Wrap Text
Unaudited Financial Results for the half year ended 31 March 2013
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: ZAE000167391
Taxation registration number: 9466/298/15/6
UNAUDITED FINANCIAL RESULTS
FOR THE HALF-YEAR ENDED 31 MARCH 2013
- TOTAL INCOME R2 504 million
up 21.8% (2012: R2 055 million)
- NON-INTEREST REVENUE R1 182 million
up 15.8% (2012: R1 021 million)
- GROSS LOANS AND ADVANCES R10 785 million
up 27.3% (2012: R8 471 million)
- HEADLINE EARNINGS R233 million
up 36.3% (2012: R171 million)
- WEIGHTED AVERAGE NUMBER OF SHARES 583.8 million
up 23.3% (2012: 473.4 million)
- HEADLINE EARNINGS PER SHARE 39.9 cents
up 10.5% (2012: 36.1 cents)
- NET ASSET VALUE PER SHARE 527.6 cents
up 30.1% (2012: 405.5 cents)
- RETURN ON EQUITY 15.6%
down 20.4% (2012: 19.6%)
- MAIDEN INTERIM DIVIDEND PER SHARE
up 9 cents (2012: 0 cents)
1H13 1H12 FY12
Unaudited Reviewed Change Audited
Consolidated income statement Rm Rm % Rm
Interest and other similar income 1 322 1 034 27.9 2 224
Interest and other similar expense (471) (443) 6.3 (883)
Net interest income 851 591 44.0 1 341
Impairment of loans and advances (492) (337) 46.0 (740)
Risk-adjusted net interest income 359 254 41.3 601
Non-interest revenue 1 182 1 021 15.8 2 126
Operating costs (1 236) (1 035) 19.4 (2 181)
Profit before tax 305 240 27.1 546
Income tax expense (54) (56) (3.6) (112)
Profit for the period 251 184 36.4 434
Attributable to non-controlling equity holders 18 13 38.5 33
Attributable to ordinary shareholders 233 171 36.3 401
Basic earnings per share from continuing
operations 39.9 36.1 10.5 77.2
Diluted basic earnings per share from
continuing operations 39.9 38.0 5.0 77.2
Headline earnings per share from continuing
operations 39.9 36.1 10.5 78.0
Normalised headline earnings per share 39.9 38.0 5.0 81.6
1H13 1H12 FY12
Consolidated statement of Unaudited Reviewed Change Audited
comprehensive income Rm Rm % Rm
Profit for the period 251 184 36.4 434
Other comprehensive income 3 100.0
Movement in cash flow hedging reserve
Fair value gains/(losses) arising during the period 29 100.0 (6)
Amount removed from other comprehensive
income and recognised in the profit and loss (18) (100.0) 4
Deferred tax (8) (100.0) 2
Total comprehensive income for the period 254 184 38.0 434
Attributable to non-controlling equity holders 18 13 38.5 33
Attributable to ordinary shareholders 236 171 38.0 401
1H13 1H12 FY12
Unaudited Reviewed Change Audited
Headline earnings reconciliation Rm Rm % Rm
Group profit attributable to ordinary
shareholders 233 171 36.3 401
Headline earnings adjustable items
(deducted)/added
Losses on disposal of properties and equipment 2
Impairment of goodwill 3
Tax on headline earnings adjustments (1)
Headline earnings from continuing operations 233 171 36.3 405
Listing costs 9 (100.0) 19
Normalised headline earnings 233 180 29.4 424
1H13 1H12 FY12
Consolidated statement of Unaudited Reviewed Change Audited
financial position Rm Rm % Rm
Assets
Cash and cash equivalents 1 260 938 34.3 1 101
Tax receivables 30 47 (36.2) 28
Trade and other receivables 624 555 12.4 410
Inventories 170 172 (1.2) 203
Loans and advances 9 594 7 717 24.3 8 780
Purchased book debts 420 318 32.1 347
Other loans receivable 291 225 29.3 228
Other investments 1 28 (96.4)
Intangible assets 34 38 (10.5) 36
Property and equipment 331 292 13.4 308
Goodwill 927 930 (0.3) 927
Deferred tax assets 127 138 (8.0) 130
Total assets 13 809 11 398 21.2 12 498
Liabilities
Bank overdrafts 233 180 29.4 158
Tax payables 22 74 (70.3) 13
Trade and other payables 748 560 33.6 827
Provisions 6 4 50.0 3
Interest-bearing liabilities 9 458 8 351 13.3 8 353
Senior debt 7 720 6 668 15.8 6 876
Subordinated debt 1 738 1 683 3.3 1 477
Deferred tax liabilities 158 123 28.5 156
Total liabilities 10 625 9 292 14.3 9 510
Equity
Ordinary share capital and premium 1 787 1 159 54.1 1 792
Reserves (3) (100.0) (3)
Retained earnings 1 292 883 46.4 1 112
Equity attributable to ordinary equity holders
of the parent 3 079 2 039 51.0 2 901
Non-controlling interests 105 67 56.7 87
Total equity 3 184 2 106 51.2 2 988
Total equity and liabilities 13 809 11 398 21.2 12 498
1H13 1H12 FY12
Condensed consolidated statement Unaudited Reviewed Change Audited
of cash flows Rm Rm % Rm
Net cash (utilised)/generated by operating activities 233 (83) (380.7) (243)
Net cash utilised by investing activities (144) (89) 61.8 (133)
Net cash raised/(utilised) by financing activities (5) 460 (101.1) 849
Net increase in cash and cash equivalents 84 288 (70.8) 473
Cash and cash equivalents at beginning of the period 943 470 100.6 470
Cash and cash equivalents at end of the period 1 027 758 35.5 943
Asset-backed lending Unsecured lending Credit services Payment services Corporate support Group
1H13 1H12 1H13 1H12 1H13 1H12 1H13 1H12 1H13 1H12 1H13 1H12
Unaudited Reviewed Unaudited Reviewed Unaudited Reviewed Unaudited Reviewed Unaudited Reviewed Unaudited Reviewed
Condensed segment report Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Condensed income statement
for the six months ended 31 March 2013
Net interest income 318 259 525 356 1 (4) (4) 11 (20) 851 591
Impairment of loans and advances (128) (122) (362) (215) (2) (492) (337)
Non-interest revenue 92 89 450 337 390 365 262 230 (12) 1 182 1 021
Total operating costs (193) (151) (502) (380) (330) (311) (219) (189) 8 (4) (1 236) (1 035)
Profit before tax 89 75 111 98 59 54 39 37 7 (24) 305 240
Headline earnings 68 58 89 69 43 39 28 24 5 (19) 233 171
Services: EBITDA 62 58 77 69
Net interest margin (%) 12.2 11.9 20.6 20.9 16.4 15.1
Cost-to-income (%) 47.1 43.4 51.5 54.8 84.4 84.9 84.9 83.9 60.8 64.2
Number of employees 572 511 1 221 1 085 2 831 2 410 411 344 67 53 5 102 4 403
Condensed statement of financial position
at 31 March 2013
Assets
Cash and cash equivalents 483 476 553 230 25 66 131 98 68 68 1 260 938
Loans and advances 5 104 4 370 4 439 3 274 51 68 5 9 594 7 717
Purchased book debts 420 318 420 318
Other assets and receivables 491 518 796 805 299 210 340 288 609 604 2 535 2 425
Total assets 6 078 5 364 5 788 4 309 795 662 471 386 677 677 13 809 11 398
Liabilities
Bank overdrafts 100 162 4 45 18 84 233 180
Interest-bearing liabilities 4 579 4 459 4 165 2 963 185 139 79 80 450 710 9 458 8 351
Senior debt 4 078 4 043 3 378 2 408 185 137 79 80 7 720 6 668
Subordinated debt 501 416 787 555 2 450 710 1 738 1 683
Group 630 208 217 473 61 19 (908) (700)
Other liabilities and payables 281 177 252 224 194 188 177 131 30 41 934 761
Total liabilities 5 590 5 006 4 634 3 660 444 346 301 229 (344) 51 10 625 9 292
Total equity 488 358 1 154 649 351 316 170 157 1 021 626 3 184 2 106
Return on average assets (ROA) (%) 2.4 2.3 4.0 4.2 11.7 11.2 14.2 15.1 3.9 3.5
Return on average equity (ROE) (%) 29.6 25.3 17.0 27.4 25.5 26.4 34.4 37.8 15.6 19.6
Capital adequacy ratio (%) 28.0 19.1 35.7 33.9 48.8 50.3 50.0 54.7 34.4 30.0
Average cost of borrowings (%) 10.1 11.0 10.5 11.9 7.1 12.5 9.9 9.0 10.6 11.1
Credit loss ratio (%) 4.9 5.6 14.2 12.6 9.5 8.6
Provision coverage (%) 4.9 4.1 17.9 14.7 11.5 8.9
Non-performing loan ratio (%) 32.4 28.3 30.6 28.2 31.3 28.0
Non-performing loan coverage (%) 15.2 14.4 58.6 52.0 36.6 31.8
Assets under management (Rb) 23.7 21.8
Number of collection agents 2 547 2 159
ATM disbursements (Rb) 17.4 14.1
Number of ATMs 4 522 4 179
Ordinary Non-
Share capital Cash flow Retained shareholders controlling Total
and premium hedging reserve earnings equity interests equity
Condensed consolidated statement of changes in equity Rm Rm Rm Rm Rm Rm
Balance at 31 March 2012 1 159 (3) 882 2 038 67 2 106
Total comprehensive income 230 230 20 250
Profit for the period 230 230 20 250
Issue of shares 653 653 653
Repurchase of shares (2) (2) (3)
Share issue costs (18) (18) (18)
Balance at 30 September 2012 1 792 (3) 1 112 2 901 87 2 988
Total comprehensive income 3 233 236 18 254
Profit for the period 233 233 18 251
Other comprehensive income for the period 3 3 3
Dividends paid (53) (53) (53)
Repurchase of shares (5) (5) (5)
Balance at 31 March 2013 1 787 1 292 3 079 105 3 184
Overview
In the six months ended 31 March 2013, Transaction Capital moved closer to its strategic, operating and organisational
objectives, culminating in a financial result in line with expectations for the first half of its first full year as a public company.
The results reflect the impact of approximately R870 million of new equity issued in two private placements during February
2012 and on the JSE listing of the company in June 2012:
- total income increased by 21.8% to R2 504 million;
- non-interest revenue increased by 15.8% to R1 182 million;
- gross loans and advances grew 27.3% to R10 785 million;
- headline earnings increased by 36.3% to R233 million;
- weighted average number of shares increased by 23.3% to 583.8 million shares;
- headline earnings per share increased by 10.5% to 39.9 cents;
- net asset value per share increased by 30.1% to 527.6 cents;
- return on average assets increased by 11.4% to 3.9%; and
- return on average equity of 15.6% was achieved, down from 19.6% in the prior years first half.
An interim dividend of 9 cents per share was declared.
Environment
The South African consumer economy softened over the period with unemployment and higher food, fuel and electricity prices
weighing more heavily on lower income households. This was offset partially by social grants and by informal economic activity
which is more diverse, widespread and robust than generally reported.
Although still high, debt and debt service cost to household income ratios are declining as credit providers tighten standards
and loan growth and debt consolidation slows. As intended by the National Credit Act, unsecured loans continue to be a
necessary and valued source of finance, particularly for the 94% of South Africans who do not have a home loan.
The widely reported deterioration of national credit metrics is being addressed with appropriate credit, collection, provision
and write-off procedures by major lenders, in keeping with their commitment to regulatory compliance and responsible market
conduct. This together with regulatory refinement and enforcement will avert a consumer lending crisis.
Notwithstanding a less than vibrant economy, the upward migration of lower income consumers continued to stimulate demand
for the financial products and services offered by Transaction Capital.
Financial performance
Transaction Capitals headline earnings for the half-year increased by 36.3% to R233 million as a result of strong revenue growth
and an improvement in operational efficiencies.
Net interest income grew 44.0% to R851 million. The group improved its net interest margin from 15.1% to 16.4% due to an
enhanced yield on gross advances as the weighting shifted towards higher yielding unsecured loans. The cost of debt reduced
with the increase in equity.
The groups credit loss ratio increased from 8.6% to 9.5% as the weighting of loans and advances shifted to higher risk
unsecured credit, which has a higher credit loss ratio than asset-backed lending. In addition, the increase in the unsecured
lending credit loss ratio was offset slightly by the credit loss ratio in asset-backed lending decreasing as a result of improved
asset quality.
Non-interest income grew 15.8% to R1 182 million due to growth in loans and advances of 27.3%, which drove fee, commission
and insurance related income, and the active ATM network increasing by 8.2% to 4 522 ATMs, which combined with high
network uptime yielded a 23.1% increase in ATM disbursements and payment based income growing by 14.4%.
The cost-to-income ratio improved from 64.2% to 60.8% as a result of excellent cost control in the services divisions and an
increase in the groups lending operations, which have a lower cost-to-income ratio than the services divisions. Total expenses
grew 19.4% to R1 236 million as both assets in the lending divisions and revenue generating activities in the services divisions
expanded, and substantial investment in human capital continued. There was no significant change in the composition of the
groups costs although some efficiency was realised from the investment in systems and process upgrades.
With a capital adequacy of 34.4% Transaction Capital is well positioned to take advantage of and fund growth opportunities.
Since the start of the financial year 18 institutions invested more than R2.4 billion of debt capital.
Operational highlights
Asset-backed lending SA Taxi, Rand Trust
SA Taxi is a specialist financier of mini-bus taxis to SMEs. Credit quality improved due to more stringent credit scoring,
improved collections and an origination strategy biased towards premium vehicles. Credit losses reduced from 5.8% a year
ago to 5.1%, as the saleability of repossessed vehicles was enhanced by the companys Taximart refurbishment capability.
Comprehensive refurbishment has however required repossessed vehicles to be held on book for a longer time period, causing
the non-performing loan ("NPL") ratio to increase from 29.4% to 34.0%. NPL coverage was strengthened from 14.1% to 15.0%,
as was provision coverage from 4.1% to 5.1%. SA Taxis businesses were relocated to a single site.
Rand Trust provides receivables discounting and commercial debtor management to SMEs. In an effort to create scale, Rand
Trust invested heavily in its distribution channel, marketing mechanisms and client offering in order to diversify its client base,
improve clients utilisation of available facilities and retain existing clients. The result was a 34.4% growth in loans and advances
and a 26.7% growth in net interest income.
Unsecured lending Bayport
Bayport is a provider of unsecured personal loans to middle market consumers.
Bayport experienced strong collections performance and a relatively stable NPL ratio from March 2012 (28.2%) to December
2012 (29.9%). Credit criteria were further tightened and disbursement levels decreased through the first quarter of 2013.
Concurrently, the implementation of system improvements resulted in an initial slowdown in late stage collections. The resulting
NPL ratio of 30.6% at 31 March 2013, was addressed through an improvement in the NPL coverage ratio from 52.0% to 58.6%
and the provision coverage from 14.7% to 17.9% which increased credit losses from 12.6% to 14.2%.
Bayport will continue to be conservative in targeting client and employer segments while actively monitoring credit quality, loan
size (average at origination: R14 866) and term (average at origination: 47 months).
Credit services MBD Credit Solutions and Principa Decisions
MBD collects distressed consumer and commercial debt as agent for credit providers and as principal on acquired book debts.
Earnings grew as a result of modest revenue growth enhanced by sound cost management. Book debt acquisitions of R99.5
million during the period, together with acquisitions of R42.6 million late in the prior financial year, necessitated an increase
in MBDs collection capacity via the expansion of its Johannesburg CBD call centre and the optimisation of existing capacity.
It is expected that the benefits of the investment in purchased book debts will be realised during the second half of the year.
Principa Decisions provides credit risk consultancy services and software. Although a smaller contributor to group earnings,
Principa Decisions profit performance fell short of first half expectations.
Payment services Paycorp
Paycorp comprises ATM Solutions, which owns, installs, operates and maintains a fleet of off bank premise ATMs and EFT
terminals, and DrawCard, a prepaid card issuer.
Half-year earnings grew by 16.7% to R28 million. The active ATM fleet grew 8.2% to 4 522 machines, representing an estimated
16% share of South Africas ATM footprint. This growth, the continued relocation of underperforming ATMs to better sites, and
high network uptime levels, yielded a 23.1% increase in ATM disbursements and a 14.4% growth in payment based income.
Innovation in the area of ATM security curtailed vandalism and facilitated the deployment of machines to higher risk areas.
Appreciation
For most of the 5 102 people who choose Transaction Capital as their employer, the journey started many years before our
listing on the JSE less than a year ago. We thank them and our newer colleagues for their untiring contribution to these results
and to our continued progress and growth.
Outlook
It is likely that the remainder of 2013 will be difficult for the clients and customers of Transaction Capital. Too many households
are financially stressed or indebted for this not to be the case.
We are however confident that the probability of banking and financial instability is extremely remote and that the major providers
of financial services will behave responsibly in assisting borrowers to deleverage through a period of low economic growth.
In such an environment Transaction Capital will continue to generate revenue by providing innovative solutions to clients needs,
while exercising discipline in the control of costs and prudence in credit extension. Credit quality will not be compromised in
pursuit of book growth, and credit metrics are likely to decline marginally as advances slow.
In the absence of any further issues, the weighted average number of shares at 30 September 2013 is expected to remain
at about 583.8 million shares, resulting in less of a discrepancy between earnings growth and per share earnings growth than
in this half-year result.
In the absence of a deterioration in the current environment, we expect our previously communicated earnings expectations to remain intact.
Dividend declaration
For the six months ended 31 March 2013 (the dividend period), the board has declared an interim gross cash dividend of
9 cents per share to those members recorded per 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 dividend withholding tax. The
company has a further R63 million of STC credits available. The salient features applicable to the interim dividend are as follows:
Issued shares as at declaration date 583 569 521
Declaration date Tuesday, 7 May 2013
Last day to trade cum dividend Friday, 31 May 2013
First day to trade ex dividend Monday, 3 June 2013
Record date Friday, 7 June 2013
Payment date Monday, 10 June 2013
Share certificates may not be dematerialised or rematerialised between Monday, 3 June 2013 and Friday, 7 June 2013, both
dates inclusive.
On Monday, 10 June 2013 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 10 June
2013 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, 10 June 2013.
Basis for preparation
The financial results of the group for six months ended 31 March 2013 are unaudited and have been prepared in accordance with
International Financial Reporting Standards ("IFRS") and contains the information required by IAS 34: Interim Financial Reporting,
as well as the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as
issued by the Financial Reporting Standards Council.
The accounting policies and their application are consistent, in all material respects, with those detailed in Transaction Capitals
prior year annual financial statements, except for the adoption on 1 October 2012 of new and amended statements and interpretations
of International Financial Reporting Standards with effective dates beginning on or after 1 October 2012.
The adoption of the new and amended statements of International Financial Reporting Standards, interpretations of statements of
International Financial Reporting Standards had no material effect on the groups financial results.
Cash and cash equivalents of R152 million (1H12) and R43 million (FY12) in the services division, and corresponding trade and
other payables were offset in line with IFRS. This relates to cash receipts from customers and payments made on their behalf.
These condensed financial results have been prepared under the supervision of D M Hurwitz, Chief financial officer.
Subsequent events
No events have taken place between 31 March 2013 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
M J Lamberti D M Hurwitz
Chief executive officer Chief financial officer
7 May 2013
www.transactioncapital.co.za
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: ZAE000167391 . Taxation registration 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 (Chief financial officer), Jonathan Jawno, Steven Kark, Phumzile Langeni*, Michael Mendelowitz, Cedric Ntumba*, Roberto Rossi, Dumisani Tabata*,
David Woollam*, Shaun Zagnoev** (*Independent non-executive) (**Non-executive), Brenda Madumise (resigned 29 April 2013)
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
Date: 07/05/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
