Integrated Annual Report




Despite the economic deterioration in South Africa, Transaction Capital delivered excellent organic growth in 2019, driven by strong client acquisition, innovative product development, focused operational execution and robust risk management. Both core headline earnings and core headline earnings per share increased 18% to R803 million and 131.3 cents respectively. SA Taxi grew core headline earnings 38%, resulting in the group's attributable portion of SA Taxi's core headline earnings growing by 21% to R446 million. TCRS achieved headline earnings growth of 15% to R313 million.



Over the past five years, Transaction Capital has achieved compound annual growth in core headline earnings per share of 20%. Dividends per share have grown faster than earnings at 31% per year. In the 2019 financial year, the total dividend per share was 22% higher at 61 cents per share, supported by high-quality earnings and healthy cash conversion rates.



The ownership transaction between SA Taxi and SANTACO was finalised on 6 February 2019. SANTACO's 25% stake in SA Taxi was co-funded by The Standard Bank of South Africa and Futuregrowth Asset Management by way of preference shares to the value of R1.2 billion, with SA Taxi providing R521 million of vendor finance through the issue of a new class of preference share.      



131.3 cents

2018: 111.7 cents



61.0 cents

2018: 50.0 cents

attributable to the group



R803 million

2018: R682 million



R446 million

2018: R368 million



R313 million

2018: R273 million

The group successfully implemented International Financial Reporting Standard (IFRS) 17 – Insurance Contracts in SA Taxi, with an effective retrospective adoption date of 1 October 2017.          
The group adopted IFRS 15 – Revenue from Contracts with Customers, which took effect in the 2019 financial year. It has no material impact on the group.     On 5 September 2019, the group received shareholder approval to implement a structure with Transaction Capital's founders to deploy €100 million into specialised creditorientated assets in Europe. The venture is accounted for using equity accounting.    
TCRS restructured its funding arrangements to support the division's increased capital requirements. Through the new treasury structure, TCRS increased its funding facilities to R2.4 billion, from half that amount in 2018.     On 10 November 2019, Transaction Capital was awarded second place in the Sunday Times Top 100 Company Awards, which ranks the value delivered to shareholders by companies listed on the JSE Limited over five years.    

The summarised consolidated annual financial statements are included in the financial information section. Core financial results and ratios exclude once-off costs of R84 million attributable to the group relating to SA Taxi's ownership transaction with SANTACO, which arose in the first half of the 2019 financial year. R81 million of these costs are non-cash and in accordance with IFRS 2 – Share-based Payment. A further R3 million relates to early debt settlement costs.

2018 balances have been restated for the early adoption of IFRS 17 – Insurance Contracts.


    SA Taxi   Transaction
Capital Risk Services
executive office**
SUMMARISED INCOME STATEMENT                                  
For the year ended 30 September                                  
Net interest income     1 217     979     (13)    51     75     70     1 279     1 100    
Impairment of loans and advances     (322)    (306)    (14)    (15)    –     –     (336)    (321)   
Non-interest revenue     584     498     2 104     1 837     –     –     2 688     2 335    
Operating costs     (896)    (674)    (1 650)    (1 510)    (16)    (11)    (2 562)    (2 195)   
Non-operating profit/(loss)    –     –     7     (3)    –     –        (3)   
Equity accounted income     –     –     4     –     –     –        –    
PROFIT BEFORE TAX     583     497     438     360     59     59     1 080     916    
Profit attributable to ordinary equity holders of parent     365     368     321     273     41     41     727     682    
Headline earnings adjustments     –     –     (8)    –     –     –     (8)    –    
Once-off transaction costs***     81     –          –        –     84     –    
CORE HEADLINE EARNINGS ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT     446     368     313     273     44     41     803     682    
SUMMARISED STATEMENT OF FINANCIAL POSITION                                                    
At 30 September                                                    
Cash and cash equivalents     693     677     194     168     32     55     919     900    
Trade and other receivables     965     769     317     360        (3)    1 287     1 126    
Inventories     831     478     1     –     –     –     832     478    
Loans and advances     10 412     9 026     579     566     –     –     10 991     9 592    
Purchased book debts     –     –     2 382     1 374     –     –     2 382     1 374    
Equity accounted investment     –     –     92     –     –     –     92     –    
Other assets     885     933     1 035     1 066     40     17     1 960     2 016    
TOTAL ASSETS     13 786     11 883     4 600     3 534     77     69     18 463     15 486    
Bank overdrafts     99     116     282     –     –     –     381     116    
Trade and other payables     275     333     396     368     38     36     709     737    
Insurance contract liabilities     537     607          –     –     –     537     607    
Interest-bearing liabilities     9 929     9 503     1 821     1 345     (944)    (1 031)    10 806     9 817    
   Senior debt     9 249     7 650     1 038     1 103     –     –     10 287     8 753    
   Subordinated debt     517     683          –     –     377     517     1 060    
   Finance leases     –     –     2        –     –          
   Group loans     163     1 170     781     238     (944)    (1 408)    –     –    
Other liabilities     192     56     361     330        –     558     386    
TOTAL LIABILITIES     11 032     10 615     2 860     2 043     (901)    (995)    12 991     11 663    
TOTAL EQUITY     2 754     1 268     1 740     1 491     978     1 064     5 472     3 823    
* Restated for the early adoption of IFRS 17 – Insurance Contracts.
** Group executive office numbers are presented net of group consolidation entries.
*** Transaction Capital's core financial ratios exclude once-off costs of R84 million attributable to the group relating to SA Taxi's ownership transaction with SANTACO, which arose in the first half of the 2019 financial year. R81 million of these costs are non-cash and in accordance with IFRS 2 – Share-based Payment. A further R3 million relates to early debt settlement costs.


        For the year ended 30 September  
Core headline earnings Rm     519   376   38%  
Core headline earnings attributable to the group Rm     446   368   21%  
Non-interest revenue Rm     584   498   17%  
Net interest income Rm     1 217   979   24%  
Net interest margin %     12.2   11.2      
Core cost-to-income ratio %     44.2   45.6      
CREDIT PERFORMANCE                  
Gross loans and advances Rm     10 753   9 264   16%  
Non-performing loan ratio %     17.9   17.5      
Credit loss ratio %     3.2   3.5      
  SA Taxi's divisional review provides detail on its strategic and operational highlights, social impact, market context and business activities.


As stated earlier, the ownership transaction between SA Taxi and SANTACO was finalised on 6 February 2019 (refer to the SENS announcements on 19 November 2018 and 6 February 2019).

  Available at www.transactioncapital.co.za/SENS.php.

Of the R1.2 billion net proceeds from the transaction, SA Taxi settled approximately R1.0 billion of interest-bearing debt, with the remainder retained to fund growth. The immediate financial benefit of the transaction (improved net interest margins from lower leverage and interest expense savings of R55 million post tax), and the operational benefits of a stronger relationship with SANTACO, have been accretive to SA Taxi's earnings.

For the period 6 February 2019 to 30 September 2019, Transaction Capital consolidated 81.4% of SA Taxi's headline earnings, compared to 98.5% previously.


In the last five years, SA Taxi’s loans and advances portfolio has shown a relatively stable compound annual growth rate of about 12%. This year, the portfolio grew 16% to R10.8 billion comprising 32 441 loans, with the number of loans originated increasing 11%. Higher vehicle retail prices, Toyota’s increased production of minibus taxis, SA Taxi’s launch of a lower interest rate product for better quality customers and higher loan origination volumes on Nissan vehicles supported this growth. Strong momentum in the sale and finance of its fully refurbished pre-owned minibus taxis also contributed to growth as operators seek a more affordable but reliable alternative to buying a new minibus taxi in a challenging economic environment.

Net interest income grew 24% to R1.2 billion, with the net interest margin improving to 12.2% (2018: 11.2%). This was mainly due to the settlement of interest-bearing debt of about R1.0 billion in February 2019 following the SANTACO transaction. A robust risk-adjusted net interest margin of 9.0% was attributable to SA Taxi’s higher net interest margin and slightly better credit metrics. The NPL ratio of 17.9% (2018: 17.5%) has remained in line with our expectations of about 18%.

Our consistently conservative credit granting criteria and strong collection performance was offset marginally by the difficult economic conditions.

Improved recoveries on repossessed vehicles supported an improved credit loss ratio of 3.2%, at the bottom end of our risk tolerance of 3% to 4%. This was partially attributable to a lower average cost to refurbish vehicles due to efficiencies in SA Taxi Auto Repairs, together with SA Taxi Auto Parts’ cost-efficient procurement of parts and higher recoveries on salvage. At 4.8%, provision coverage remains adequate.

  See the Capital management report for details on funding initiatives during the year.


SA Taxi’s dealership sells new and pre-owned minibus taxis, providing operators with a reliable and affordable alternative to buying new vehicles. Loans originated through its dealerships are more profitable than loans originated through external channels due to product margin earned, higher take-up of insurance products and improved credit performance.

SA Taxi’s retail dealerships in Midrand and Polokwane showed strong momentum in 2019. The number of minibus taxis sold grew by 14% on last year, generating gross revenue of about R900 million. New dealerships are being considered in the medium term.


SA Taxi’s insurance business is the main component of non-interest revenue, with the gross written premium growing 20% to R823 million, driven by new customer acquisition. The business broadened its client base via its broker network, specifically targeting open market clients (i.e. insurance clients not financed by SA Taxi Finance). Penetration of SA Taxi’s financed customer base remained stable, with the majority of SA Taxi Finance’s clients choosing to be insured through SA Taxi Protect.

On average, individual insurance premiums remained stable. SA Taxi Protect’s competitive advantage is its ability to reduce its cost of claim through efficiencies in SA Taxi Auto Repairs and SA Taxi Auto Parts, which supports a competitively priced insurance premium. The cost of claim remains in our target range of between 50% and 60%.


SA Taxi elected to early adopt IFRS 17– Insurance Contracts in the 2019 financial year, with no material impact on headline earnings. Prior year balances have been restated accordingly, applying the transitional provisions of Appendix C to IFRS 17. SA Taxi was well positioned to early adopt IFRS 17 and absorb the resulting equity adjustment due to the buffer provided by the undeployed capital on the group's balance sheet, following the conclusion of the ownership transaction with SANTACO (see above).

The benefits of early adopting IFRS 17 include:

  • Closer alignment of the group's accounting policies with its operations.
  • Alignment of insurance provisioning with the IFRS 9 – Financial Instruments provisioning model, in that provisions are based on a forward-looking expected loss model rather than an incurred loss model.
  • A more robust balance sheet due to increased provisions, an approach favoured by management in light of the challenging economic conditions.
  • Removing future uncertainty relating to the implementation of IFRS 17 on financial results and ratios.

The initial adoption of IFRS 17 resulted in a net adjustment of R370 million to the opening retained earnings balance for the financial year ended 30 September 2018, being the earliest period for which comparative information is presented in the annual financial statements. The table below sets out the reconciliation of SA Taxi's opening retained earnings balance pre and post the adoption of IFRS 17.

Insurance contract liabilities   (514)  
   Benefits ceded on insurance contracts relating to inventories   (53)  
   Benefits ceded on insurance contracts relating to loans and advances   (205)  
   Benefits accruing to insurance contract holders   (256)  
Deferred tax assets   144   

Additional insurance contract liabilities of R514 million relate to provisions raised for the remaining coverage of onerous contracts, as well as the inclusion of discounting and an appropriate risk adjustment in the liability for incurred claims. A corresponding deferred tax asset has been recognised at the tax rate of 28%.

The group's exposure to the underlying financed portfolio consists of both credit risk (measured in accordance with IFRS 9) and insurance risk (measured in accordance with IFRS 17), which are inextricably linked. To the extent that an insured event affects the recovery of the underlying asset, and given that the assessment of risk and exposure on the underlying portfolio is considered on a group basis, a portion of the insurance contract liabilities relating to the active financed debtors and repossessed vehicle stock portfolios is ceded to loans and advances or inventories (where the repossessed vehicle stock has moved into a repair or realisation channel). All other insurance liabilities are reflected as part of insurance contract liabilities.

Refer to the group annual financial statements (available online at www.transactioncapital.co.za) for more information on the nature and impact of the changes as a result of the adoption of IFRS 17.


SA Taxi Auto Parts imports and locally procures new minibus taxi parts directly from source. In addition, its salvage operation recovers and refurbishes used parts from vehicles that are not economically viable to repair. This contributes to a reduced vehicle refurbishment cost. In 2019, SA Taxi Auto Parts supplied parts to the value of approximately R6 million per month to SA Taxi Auto Repairs and has recently started distributing to its network of preferred external autobody repairers as well.

SA Taxi Auto Parts also retails well-priced new and pre-owned auto parts to taxi operators via its parts retail facility in Midrand, targeting existing clients of SA Taxi, as well as other operators in the open market. With the majority of these retail customers not previously being SA Taxi clients, this initiative exposes SA Taxi's brand and services to a wider market, presenting potential for cross sell organic revenue growth opportunities. Retail sales have exceeded initial expectations, achieving revenue of approximately R3 million per month in 2019.


In close collaboration with the minibus taxi industry, SA Taxi Rewards was established in 2018 to leverage the industry's purchasing power to negotiate better pricing to benefit minibus taxi operators, associations and ultimately the entire industry.

In October 2019, SA Taxi Rewards partnered with Bridgestone to launch its tyre programme. This offers operators a tyre at a lower cost and of higher quality, with a safety specification designed specifically for minibus taxis. Operators who are members of SA Taxi Rewards accrue additional rewards.


Despite the challenging environment, SA Taxi recorded a strong operational, credit and financial performance for 2019. This is evident in accelerated gross loans and advances growth of 16%, higher net interest margins at 12.2% and 17% growth in non-interest revenue. SA Taxi is continually assessing opportunities and investing into adjacent and vertically integrated sectors of the minibus taxi industry to support future organic growth. This investment is offset by new revenue lines and investment into technology to drive operational efficiencies. The cost-to-income ratio improved to 44.2%.

SA Taxi's organic growth lifted core headline earnings by 38%, resulting in the group's attributable portion of SA Taxi's core headline earnings growing by 21% to R446 million.



      For the year ended 30 September  
      2019   2018   Movement  
Headline earnings attributable to the group Rm   313   273   15%  
Non-interest revenue Rm   2 104   1 837   15%  
PURCHASED BOOK DEBTS                
Cost price of purchased book debts acquired Rm   1 186   662   79%  
Carrying value of purchased book debts Rm   2 382   1 374   73%  
Estimated remaining collections – 120 months Rm   4 480   2 989   50%  
  TCRS's divisional review provides detail on its strategic and operational highlights, social impact, market context and business activities.


In its most significant business activity, TCRS acts either as a principal in acquiring and then collecting on NPL portfolios, or as a service provider on an outsourced contingency or FFS basis. These business activities are diversified across sectors, clients and geographies, which lowers concentration risk and supports good performance and returns in different market conditions.

TCRS’s collection services business delivered organic revenue growth of 21%, driven by an increase of more than 20% from our South African collection activities. Excellent revenue growth in the collection of NPL portfolios acquired as principal performed ahead of expectations and has positively offset the impact of the expected slowdown in contingency and FFS collections in South Africa. The Australian collections business performed ahead of expectations with revenue in Australia growing by low double digits during the year.   


TCRS invested R1 064 million in South African NPL portfolios and a further R122 million into Australian NPL portfolios. At 30 September 2019, TCRS owned 273 NPL portfolios with a face value of R23 795 million. Valued at R2 382 million (an increase of 73% from R1 374 million a year ago), this asset will support strong and predictable annuity revenue (estimated at R4 480 million, an increase of 50% from R2 989 million a year ago) over the medium term.

We expect the acquisition of NPL portfolios in the 2020 financial year to be at least in line with that of 2019. The increases in credit extension reported by the National Credit Regulator in South Africa, the economic climate which favours the acquisition of NPL portfolios, and TCRS's active involvement in developing and broadening this sector should support this expectation in South Africa, as will our strategy to establish a more meaningful position in the larger Australian market. A portion of our undeployed capital has been allocated towards this strategic organic growth initiative.


Recoveries Corporation in Australia posted a robust performance, growing revenue organically in low double digits by gaining new mandates from existing clients and winning new clients. Operating costs were kept stable, achieving significant operational leverage. Greater management depth, investment in data and analytics, the deployment of technologies proven in South Africa into our Australia operations, and implementing business information, payment automation and collection technologies supported this pleasing result.

The South African contingency and FFS division is performing in line with expectations in the difficult consumer credit environment. Despite the lower volumes and yields from contingency matters handed over for collection, TCRS continues to deepen its penetration in its traditional market segments (banks, retailers and specialist lenders) as well as in adjacent sectors (insurance, telecommunication and public sectors), according to its sector specialisation strategy.


Transaction Capital Payment Solutions and Road Cover, as services-orientated businesses, have been impacted by the persistently challenging operating environment in South Africa. Notwithstanding this, both contributed positively to the earnings growth of TCRS.



TC Global Finance was established in 2019 to pursue growth opportunities in select international markets. The fragmented European specialised credit market, which is many times larger than the South African and Australian markets, presents an attractive growth opportunity. TCRS is targeting niche higher-yielding credit-orientated alternative assets in this market directly through bilateral transactions and indirectly via co-investments in partnership with its network of specialist credit managers.

This strategy will provide Transaction Capital with unique access to niche European specialist credit managers, without concentration risk to any particular portfolio, asset class, asset originator, collection platform or geographic market. This strategy serves to diversify TCRS's earnings base further and we expect it to deliver low double-digit hard currency returns.

TCRS has invested €2.7 million to date, with €1.4 million thereof invested after 30 September 2019. Initial returns are in line with our communicated expectations. A portion of our undeployed capital has been allocated towards this strategic organic growth initiative.

In time we intend to replicate Transaction Capital's business model by investing into niche credit-orientated asset portfolios, building scalable servicing platforms to manage these assets by leveraging TCRS's IP, technologies and low-cost South African infrastructure, and partnering entrepreneurial owners and management teams.


Cognisant of the higher risk in the SME sector, TCBS has proactively curbed gross loans and advances growth to this sector since the second half of 2018.


TCRS grew headline earnings by 15% to R313 million, with excellent growth in revenue from the collection of NPL portfolios acquired as principal and a robust performance from our Australian collections business. Outsourcing certain functions from Australia to our South African low-cost centre of excellence, currently in pilot phase, could support future efficiencies and enable additional organic growth.

TCRS's cost-to-income ratio improved to 78.9% (2018: 80.0%), driven by our continued investment in technology. TCRS continues to deploy technologies proven in South Africa into its Australia operations, resulting in higher productivity, effectiveness and efficiency, and lower operating costs per activity. The division continues to explore the benefits of new technologies, including artificial intelligence.


The group executive office added R44 million to the group's headline earnings for the year from the efficient management of its capital. This result is net of central costs incurred by the group executive office and includes cost recoveries from SA Taxi and TCRS.

The Transaction Capital holding company balance sheet is strong and debt free, with undeployed capital of R950 million. This provides Transaction Capital with ample capacity to fund organic and acquisitive growth.


Following the interim dividend of 27 cents per share (2018 interim: 21 cents per share), and in line with the stated dividend policy of 2 to 2.5 times, the board has declared a final gross cash dividend of 34 cents per share (2018: 29 cents per share) for the six months ended 30 September 2019. Total core dividend cover for the financial year was 2.2 times.


Transaction Capital's objective is to ensure that appropriate, understandable and sustainable accounting policies are adopted and implemented, which are aligned with the group's commercial realities, risks and strategies to the greatest extent possible. The group has consistently applied all accounting policies in the current financial year, with the exception of the adoption of IFRS 17 – Insurance Contracts and IFRS 15 – Revenue from Contracts with Customers.

  The early adoption of IFRS 17 is discussed in detail here.

The group adopted IFRS 15 with effect from 1 October 2018, applying a modified retrospective approach. As a result, 2018 comparative numbers have not been restated for the adoption of IFRS 15. IFRS 15 replaces all existing revenue recognition criteria in IAS 18 – Revenue and applies to all revenue arising from contracts with customers, unless the contracts are in the scope of the standards on leases, insurance contracts and financial instruments. The adoption of IFRS 15 had no material impact on the revenue recognition of the group, as the majority of the group's revenue falls within the scope of IFRS 9– Financial Instruments and IFRS 17 – Insurance Contracts. The adoption resulted in a R9 million debit adjustment to the group's opening retained earnings balance. Refer to note 33 in the group annual financial statements for further disclosure in this regard.


The auditors issued an unmodified audit opinion for the 2019 financial year. Refer to the group annual financial statements, available on www.transactioncapital.co.za, for more detail.



Transaction Capital acquired 100% of FIHRST Management Services Proprietary Limited (FIHRST Management Services) for R180 million, with the transaction completed on 1 December 2019. FIHRST Management Services provides payroll management services and third-party payments in South Africa. It will be consolidated as part of TCRS and included in the transactional services division.

No further events that would have a material impact on either the financial position or operating results of Transaction Capital have taken place between 30 September 2019 and the date of release of this report.


IFRS 16 – Leases will come into effect in the 2020 financial year. IFRS 16 introduces a comprehensive model for identifying lease arrangements and accounting treatments for both lessors and lessees and will supersede the current lease guidance. A preliminary assessment indicates that the group will recognise lease liabilities estimated at R478 million and right-of-use assets of approximately R416 million.


My sincere thanks to the group and operational finance teams for their diligence in ensuring that Transaction Capital is able to provide stakeholders with an accurate and meaningful analysis of its financial and operational performance.