and servicing fees
VCP: Value Creation Plan – business-wide review highlighting areas
FCF: Free cash flow for accelerated investment
NP Secondary Funding Facility: NewDay Partnership Secondary VFN: Variable funding note
Funding Facility
Confidential 25Investor Relations Team investor.relations@newday.co.uk
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