Wrap Text
Audited Financial Results for the year ended 30 September 2012
Transaction Capital Limited
Registration number: 2002/031730/06 (Incorporated in the Republic of South Africa)
("Transaction Capital" or "the company" or "the group")
JSE share code: TCP
ISIN code: ZAE000167391
Taxation reference number: 9466/298/15/6
AUDITED FINANCIAL RESULTS
for the year ended 30 September 2012
TOTAL INCOME
UP 20.6% TO R4 350m
NORMALISED HEADLINE EARNINGS
UP 31.3% TO R424m
GROSS LOANS AND ADVANCES
UP 33.9% TO R9 758m
NON-INTEREST INCOME
UP 16.7% TO R2 126m
NORMALISED HEADLINE EARNINGS PER SHARE
UP 17.1% TO 81.6 CENTS
NAV PER SHARE
UP 42.9% TO 496.5 CENTS
2012 2011
Consolidated income statement Change Audited Audited
for the year ended 30 September 2012 % Rm Rm
Interest and other similar income 24.6 2 224 1 785
Interest and other similar expense 10.7 (883) (798)
Net interest income 35.9 1 341 987
Impairment of loans and advances 30.7 (740) (566)
Risk adjusted net interest income 42.8 601 421
Non-interest revenue 16.7 2 126 1 821
Operating costs 22.0 (2 181) (1 788)
Profit before tax 20.3 546 454
Income tax expense 3.7 (112) (108)
Profit from continuing operations 25.4 434 346
Loss from discontinued operations (70)
Profit for the year 57.2 434 276
Basic earnings attributable to non-controlling equity holders 27.6 33 26
Basic earnings attributable to ordinary shareholders 60.4 401 250
Basic earnings per share from continuing operations 11.7 77.3 69.2
Diluted basic earnings per share from continuing operations 11.7 77.3 69.2
Headline earnings per share from continuing operations 12.2 78.0 69.6
Normalised headline earnings per share 17.1 81.6 69.7
Consolidated statement of comprehensive 2012 2011
income Change Audited Audited
for the year ended 30 September 2012 % Rm Rm
Profit for the year 57.2 434 276
Other comprehensive income (3)
Movement in cash flow hedging reserve
Fair value (losses)/gains arising during the year (6) 1
Amount removed from other comprehensive income
and recognised in the profit and loss 4 (4)
Deferred tax 2
Total comprehensive income for the period 59.0 434 273
Attributable to non-controlling equity holders 27.6 33 26
Attributable to ordinary shareholders 62.3 401 247
2012 2011
Headline earnings reconciliation Change Audited Audited
for the year ended 30 September 2012 % Rm Rm
Group profit attributable to ordinary
shareholders 60.4 401 250
Headline earnings adjustable items (deducted)/
added
Losses on disposal of properties and equipment 2
Impairment of goodwill 3 2
Capital loss on discontinued operations 45
Tax on headline earnings adjustments (1)
Headline earnings 36.4 405 297
Trading loss on discontinued operations 26
Tax on headline earnings adjustments (1)
Headline earnings from continuing operations 25.8 405 322
Listing costs 19 1
Normalised headline earnings 31.3 424 323
2012 2011
Consolidated statement of financial position Change Audited Audited
at 30 September 2012 % Rm Rm
Assets
Cash and cash equivalents 62.6 1 132 696
Tax receivables (56.4) 28 64
Trade and other receivables (18.3) 410 502
Inventories 30.1 203 156
Loans and advances 30.7 8 780 6 720
Purchased book debts 12.7 347 308
Other loans receivable (0.9) 228 230
Intangible assets (8.8) 36 40
Property and equipment 10.3 308 279
Goodwill (0.3) 927 930
Deferred tax assets (0.8) 130 131
Total assets 24.6 12 529 10 056
Liabilities
Bank overdrafts (13.5) 158 183
Tax payables (11.7) 13 14
Trade and other payables 57.4 858 545
Provisions 67.4 3 2
Interest-bearing liabilities 11.8 8 353 7 469
Senior debt 17.2 6 876 5 867
Subordinated debt (7.8) 1 477 1 602
Deferred tax liabilities 17.1 156 134
Total liabilities 14.3 9 541 8 347
Equity
Ordinary share capital and premium 97.3 1 792 908
Reserves 6.7 (3) (3)
Retained earnings 52.1 1 112 731
Equity attributable to ordinary equity holders
of the parent 77.3 2 901 1 636
Non-controlling interests 19.2 87 73
Total equity 74.8 2 988 1 709
Total equity and liabilities 24.6 12 529 10 056
2012 2011
Condensed consolidated statement of cash flows Audited Audited
for the year ended 30 September 2012 Rm Rm
Net cash (utilised)/generated by operating activities (255) 176
Net cash utilised by investing activities (133) (32)
Net cash raised/(utilised) by financing activities 849 (14)
Net increase in cash and cash equivalents 461 130
Cash and cash equivalents at beginning of the year 513 383
Cash and cash equivalents at end of the year 974 513
Asset-backed lending Unsecured lending Credit services Payment services Corporate support Total group
2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
Condensed segment report Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Condensed income statement
for the year ended 30 September 2012
Net interest income 552 494 809 524 4 (8) (7) (17) (23) 1 341 987
Impairment of loans and advances (245) (242) (494) (323) (1) (1) (740) (566)
Non-interest revenue 191 156 724 609 769 632 467 428 (25) (4) 2 126 1 821
Total operating costs (333) (271) (805) (616) (652) (533) (397) (378) 6 10 (2 181) (1 788)
Profit/(loss) before tax 165 137 234 194 120 91 63 50 (36) (18) 546 454
Normalised headline earnings 133 109 166 138 88 61 43 37 (6) (22) 424 323
Services: EBITDA 125 108 129 107
Net interest margin (%) 12.1 11.8 21.2 21.0 15.9 14.5
Cost to income (%) 44.8 41.6 52.5 54.3 84.4 85.5 86.3 88.3 62.9 63.7
Number of employees 555 411 1 179 964 2 518 2 518 389 369 56 43 4 697 4 305
Condensed statement of financial
position
at 30 September 2012
Assets
Cash and cash equivalents 528 182 270 131 88 48 154 125 92 210 1 132 696
Loans and advances 4 801 4 011 3 920 2 633 59 76 8 780 6 720
Purchased book debts 347 308 347 308
Other assets and receivables 386 490 809 759 255 184 302 276 518 623 2 270 2 332
Total assets 5 715 4 683 4 999 3 523 749 540 456 401 610 909 12 529 10 056
Liabilities
Bank overdrafts 137 180 21 3 158 183
Interest-bearing liabilities 4 468 3 891 3 229 2 448 140 71 67 91 449 968 8 353 7 469
Senior debt 4 103 3 467 2 566 1 947 140 71 67 91 291 6 876 5 867
Subordinated debt 365 424 663 501 449 677 1 477 1 602
Group 410 197 469 285 22 (901) (482)
Other liabilities and payables 267 155 254 144 257 185 205 168 47 43 1 030 695
Total liabilities 5 282 4 423 3 952 2 877 419 256 293 262 (405) 529 9 541 8 347
Total equity 433 260 1 047 646 330 284 163 139 1 015 380 2 988 1 709
Return on average assets (ROA) (%) 2.5 2.4 4.6 5.1 12.4 12.2 12.6 9.7 3.8 3.6
Return on average equity (ROE) (%) 39.3 53.9 23.2 24.2 28.9 22.4 30.5 23.6 18.6 21.9
Capital adequacy ratio (%) 22.2 18.5 40.5 32.0 47.8 51.3 54.0 50.2 33.8 28.2
Average cost of borrowings (%) 11.2 11.1 11.7 12.8 9.5 9.0 7.9 9.0 11.0 11.2
Credit loss ratio (%) 5.4 5.8 13.0 13.0 8.8 8.3
Provision coverage (%) 4.7 4.1 16.6 12.9 10.5 7.8
Non-performing loan ratio (%) 30.7 26.6 30.6 24.3 30.4 25.4
Non-performing loan coverage (%) 15.5 15.5 54.3 53.1 34.4 30.8
Ordinary Non-
Share capital Cash flow Retained shareholders' controlling Total
Condensed consolidated statement of changes in equity and premium hedging reserve earnings equity interests equity
for the year ended 30 September 2012 Rm Rm Rm Rm Rm Rm
Balance at 30 September 2010 834 500 1 334 44 1 378
Total comprehensive income (3) 250 247 26 273
Profit for the year 250 250 26 276
Other comprehensive income (3) (3) (3)
Dividends paid (14) (14)
Transactions with non-controlling equity holders (19) (19) 17 (2)
Issue of shares 134 134 134
Repurchase of shares (23) (23) (23)
Distributions from share premium (37) (37) (37)
Balance at 30 September 2011 908 (3) 731 1 636 73 1 709
Total comprehensive income 401 401 33 434
Profit for the year 401 401 33 434
Dividends paid (4) (4)
Transactions with non-controlling equity holders (20) (20) (15) (35)
Issue of shares 913 913 913
Repurchase of shares (11) (11) (11)
Share issue costs (18) (18) (18)
Balance at 30 September 2012 1 792 (3) 1 112 2 901 87 2 988
Group performance
Transaction Capital is pleased to present its maiden results as a public company.
The year ended 30 September 2012 saw substantial progress towards the group's strategic,
structural, organisational and operating objectives, culminating in a financial performance
slightly ahead of expectations:
- gross loans and advances grew 33.9% to R9 758 million;
- total income grew 20.6% to R4 350 million;
- non-interest revenue grew 16.7% to R2 126 million;
- basic earnings grew 60.4% to R401 million, whilst basic earnings per share grew 42.9%
to 77.3 cents;
- headline earnings grew 36.4% to R405 million, whilst normalised headline earnings grew
31.3% to R424 million;
- normalised headline earnings per share grew 17.1% to 81.6 cents;
- resulting from the raising of R870 million of equity prior to and during the Initial Public
Offering, the group's capital adequacy at year end was 33.8%, with a consequent decline
in ROE from 21.9% to 18.6%; and
- NAV per share increased 42.9% from 347.4 cents to 496.5 cents.
Environment
South Africa experienced a decline in economic growth through 2012 in concert with the global economic slowdown and in particular
that of Europe, still a major trading partner. As the financial year drew to a close, the country's heightened socio-economic risk was
reflected in downgrades of South Africa's sovereign credit ratings by Moody's and Standard and Poor's.
In contrast the consumer economy, reflected in solid retail and motor vehicle sales, was buoyed by real wage growth, the lowest interest
rates in over 30 years, and a growth in credit extension to households.
The latter, particularly with regard to the rapid rate of unsecured lending growth, gave rise to commentary by the Reserve Bank, the
Ministry of Finance and the National Credit Regulator voicing concerns about over indebtedness. This culminated in the Minister of
Finance and the Banking Association of South Africa issuing a joint statement on October 19th regarding responsible conduct for bank
lending and the provision of associated products and services. Transaction Capital has formally communicated its concurrence with the
tenor and direction of this statement, which is entirely consistent with Transaction Capital's commitment to responsible market conduct
within the letter and spirit of all laws and regulations.
Notwithstanding a challenging socio-economic environment and aggressive competitive activity most evident in high marketing
expenditures and product innovation the demand for the specialised financial products and services offered by Transaction Capital
remained strong.
Financial performance
Transaction Capital's normalised headline earnings for the year ended 30 September 2012 increased by R101 million or 31.3% to
R424 million. The result was the combination of revenue growth and cost containment from all divisions.
Net interest income grew by 35.9% to R1 341 million. The group improved its net interest margin from 14.5% to 15.9% due to an
enhanced yield on gross advances as the weighting of loans and advances shifted towards higher interest rate unsecured loans. Actual
cost of debt reduced with the increased weighting of equity capital.
The increase in the group's credit loss ratio from 8.3% to 8.8%, is purely as a result of the increased weighting of higher credit risk
unsecured loans in the composition of total loans and advances, with unsecured lending having a higher credit loss ratio than asset-
backed lending.
Non-interest income grew year-on-year by 16.7% to R2 126 million due to:
- growth in loans and advances of 30.7%, which drove fee and commission income (15.5% growth) as well as insurance related
income (52.8% growth); and
- purchased book revenue within credit services grew by 23.9%, driven mainly by the growth in purchased book debts of 12.7% to
R347 million and the efficiency created via debit order and other collection strategies.
Total expenses grew by 22.0% to R2 181 million for the year. This was as a result of both an increase in assets in the lending divisions,
and revenue generating activities in the services divisions. The cost to income ratio improved to 62.9% from 63.7% a year ago. The
improvement is the result of a further shift in the group's operations to lending, which has a lower cost to income ratio than the cost intensive
services divisions. There was no significant change in the composition of the group's costs although some cost efficiencies were realised
from the investment in systems and process upgrades.
In line with international trends, Transaction Capital began restructuring its capital away from subordinated debt towards equity.
The R400 million of equity raised during the June 2012 Initial Public Offering ("IPO") was preceded by two pre-IPO capital raising
transactions, raising R238 million of equity, and the conversion of R232 million of convertible debt to equity, increasing equity R870 million
in total. At year-end, the group was favourably capitalised, with a capital adequacy ratio of 33.8%.
Strategic progress
Transaction Capital has two strategic objectives: the competitive positioning of each business unit within its chosen market segment; and
the creation of value arising from the composition and capabilities of the group.
Progress with the first objective is reflected in the operational highlights below. Progress with the second entailed the following major
initiatives resulting from the implementation of the group's five strategic thrusts, described fully in Transaction Capital's Pre-Listing Statement
of June 2012:
- strengthening of the board with the appointment of Messrs Woolam, Hurwitz and Ntumba;
- continued investment group wide in the appointment and development of executive leadership;
- substantial capital and operating expenditure in technology;
- intra-group value creation through collaboration, shared services and intercompany transactions; and
- the facilitation of more than R3.9 billion of debt capital from 14 debt investors.
Operational highlights
Asset Backed Lending SA Taxi, Rand Trust
Dominated by SA Taxi, the division increased normalised headline earnings by 22.0% to R133 million from a 19.9% growth in gross
loans and advances to R5.0 billion.
SA Taxi is a specialist financier of mini-bus taxis to SMEs. Credit quality continues to improve with the bias towards the financing of
premium vehicles. The division's non-performing loan ratio increased from 26.6% to 30.7%, while the provision coverage was strengthened from
4.1% to 4.7% and the credit loss ratio declined from 5.8% to 5.4%. The company has invested heavily in the improved efficiency of
Taximart, a full service refurbishment facility established to curb credit losses by enhancing the value realised on the resale of repossessed
vehicles.
Rand Trust is a niched provider of receivables discounting and commercial debtor management to SMEs. The company produced a solid
growth of both loans and advances and net interest income, with headline earnings growing at a much lower rate off a modest base as
a result of investment for growth.
Unsecured Lending Bayport
Bayport is a provider of unsecured personal loans to middle market consumers. The division invested heavily in people and infrastructure;
increasing normalised headline earnings 20.3% to R166 million from a 54.6% growth in gross loans and advances to R4.7 billion.
The company maintained a stable credit loss ratio of 13.0%, and while the non-performing loan ratio increased from 24.3% to 30.6%,
provision coverage was strengthened from 12.9% to 16.6%.
Bayport continues to grow cautiously, using its unique agent distribution model to target client and employer segments, while actively
monitoring credit quality, loan size and term.
The earnings of the Credit Services and Payment Services divisions remain of a high quality, as evidenced by the strong EBITDA
generation which increased by 18.1% to R254 million.
Credit Services MBD Credit Solutions and Principa Decisions (previously PIC Solutions)
The division increased normalised headline earnings by 44.3% to R88 million, achieving significant growth in revenue from the collection
of purchased book debts and efficient collection strategies. Earnings were enhanced by sound cost and productivity management.
MBD Credit Solutions collects non-performing consumer and commercial debt on behalf of South Africa's leading credit providers and
as principal. The company grew via the acquisition of, and revenue generated from, the collection of purchased book debts, resulting in
the opening of a ninth call centre located in central Johannesburg. Its capabilities were further enhanced by the acquisition of two small
businesses from within the group pursuant to the simplification of structures.
Principa Decisions produced an excellent result, enhanced by the turnaround of the Middle East operation, and the conclusion of a joint
venture with Simah, the leading Saudi credit bureau.
Payment Services Paycorp
Paycorp comprises ATM Solutions, which owns, installs, operates and maintains a fleet of off-site ATMs in South Africa and Namibia, and
DrawCard, an early stage prepaid debit card issuing business. The division grew normalised headline earnings by 16.2% to R43 million.
The active ATM fleet grew moderately by 7.6% to 4 381 machines, which represents an estimated 16% market share of the total
number of ATMs in South Africa. The uptime of the network continued to perform at the highest levels, while the relocation of ATMs from
underperforming sites to better locations resulted in increased transaction volumes and values. Various successful initiatives undertaken by
management to improve efficiencies and contain cost included measures to address ATM vandalism and cash in transit costs.
Prospects
Transaction Capital is pleased with the strategic and operating progress of recent years and particularly pleased with the step change in
organisational maturity pursuant to the listing of the group. Improved governance, risk management and predictability are the consequence.
To date the competitive strategies, business models, organisation design and human capabilities of Transaction Capital are proving to
be resilient and relevant in the carefully selected segments in which the group operates. We will continue to invest wherever necessary in
pursuit of sustainable quality earnings growth.
Dividend declaration
In line with the stated dividend policy of 4-5 times cover, the board has declared a final gross cash dividend of 9 cents per share net
of dividend withholding tax, where applicable, for the six months ended 30 September 2012 (the dividend period), to those members
recorded in the register of members on the record date, appearing below. The dividend is declared out of income reserves. The company
has utilised STC credits to the value of 9 cents per share to offset the 15% withholding tax, in full resulting in a net dividend of 9 cents
per share to those shareholders who are not exempt from dividends tax. The company has a further R116 million of STC credits available. The salient features applicable to the final dividend are as
follows:
Issued shares as at declaration date 584 304 184
Declaration date Thursday, 29 November 2012
Last day to trade cum dividend Thursday, 13 December 2012
First day to trade ex dividend Friday, 14 December 2012
Record date Friday, 21 December 2012
Payment date Monday, 24 December 2012
Share certificates may not be dematerialised or rematerialised between Friday, 14 December 2012, and Friday, 21 December 2012,
both dates inclusive.
On Monday, 24 December 2012, the cash dividend will be electronically transferred to the bank accounts of all certificated shareholders
where this facility is available. Where electronic fund transfer is not available or desired, cheques dated 24 December 2012 will be
posted on that date. Shareholders who have dematerialised their share certificates will have their accounts at their CSDP or broker credited
on Monday, 24 December 2012.
Subsequent events
No events have taken place between 30 September 2012 and the date of the release of this report, which would have a material impact
on either the financial position or operating results of the group.
On behalf of the board of directors
M J Lamberti D M Hurwitz
Chief executive officer Chief financial officer
29 November 2012
Auditor's opinion
The group's external auditors have issued their opinion on the group's financial statements for the year ended 30 September 2012.
The audit was performed in accordance with International Standards on Auditing. They have issued an unmodified audit opinion.
These condensed results have been derived from the group audited annual financial statements and are consistent in all material respects,
with the annual financial statements. A copy of the external audit report is available for inspection at the company's registered office. Any
reference to future financial performance and operational information included in this announcement, has not been audited or reported
on by the group's external auditors.
The auditor's report does not necessarily cover all of the information contained in this announcement. Shareholders are therefore advised
that in order to obtain a full understanding of the nature of the auditor's work they should obtain a copy of that report together with the
accompanying financial information from the registered office of the company.
Basis for preparation
The audited consolidated financial statements of the group have been prepared in accordance with International
Financial Reporting Standards ("IFRS"), the AC 500 standards, the JSE Limited Listings Requirements, the going
concern principle and the requirements of the South African Companies Act, 71 of 2008. The abridged financial
statements are presented in accordance with IAS 34 and the Listings Requirements.
The accounting policies and their application are consistent, in all material respects, with those detailed in
Transaction Capital's prior year annual financial statements, except for the adoption on 1 October 2011 of
those new and amended statements and interpretations of IFRS listed in Transaction Capital's 2012 annual financial
statements with effective dates for Transaction Capital of 1 October 2011.
The adoption of the new and amended statements of IFRS, interpretations of statements of IFRS had no material effect
on the group's financial results.
These condensed financial results have been prepared under the supervision of D M Hurwitz, Chief financial officer.
Administration
Transaction Capital Limited
Registration number: 2002/031730/06 (Incorporated in the Republic of South Africa)
("Transaction Capital" or "the company" or "the group")
JSE share code: TCP
ISIN code: ZAE000167391
Taxation reference number: 9466/298/15/6
Registered office: Sandhavon Office Park, 14 Pongola Crescent, Eastgate Ext.17, Sandton, 2199,
PO Box 41888, Craighall, 2024, Republic of South Africa, Tel: +27 (0) 11 531 5485
Fax: +27 (0) 11 262 3713
Directors: Christopher Seabrooke (Chairman)*, Mark Lamberti (Chief executive officer),
David Hurwitz, Jonathan Jawno, Steven Kark, Phumzile Langeni*, Brenda Madumise*,
Michael Mendelowitz, Cedric Ntumba*, Roberto Rossi, Dumisani Tabata*,
David Woollam*, Shaun Zagnoev** (*Independent non-executive) (**Non-executive)
Company secretary: P J Katzenellenbogen
Auditors: Deloitte & Touche
Sponsor: Deutsche Securities (SA) Proprietary Limited
Transfer secretaries: Computershare Investor Services Proprietary Limited,
70 Marshall Street, Johannesburg, 2001
www.transactioncapital.co.za
Date: 29/11/2012 07:11:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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