Meilleurtaux

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SFAF Meeting29 March 2007
Christophe Crémer Chairman
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Overview

• meilleurtauxSeven years of robust growth
  resulting in the leading mortgage broker in
  France A unique, proven multi-channel business
  model
• 2006 business reviewMajor strategic
  investments74 surge in revenue
• 2006 resultsProfit temporarily impacted by the
  opening of the Le Havre call centre and
  aggressive branch office expansions
• 2007 goalsContinue gaining market share with a
  priority on improving margins

3
meilleurtaux Seven years of robust growth
resulting in the leading mortgage broker in
France a unique, proven business model
4
Robust revenue growth
2006 45 offices, 35 franchises, 2 call centres
(Paris and Le Havre)
45.5M
Oct. 2006 Transferred to Eurolist
74
2005 32 offices, start of the insurance,
savings, and franchise businesses
26.2M
152
2004 18 offices, 1 call centre in Paris
Branch office
10.4M
Franchise
89
2003 5 offices
5.5M
2001 1 office
x 4.4
0.8M
1999 meilleurtaux is launched
2003
2004
2005
2006
2001
Revenue quadrupled in two years
meilleurtaux
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meilleurtaux in 2006 a leading mortgage broker
Individuals
Banks
Over 370,000 applications filed in 2006 (up 22)
110 banking partners in 2006
11 market share
A strong brand with growing recognition

• Complete information on mortgage-related issues
• Qualified advisors to help assemble a loan
  application
• Lower financing costs for loans and borrowers
  insurance

• An additional channel for generating business
• Lower customer acquisition costs
• Access to a portfolio of qualified prospects
  (high-income group)

The largest network of banking partners in the
market
meilleurtaux the leading online mortgage broker
in France
Benefit for individuals A free service without
obligation
Benefit for banks A single commission rate
meilleurtaux
Source meilleurtaux
6
The power of a proven business model
website
Individuals
Banks
Generates business for branch offices
Advisors
meilleurtaux
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The benefits of multi-channel distribution

• A retail website to leverage the boom in internet
  use and e-commerce
• 4 million unique visitors in 2006, with 370,681
  applications filed (up 22)
• Two call centres to meet customers needs
• Paris opened in 2004 (48 advisors at end 2006)
• Le Havre opened in 2006 (59 advisors at end 2006)
• Branch offices to promote meilleurtauxs products
  and new brokerage services through a local agent
• 45 offices at end 2006 (292 advisors) up by a
  factor of 10 in four years
• A franchise network for towns with between 50,000
  and 100,000 residents
• 35 franchises at end 2006

All the resources are in place to execute an
aggressive market share acquisition strategy
meilleurtaux
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A business model with profitable growth

• Lower customer acquisition costs
  through
• increased website use, coupled with
• more call centre business

website
Generates applications

• Higher loan application conversion rates through
• an expanded chain of branch offices in
  high-potential cities with gt100,000 residents
  and
• more franchises in towns with 50,000-100,000
  residents

• Greater branch office profitability relative to
  their age
• breakeven during the first year
• profit growth from the second year

meilleurtaux
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2006 business review Major strategic investments
a surge in revenues
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Market environment Robust mortgage demand
New mortgage originations in France
166
15
In billion
21
144
118
23
96
Source Banque de France
The mortgage market jumped 15 in 2006
Business
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Mortgage brokerage A high-potential, growing
market
Mortgage broker market share in 2006 (estimate)
Mortgage broker market share in France
19
18
15
Source meilleurtaux
Source meilleurtaux, Wholesale Access, and
Mortgage Finance Gazette
Mortgage brokers had 19 of the French market in
2006
Business
12
Revenue skyrocketed 74 in 2006
Number of applications billed
Revenue growth (million )
68
74
124
152
89
894
Total applications billed to customers less
cancelled applications

• meilleurtaux is gaining market share
• 2 of the mortgage market in 2006, up from 1.4
  in 2005
• 11 of the mortgage broker market in 2006, up
  from 8 in 2005

Business
Source meilleurtaux
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2006 highlights

• Remarkably successful franchise openings
• 14 total franchises at end of June 35 at
  year-end
• 16 new branch offices
• 4 advisor offices
• 3 relocations
• Le Havre call centre opened in March
• 59 financial advisors at year-end
• Launch of the meilleurtaux borrowers insurance
  Two types
• meilleurtaux Borrower for branch office and
  website customers
• Premium Borrower for brokers
• A partnership with FNAIM (French property
  federation)
• Largest professional property association (a
  network of 11,000 agencies)
• Transferred to Eurolist on 25 October 2006

Business
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Higher loan application conversion
Loan application conversion rate
Applications billed to customers as a percent of
applications submitted
Branch offices logically have a higher conversion
rate because applications are fully prepared
Business
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Focus on the Le Havre call centre

• Goals
• Create a second website
• Allocate additional resources to meet customers
  needs
• Whats already been done
• Call centre opened in early March 2006
• Ramp-up has been slower than expected
• A clear revenue shortfall in the fourth quarter
  due to
• organizational difficulties related to
  insufficiently-qualified new hires and
• poor distribution of online loan applications
  between the call centres and branch offices gt
  too few applications handled by call centres

Weaker-than-expected revenue growth in the fourth
quarter
Business
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Weaker-than-expectedrevenue growth in Q4
Quarterly revenue growth (million )
33
71
88
133
95 increase in the first 9 months, but 1.6
million below target in the fourth quarter
Business
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Revenue boosted by a pick-up in internet use
2005 Consolidated revenue breakdown
2006 Consolidated revenue breakdown
68 generated by the website
60 generated by the website
Multi-channel distribution in which the website
plays a key role (60 of total revenue)
Business
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Branch offices starting to benefit from advisor
referrals
2006 Branch office revenue breakdown
2005 Branch office revenue breakdown
Advisor referrals are a new, continuously-expandin
g growth engine
Business
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Premium Borrower meilleurtaux borrowers
insurance

• Premium Borrower was introduced in 2006 with
  great success
• Policies are taken out with Direct Assurance
  (part of the AXA group)
• Wide distribution through meilleurtaux offices,
  insurance brokers, and mortgage brokers
• A product tailored to customers needs
• Customers can save an average of 10,000
• 70 of purchasers fit the target customer profile
  (under 35 years old)
• An innovative product
• Includes partial disability and unemployment
  insurance (optional)
• Attractive to meilleurtaux partners
• Some of the lowest rates in the market combined
  with the best guaranties
• A source of recurring revenue

Business
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2006 resultsA surge in revenue with profit
impacted by new openings
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Solid revenue growth
In million
A surge in revenue fuelled by the website (60 of
revenue, quadrupled in two years) and carried by
the branch offices (70 of revenue, up by a
factor of 5 in two years)
Results
IFRS data
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Profit still has room for improvement
In million
Major growth spending over the past two years
continue to weigh on margins, with Q4
temporarily hurt by lagging revenue from Le Havre.
Results
IFRS data
23
IFRS income statement
24
Operating expense breakdown
2006
2005
Personnel expenses made up 60 of operating
expenses in 2006 7.7 of revenue is spent on
fees related to business premises (vs. 7.6 in
2005) and 8.3 on advertising (vs. 4.4 in 2005)
Results
IFRS data
25
A short-term dip in operating margin
Operating profit and operating margin

• Capital expenditures for business expansion
• New branch offices
• Le Havre call centre opening
• Headquarters move to La Défense
• Non-recurring expenses
• Transfer to Eurolist

9.5
7.2
6.4
CapEx spending and slower revenue growth in
Q4 Operating profit 1.4 million below target
(in line with 2005)
Results
IFRS data
26
Operating margin by distribution channel
2006 revenue and operating margin
18.3
6.4
4.1
Branch offices operating margin hurt by an
aggressive expansion strategy Call centres
lower-than-expected operating margin from delays
at Le Havre
Results
IFRS data
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Branch offices profit pressure from expansion
costs

• An aggressive expansion strategy was launched in
  2004
• 45 branch offices at year-end 2006, up from18 at
  year-end 2004
• 292 financial advisors at year-end 2006, up from
  117 at year-end 2004
• Revenue up by a factor of 5 in two years
• Profitability is low because most offices are
  still new
• 37 offices are less than two years old
• Margins have been squeezed by the rapid expansion
  
• An ambitious recruitment policy has weighed on
  personnel expenses
• New advisors generate no revenue during their
  first three months

Branch office profits are under pressure from new
openings and the large percentage of relatively
young offices
Results
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Branch offices typical maturity cycle

• Model an office should reach maturity in two
  years and achieve a 15 operating margin going
  forward
• Typical maturity cycle
• Breakeven on direct costs after 8 months
• Breakeven on all operating expenses after 16 to
  18 months
• After two years, the gross operating margin
  (after direct costs) should be 30, with a total
  operating margin of 15
• In 2006, 8 offices were over 2 years old, 15 over
  1 year old, and 22 less than 1 year old
• In 2006, 5 offices had gt15 operating margin, 16
  between 0 and 15, and 24 were negative

The large percentage of young offices has
logically weighed on margins
Results
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New Le Havre call centrelower-than-expected
revenue

• Operating challenges related to starting-up a new
  centre
• Hiring is taking longer than planned (building a
  team from scratch)
• Additional resources have been allocated to train
  employees
• Business volume at the call centre remains
  sluggish despite a climbing conversion rate
• 7 increase in loan applications sent to banks
  from call centres vs. a 57 increase from branch
  offices
• Poor distribution of online loan applications
  between call centres and branch offices due to
  the 100 newly-hired financial advisors in the
  offices

The timing delay at Le Havre does not diminish
the call centres potential
over the medium-term
Results
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Growth in free cash flow
All capital expenditures between 2003 and 2006
(IT systems, new offices, and the new call
centre) were paid for by operating cash flow
Results
IFRS data
31
A healthy balance sheet
2006 (million )
2005 (million )
Equity
10.8
Non-current assets
8.7
Equity
9.1
Non-current assets
4.3
Liabilities
15.6
Receivables
8.7
Liabilities
7.7
Receivables
5.8
Cash
9.0
Financial liabilities
4.2
2.3
Financial liabilities
Cash
6.8
Total assets
26.4
26.4
Total assets
16.8
16.8
Net cash position
4.7
Net cash position
4.5
2005 summary balance sheet
2006 summary balance sheet
A healthy balance sheet with 41 equity and a
positive cash position
Results
IFRS data
32
meilleurtaux shareholders
Results
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2007 goals Continue gaining market share with a
priority on improving margins
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Goals

• 20 revenue growth (at least)
• 10 operating margin

Goals
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Action plan

• Restructure the Le Havre call centre
• Boost business at both call centres
• Enhance branch office performance
• Develop products and services complementary to
  the meilleurtaux core business combine credit
  and insurance

Goals
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1. Restructure the Le Havre call centre

• Develop specialised advisors
• 25 front-office financial advisors responsible
  for assembling loan applications with banks
• 35 back-office telephone advisors responsible for
  finishing incomplete loan applications
• missing signatures
• additional credit checks

Loan application target 5 applications/day per
advisor Revenue target 15,000/month per advisor
Goals
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2. Boost business at both call centres

• Couple higher volumes with better call-centre
  organisation
• Allocate qualified loan applications
• Nurse loan applications
• Re-qualify loan applications
• Strengthen synergies with branch offices (loan
  applications not sent to banks)

Call centre target 15 loan application
conversion rate Target reached in January 2007
Goals
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3. Enhance branch office performance

• Support profitability
• Underscore performance tracking
• Improve management and training applications
• Slow the pace of new openings
• 7 new branch offices in 2007 (vs. 16 in 2006)
• Marseille Canebière, St Germain en Laye,
  Perpignan, Valence, Auteuil, Angers, and Le Havre
• 25 new franchises (vs. 35 in 2006, out of 150
  requests)
• Select franchise applicants
• Build an advisor referral network

Continue with a selective expansion plan
Goals
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4. Develop complementary products and services

• Two priority growth drivers related to
  meilleurtauxs core business
• Borrowers insurance
• A huge market (insurance is mandatory)
• 90,000 branch office appointments privileged
  customer relationships
• Loan refinancing
• A growing market
• A value-added service gt substantial margins

Goal Set up a loan refinancing department and
create a meilleurtaux refinancing service 
Goals
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2007 year-to-date in line with projections

• Q1 was on track with full-year forecasts
• Loan applications put together during the
  previous quarter were finalised
• gt Revenue from applications started at the
  end of 2006
• Q1 broke all loan-application processing records
• Average of 1,500 applications/calendar day in
  March, with a high of 1,900 (2006 average was
  1,000)

meilleurtaux is in an excellent position to
benefit from the swelling brokerage
market
Goals
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A long-term growth strategy

• The power of multi-channel distribution
• Online quick responses, large volumes, in tune
  with customer needs
• Branch offices advice, personal service,
  partnerships with real estate professionals (55
  of the market), meets banks stringent demands,
  broad range of services
• meilleurtauxs strong reputation enables it to
  leverage both channels, to
• Become a major player in mortgage distribution
  and
• Enlarge its range of services, so as to better
  meet retail customer needs and generate
  additional revenue.
• Solid, profitable, and
  long-term growth

Goals
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SFAF Meeting29 March 2007