Accretive utilisation of capital via three acquisitions within Transaction Capital Risk Services (TCRS):
> 100% of Australian-based Recoveries Corporation Group Limited (Recoveries Corporation)
> Majority share of RC Value Added Services (Pty) Ltd (Road Cover)
> Majority share of The Beancounter Financial Services (Pty) Ltd (The Beancounter)
Acquisition search continues.
Uninterrupted access to debt capital markets:
> Near fully funded for 2017
> SA Taxi:
– Raised R3.5 billion in the 2016 financial year
– R513 million Transsec 2 tap issuance
> Created Transaction Capital’s R2 billion Domestic Note Programme
> Accessed over R1.5 billion of debt funding from the European Development Finance Institution (DFI) capital market since 2010
> Strategic imperative to further penetrate global DFI markets
> S&P Global upgraded Transsec 1 (SA Taxi)
> Global Credit Ratings Co. awarded a zaA- rating to Transaction Capital’s Domestic Note Programme
> Capital adequacy ratio of >35%
> Liquid capital of ~R300 million remaining
> Continue to invest in organic and acquisitive opportunities
> Dividend policy amended to 2.5 to 3 times
> Previously 3 to 4 times
> Total dividend cover of 2.7 times
> More conservative provisioning methodology resulting in a higher quality of earnings
> Removes uncertainty regarding implementation of IFRS 9 on future results and ratios
Founders’ individual shareholdings consolidated
into a single holding structure:
> Committed shareholder of reference
> Displays founders’ continued confidence in Transaction Capital
> Enhances Transaction Capital’s rating in capital markets
Independent non-executive directors:
> Appointment of Kuben Pillay and Moses Kgosana
> Appointment of Funke Ighodaro effective 1 April 2017
> David Woollam and Dumisani Tabata not available for re-election at the annual general meeting in March 2017
> Ronen Goldstein appointed as financial director
> Mark Herskovits appointed as executive director with responsibility for group capital management (previously group chief financial officer)
> Approved by shareholders on 20 October 2016
> Mechanism to attract and retain key executives
> Creates alignment with shareholders
> Executives participate in value created within their division and at a group level
Gross domestic product (GDP) growth in South Africa remains constrained due to a combination of global and domestic macro- and socio-economic factors:
> Global: developments such as the slowdown in Chinese economic growth, the UK’s decision to leave the European Union and an anticipated increase in US interest rates impacting the performance of developing economies.
> Political: political instability and concerns around a potential sovereign ratings downgrade resulted in lower business and consumer confidence.
> Social: persistent low employment levels, low real wage growth and social unrest.
> Economic: higher inflation caused by currency weakness and food inflation due to the ongoing drought. Household debt-to-disposable income ratio remains elevated at 75%.
The combination of these factors means that consumers and the small- and medium-sized enterprise (SME) sector in South Africa remain vulnerable
The defensive and market-leading positions of Transaction Capital’s divisions enables them to grow earnings despite a challenging and low-growth economic environment.See the SA Taxi and TCRS divisional reviews for an overview of their market positioning.
The regulatory environment in South Africa is more stable, with the pace of new regulations and amendments to existing regulations impacting financial services providers moderating. Key regulatory developments in 2016 include:
> Amendments to the National Credit Act (NCA):
– Regulations on the limitations of fees and interest rates came into effect on 6 May 2016.
SA Taxi is compliant with the regulations, with no material impact on profitability.
– Regulations on affordability assessments performed by credit providers were introduced by the National Credit Regulator in September 2015, which may not be conducive to credit expansion.
In the medium term these regulations may negatively impact the volume of matters handed over to TCRS. Cognisant of this, TCRS continues to expand into adjacent markets that are not regulated by the National Credit Regulator, including the public, telecommunications and insurance sectors.
SA Taxi is compliant with the regulations, with no impact on its ability to extend credit to its customers.
– Amendments regarding the prescription of debt were enacted during March 2015, with limited effect on TCRS.
Transaction Capital Recoveries applies conservative interpretation favouring the consumer when collecting or buying non-performing loan portfolios.
> Various developments regarding emolument attachment orders.
Transaction Capital Recoveries’ exposure to emolument attachment orders is insignificant, having not initiated new emolument attachment orders for more than two years.
> Changes to legislation regarding non-authenticated early debit orders (NAEDO), which would require consumers to confirm with their bank before an early debit order becomes active on their account, has been delayed to October 2019.