Divisions

  • SA TAXI
  • TRANSACTION CAPITAL RISK SERVICES

A VERTICALLY INTEGRATED
MINIBUS TAXI PLATFORM

UTILISING SPECIALIST CAPABILITIES,

ENRICHED PROPRIETARY DATA AND
TECHNOLOGY
TO PROVIDE

DEVELOPMENTAL FINANCE,

INSURANCE AND OTHER SERVICES

TO EMPOWER SMEs AND

CREATE SHARED-VALUE OPPORTUNITIES,

THUS ENABLING THE SUSTAINABILITY

OF THE MINIBUS TAXI INDUSTRY.

An innovative and pioneering business model with operations expanding throughout the financial services and asset value chain, building a scalable platform that can be leveraged in adjacent markets.
A unique blend of vehicle procurement, retail, repossession and refurbishment capabilities, with financing and comprehensive insurance competencies for focussed vehicle types.
Leveraging innovative technology, and valuable client and market insights developed from overlaying granular telematics, credit, vehicle and other data to enable precise and informed origination, collection decisioning and proactive risk management.
Enabling financial inclusion by proficiently securing funding from local and international debt investors to judiciously extend developmental credit to small and medium-sized enterprises (SMEs) that may otherwise not easily have access to credit from traditional financiers.
Providing complementary business services that assist SMEs to maximise cash flow and protect their income-generating assets, thus improving their ability to succeed, as well as offering value-added services to stakeholders in the wider industry.
Empowering under-served and emerging SMEs to build their businesses, which in turn creates further direct and indirect employment opportunities.
Creating shared-value opportunities by providing services to the wider industry, and facilitating collaboration and investment.
Contributing to the recapitalisation and sustainability of the minibus taxi industry – a critical pillar of the public transport sector that services the majority of South Africa’s working population.

SOCIAL RELEVANCE

SA Taxi operates on the premise of inclusive growth, utilising developmental or empowerment financing to fill a critical funding gap thereby supporting entrepreneurs who would otherwise remain outside the formal economy, thus also contributing to job creation.
SME EMPOWERMENT AND ECONOMIC TRANSFORMATION   SUSTAINABLE JOB CREATION
  • 100% black-owned SMEs
  • 23% women-owned SMEs1
  • 23% under the age of 35 years1
  • R3.3 billion loans originated, creating 7 734 SMEs in 2018
  • R21.9 billion loans originated, creating 72 423 SMEs since 2008
 
  • ~1.8 direct jobs per minibus taxi
  • >130 000 direct jobs created by SA Taxi’s fleet since 2008
  • ~600 000 indirect jobs enabled by the minibus taxi industry2
  • >13 000 direct jobs created by SA Taxi’s fleet in 2018
DEVELOPING PUBLIC TRANSPORT INFRASTRUCTURE   ENVIRONMENTAL SUSTAINABILITY
  • 7 734 reliable new and pre-owned minibus taxis on the road in 2018
  • Supporting the commuter experience by replacing older minibus taxis with safer, newer and more reliable minibus taxis
 
  • SA Taxi enables replacement of aged and less efficient vehicles with new and reduced-emission vehicles
  • 9.8% abatement on carbon emissions3
1 Based on 2018 originations.
2 Department of Transport Minister Dipuo Peters address at National Council of Provinces Budget vote NCOP 2014/15.
3 Percentage of total carbon dioxide abatement saved in 2017 through SA Taxi’s financing activities.

PERFORMANCE OVERVIEW

Triangle 21%

HEADLINE EARNINGS

to R368 MILLION1

(54% OF GROUP)

   

Triangle 13%

GROSS LOANS AND
ADVANCES

R9.4 BILLION

   

17.7%

NON-PERFORMING
LOAN RATIO

FROM 17.1% IN 2017

             

Triangle 26%

NON-INTEREST REVENUE

R540 MILLION

   

47.6%

COST-TO-INCOME RATIO

FROM 48.6% IN 2017

   

3.3%

CREDIT LOSS RATIO

FROM 3.2% IN 2017

             

25.9%

RETURN ON EQUITY

FROM 25.3% IN 2017

   

11.0%

NET INTEREST MARGIN

FROM 11.4% IN 2017

   

1. Headline earnings attributable to the group.

STRATEGIC AND OPERATIONAL HIGHLIGHTS

SOUTH AFRICAN NATIONAL TAXI COUNCIL (SANTACO) ACQUIRES 25% STAKE IN SA TAXI

  • Formalises minibus taxi operators’ participation in revenue streams of the minibus taxi industry value chain, thereby achieving positive social impact by creating a more sustainable minibus taxi industry while enhancing commercial returns.
  • Benefits accrue to the minibus taxi industry through broader participation in the value chain:
    • Ownership held by SANTACO and a trust representing broad-based provincial bodies, ensuring that ownership and associated economic benefits accrue to all levels.
    • 90% of future dividend flows will be applied towards reducing debt, with a 10% trickle dividend for infrastructure and developmental projects.
    • Strict governance framework to ensure value flows to SANTACO and its members.

INITIATIVES PROVIDING BROAD-BASED PARTICIPATION IN THE VALUE CHAIN

  • The Black Elite fuel loyalty programme rewards minibus taxi operators with cash back and airtime for their fuel purchases. At 30 September 2018, over 6 300 cards had been distributed with over 40% in active use.
  • Providing over 70 patrol vehicles to various regional, provincial and national taxi associations.
  • Funding and facilitating Project Refentse to provide certificated skills training for unqualified technicians.

INITIATIVES PROVIDING VALUE TO THE INDUSTRY

  • Credit life, a highly competitive and affordable insurance product developed by SA Taxi.
  • Taxi Auto Parts (TAP) launched in March 2018, supplies quality refurbished and new parts to minibus taxi operators at affordable prices.
  • Focussed loan origination strategies resulting in higher credit quality, supporting lower interest rates:
    • Maximum rate: 26.5%
      from 28.5% in 2017.
    • Average rate: 23.6%
      from 24.4% in 2017.

COLLABORATIVELY ENGAGING WITH INDUSTRY STAKEHOLDERS, SPECIFICALLY GOVERNMENT, REGARDING:

  • Government subsidies.
  • Government funding.
  • Scrapping allowances.

  • MARKET CONTEXT
  • OPERATIONAL PERFORMANCE
  • PERFORMANCE SINCE LISTING
  • BUSINESS ACTIVITIES

DESPITE SOUTH AFRICA’S ECONOMIC CLIMATE, THE MINIBUS TAXI INDUSTRY IS RESILIENT, DEFENSIVE AND GROWING

STRUCTURAL ELEMENTS WITHIN THE PUBLIC TRANSPORT SECTOR SUPPORT SA TAXI’S DEFENSIVE BUSINESS MODEL

40% OF SOUTH AFRICANS USE PUBLIC TRANSPORT –

with minibus taxis as the dominant form of public transport

BUS

<1 MILLION

COMMUTER TRIPS DAILY

>19 000 registered buses
>100 bus stations
~ 1 billion kms travelled per year

BUS RAPID
TRANSPORT (BRT )

>120 000

COMMUTER TRIPS DAILY

  3 metropolitan areas
<700 registered buses
~150 bus stations
<100 routes

Receives 56%

of government subsidy

TRAIN

<800 000

COMMUTER TRIPS DAILY

22%


~3 100 kms national network
~500 train stations

Receives 44%

of government subsidy

MINIBUS TAXIS

>15 MILLION

COMMUTER TRIPS DAILY

>250 000 minibus taxis
>2 600 taxi ranks
~ 19 billion kms travelled

Receives no

government subsidy yet the industry remains commercially self-sustainable


MINIBUS TAXI USAGE –

growing at a higher rate than other public transport modes

Minibus taxi usage

INCREASED >25%

since 2013

DRIVEN BY:

  • Population growth  9% since 2013
  • Increasing commuter density due to urbanisation
  • New passenger vehicles sales  19% since 2013
As minibus taxis are an essential service, spend on minibus taxi transport is non-discretionary

69% OF ALL HOUSEHOLDS

(being ~9.9 million households) use minibus taxis (from 59% in 2003), which also service 76% of all work and educational public transport trips

>250 000
MINIBUS TAXIS
operating nationally

STRUCTURAL ELEMENTS SUPPORTING THE RESILIENCE OF THE MINIBUS TAXI INDUSTRY

Dominant and growing mode of public transport

New passenger vehicle sales
 19%

(2013 to 2018)

Commercially self-sustainable

Integrated component of public transport network

Demand for minibus taxi vehicles exceeds supply

  • Ageing national fleet requiring replacement and recapitalisation
  • Driving higher demand for vehicles that are reliable and efficient
THIS IS DRIVING HIGHER DEMAND FOR VEHICLES, FINANCE AND ALLIED SERVICES SUPPLIED BY SA TAXI, RESULTING IN:
Improved credit performance as SA Taxi is selective on credit risk, due to limited supply
Improved recoveries as asset retains value due to demand exceeding supply
Liquid market for high-quality and affordable SA Taxi pre-owned vehicles

Source: Statistics SA Land Transport Survey 2018.
NAAMSA Sales Results.
National Treasury Public Transport & Infrastructure system report.
Department of Transport – Transport Infrastructure Report.
Passenger Rail Agency of SA.
SA Bus Operators Association.
FIN 24 – “New public transport system” 14/10/2017.
Websites: Rea Vaya, MyCiTi, Rustenburg Rapid Transport.

ENVIRONMENT FOR MINIBUS TAXI OPERATORS –

minibus taxi operators remain resilient in an adverse economic environment

 
CHALLENGING ENVIRONMENT
 
   
   
  VEHICLE PRICES  
     

Triangle to 15%

VAT RATE

(2017: 14%)

R433 3001

TOYOTA SESFIKILE (DIESEL) PRICE

20% SINCE 2015

~R1 900

IMPACT ON MONTHLY INSTALMENT

     
  INTEREST RATES  
     

to 6.62%

AVERAGE SOUTH AFRICAN REPO RATE

(2017: 6.95%)

23.6%

AVERAGE INTEREST RATE AT ORIGINATION

SINCE 2015  0.2%

~R52

IMPACT ON MONTHLY INSTALMENT

 

     
FUEL PRICES
   

12%

PETROL2

R14.61 PER LITRE

16%

DIESEL2

R12.98 PER LITRE

INDUSTRY RESPONSE

Fare increases in July 2018
Better asset utilisation and productivity
operator income at origination

SA TAXI’S RESPONSE

Lower risk loan origination strategy
Better route selection
 

EASTERN CAPE

~130 routes selected

AVERAGE FARE INCREASE

14%  

GAUTENG, INCLUDING SOWETO

~240 routes selected

AVERAGE FARE INCREASE

15%
             

KWAZULU-NATAL

~250 routes selected

AVERAGE FARE INCREASE

10%  

MPUMALANGA

~80 routes selected

AVERAGE FARE INCREASE

9%
             

NORTH WEST

~65 routes selected

AVERAGE FARE INCREASE

23%        
1 Toyota recommended retail price, including VAT, as at 30 September 2018.
2 www.energy.gov.za: 12-month rolling average fuel price (September 2017 to September 2018).

DESPITE FARE INCREASES, MINIBUS TAXIS REMAIN THE PREFERRED MODE OF PUBLIC TRANSPORT DUE TO COMPETITIVE PRICING, ACCESSIBILITY AND RELIABILITY

SHORT-DISTANCE ROUTE

SOWETO TO JOHANNESBURG: 23KM

  Minibus taxi Train Bus BRT
Accessibility On route Station & scheduled Scheduled stops Scheduled stops
Affordability 2016 R12.00 R8.50 N/A R13.30
Increase 17% 12% N/A 2%
Affordability 2017 R14.00 R9.50 R14.80 R13.50
Increase 14% 0% 20% 11%
Affordability 2018 R16.00 R9.50 R17.80 R15.00
Reliability 1 association with
~1 400 members
Every 10 to 20 minutes Stops at 7pm A few buses operating on the route Volume of buses
< peak capacity required
Efficiency
AVERAGE MINIBUS TAXI OPERATOR PROFITABILITY3

~R20 000 PER MONTH

LONG-DISTANCE ROUTE

JOHANNESBURG TO DURBAN: 595KM

  Minibus taxi Train Bus – Eldo Bus – Greyhound
Accessibility On route Station & scheduled Scheduled stops Scheduled stops
Affordability 2016 R270.00 N/A R210.00 R310.00
Increase 7% N/A 14% 26%
Affordability 2017 R290.00 R360.00 R240.00 R390.00
Increase 3% 8% 0% 1%
Affordability 2018 R300.00 R390.00 R240.00 R395.00
Reliability 3 associations with
~690 members
3x per week 7 departures each per day (fewer on a Saturday)
Efficiency
AVERAGE MINIBUS TAXI OPERATOR PROFITABILITY3

~R35 000 PER MONTH


3 Based on SA Taxi’s affordability calculator at origination. Average operator profitability varies based on profile of financial deal.
  • Factors include: new versus pre-owned vehicle, loan term, deposit paid, region, association, route dynamics and demand, insurance products taken up.
  • SA Taxi’s model measuring operator profitability remains conservative: maintenance and fuel costs per km increased 20% in 2018, accounting for increased fuel price and exchange rate movements.
  Source: Industry information. I Websites: Metrorail; Bus Rapid Transport; Rea Vaya; various bus companies.

OPERATIONAL PERFORMANCE

CREDIT PROFILE OF LOANS ON BOOK

69 MONTHS

Average loan term at origination

37%

Average approval rate

>R6 000

Minimum monthly operator profit

47 MONTHS

Average remaining loan term

3.3%

Credit loss ratio

>73%

Recovery rates on repossession

 
TYPICAL NEW CREDIT AGREEMENT
  Recommended retail price (Toyota diesel)     R433 300
  Interest charged     23.6%
  Term in months     72
  Origination fee (including VAT)     R2 990

  Finance instalment     R11 250
  Insurance instalment (comprehensive, credit life and other)     R2 950
  Telematics fee     R300
  Origination fee (including VAT)     R69
  Total monthly instalment     R14 569
     
     
 

SA TAXI’S OPERATOR PROFILE

1.2

VEHICLES PER CUSTOMER

3.9 YEARS

AVERAGE AGE OF VEHICLES

47 YEARS

AVERAGE AGE OF OWNER

85%

TOYOTA VEHICLES

31%

LOANS ORIGINATED TO REPEAT CUSTOMERS
DURING 2018

 
     
 

SERVING HIGHER-QUALITY TAXI OPERATORS TO CREATE A MORE SUSTAINABLE TAXI INDUSTRY

NEW ORIGINATION VOLUMES BY RISK GRADE (%)

NEW ORIGINATION VOLUMES BY RISK GRADE (%)

 

GEOGRAPHIC DISTRIBUTION

GEOGRAPHIC DISTRIBUTION

 

SUPPORTING INCLUSIVE GROWTH

  • ~80% of clients classified as previously financially excluded
  • SA Taxi grants finance at an average Empirica score* of ~600
  • Traditional banks unlikely to grant finance below Empirica score of ~640
SUPPORTING INCLUSIVE GROWTH

* Proprietary TransUnion credit score.



 

 

SA TAXI’S CREDIT-GRANTING PHILOSOPHY

Niche-specific risk assessment of loans originated
A CREDIBLE OPERATOR   IN A SUITABLE VEHICLE   ON A PROFITABLE ROUTE   MANAGED BY A CREDIBLE ASSOCIATION   This capability evaluates each taxi owner as a small business and not solely on their individual credit score, enabling us to extend credit in this niche, under-served market segment.
A CREDIBLE
OPERATOR
  IN A SUITABLE
VEHICLE
  ON A PROFITABLE
ROUTE
  MANAGED BY A CREDIBLE
ASSOCIATION
 

ADHERENCE TO SET RISK APPETITE AND
STRATEGY THROUGH APPROPRIATE
GOVERNANCE

Assurance through independent audit,
monitoring specific risk metrics and
effective corporate governance
frameworks.

 

INFORMED DECISIONS THROUGH
CONSISTENT ANALYSIS OF THE BOOK
AND ORIGINATIONS

Regular stress testing and evaluation
of the book origination over the short
and long term, embedding scenario-based
thinking.

 

MANAGED BY A SUSTAINABLE CREDIT
ORIGINATION AND MANAGEMENT
PLATFORM

Managing the team and systems
that deliver excellence at high
volumes by mastering their required
competencies.

 
     

PERFORMANCE SINCE LISTING

COMPOUND ANNUAL GROWTH RATE (CAGR) 2012 to 2018

Financial years 1 October to 30 September. I Adopted IFRS 9 in 2015. I 2014 numbers on a pro forma IFRS 9 basis. 2012 and 2013 numbers on an IAS 39 basis as reported.

1. Headline earnings attributable to the group.

2. CAGR from 2014 to 2018.

A VERTICALLY INTEGRATED BUSINESS MODEL THAT PROVIDES DEVELOPMENTAL FINANCE, INSURANCE AND OTHER ALLIED SERVICES THAT ENABLE THE SUSTAINABILITY OF THE MINIBUS TAXI INDUSTRY.

 

 
RETAIL OPERATIONS
 
   
   

TAXIMART DEALERSHIP

SA Taxi originates its loans and allied services through three key distribution channels: affiliated dealers, non-affiliated dealers and SA Taxi’s own retail channel.

SA Taxi’s retail dealership achieves higher returns and provides a profitable and reliable marketplace for the sale of new and refurbished pre-owned vehicles.

GROWTH INITIATIVES

  • Better credit performance and insurance take-up.
  • Limit unnecessary add-ons, making instalments more affordable for operators.
  • Expanding the dealership network:
    • For coverage across Gauteng, Polokwane (opened in October 2018), KwaZulu-Natal and Western Cape.
    • To retail new and refurbished vehicles and spare parts.
    • To distribute parts to SA Taxi’s network of preferred external autobody repairers.
 
 
CONNECTED SERVICES
 
   
   

A platform to communicate and transact with South Africa’s minibus taxi operators, eventually extending to commuters.

GROWTH INITIATIVES

  • Broadening SA Taxi’s total addressable market.
  • Initiation to communicating and transacting with
    >250 000 minibus taxi operators.
  • Migrating to providing financial products and services to the 15 million commuters, or 9.9 million households using minibus taxis.
 

 
FINANCING OPERATIONS
 
   
   

Extends developmental credit to taxi operators purchasing new or refurbished pre-owned vehicles.

Triangle to 13%

R9.4 BILLION

GROSS LOANS AND ADVANCES

   

11.0%

NET INTEREST MARGIN

   

Triangle 7%

30 617

LOANS ON BOOK

           

3.3%

CREDIT LOSS RATIO

       

17.7%

NON-PERFORMING
LOAN RATIO


GROWTH INITIATIVES

  • Continue to enrich SA Taxi’s proprietary database.
  • Continue investing in technologies that mitigate risk.
 
 
INSURANCE OPERATIONS
 
   
   

All financed vehicles are required to have comprehensive insurance. SA Taxi has designed its highly competitive comprehensive insurance products that are sold through its insurance cell captive established in partnership with Guardrisk Insurance Company.

Triangle 23%

R687 MILLION

GROSS WRITTEN PREMIUM

   

>85%

FINANCED CLIENTS ALSO
INSURED BY SA TAXI

       

10%

~26 000 INSURANCE
CLIENTS

   

~2.0

PRODUCTS PER CLIENT


GROWTH INITIATIVES

  • Broadened client base (financed by SA Taxi and other open market clients).
  • Mobilised the broker network with over 100 brokers.
  • Broadened the product offering (with credit life and Road Cover).
  • Reduced the cost of claim by expanding SA Taxi’s combined autobody and mechanical refurbishment facility, and increasing efficiencies.
 

 
REFURBISHMENT OPERATIONS
 
   
   

TAXIMART AUTOBODY AND MECHANICAL REFURBISHMENT, PARTS AND SALVAGE

SA Taxi manages credit loss and the cost of insurance claims by reducing refurbishment costs and improving turnaround times and product quality. The efficiencies created through SA Taxi’s own facility arise from economies of scale and its focus on specific vehicle types, allowing for specialisation, bulk procurement buying power and time saved by controlling the entire process in-house.

 >20 000 m2
COMBINED AUTOBODY
REPAIR AND MECHANICAL
REFURBISHMENT CENTRE

   

 ~220 per month
INTERNAL VEHICLE
REFURBISHMENT
CAPACITY

      TAXI AUTO PARTS
LAUNCHED IN MARCH 2018

GROWTH INITIATIVES

  • Deeper vertical integration through opening of TAP, a parts and salvage operation, which imports quality parts at a lower cost, optimises the salvage value of vehicles, and retails quality parts to operators.
  • TAP distributes parts to SA Taxi’s network of preferred external autobody repairers, thus reducing the cost of insurance claims performed by them.
 

REPOSSESSION AND RESALE

SA Taxi’s ability to refurbish and refinance recovered vehicles enables it to participate in the liquid pre-owned market, ensuring retention of asset value.

 

 >73%
RECOVERY RATES
ON REPOSSESSION,
REFURBISHMENT
AND RESALE

 

DATA AND TELEMATICS OPERATIONS

These capabilities underpin SA Taxi’s operations and are key to mitigating risk. The division continues to enrich its proprietary database, with data accumulated daily from each minibus taxi and applied to credit decisions, collections, repossessions and insurance activities.

  SA TAXI HAS BEEN TRACKING
MINIBUS TAXIS FOR
~11 years
 

 

In addition, SA Taxi continues to invest in information technology, data management and predictive analytics, as well as technologies that improve processing capabilities and extract operational efficiencies.

  ON AVERAGE, EACH OF
SA TAXI’S VEHICLES TRAVELS
6 400 kms
PER MONTH
       
  SA TAXI’S VEHICLES
OPERATE ON
~6 500
COVERING ~800 000 kms

A TECHNOLOGY-LED,

DATA-DRIVEN PROVIDER

OF CUSTOMER MANAGEMENT

SOLUTIONS IN SOUTH AFRICA
AND AUSTRALIA THROUGH A

SCALABLE AND BESPOKE
FINTECH PLATFORM,

ENABLING ITS CLIENTS TO

MITIGATE RISK THROUGH

THEIR CUSTOMER ENGAGEMENT
LIFECYCLE.

Innovative and bespoke technology systems that drive superior performance and efficiency.
Generating in-depth insights from the continuous collection of accurate and valuable data to develop a consolidated view of an individual, which enables precise and informed internal and external decisioning.
Improving its clients’ ability to originate, manage and collect from their customers through their lifecycles, thus maximising value.
Assisting its clients by accelerating cash flow as an agent on an outsourced contingency or fee-for-service (FFS) basis, or as a principal in acquiring and collecting non-performing loan (NPL) portfolios.
Proactive workforce management and technology facilitate a flexible and dynamic servicing capability able to meet each client’s unique requirements.
Regarded as a trusted partner by large consumer-facing businesses and credit providers across multiple sectors.
Enabling clients to generate higher risk-adjusted returns through their engagement with customers at the point of origination, management and collection.

SOCIAL RELEVANCE

Transaction Capital Risk Services’ (TCRS) activities broadly contribute to the efficiency and effectiveness of the South African and Australian credit systems. This includes the acquisition of distressed book debts, which assists clients to strengthen their balance sheets by accelerating cash flow and removing NPLs, thus improving their ability to continue providing debt finance to the consumer market.

TCRS also assists clients to lend responsibly, to identify which consumers to lend to, and to then collect successfully. This supports the affordability of credit by mitigating unnecessary pricing for risk.

In collections, the primary focus is on rehabilitating indebted consumers by helping them understand the importance of repaying their debts as a legal obligation, and structuring payments in a manner they can afford. This enables indebted consumers to remain active in the credit system.

Through Transaction Capital Business Solutions, SMEs that may not otherwise have access to credit gain access to working capital finance.

R596 million

LOANS ORIGINATED TO
BLACK-OWNED SMEs IN 2018

PERFORMANCE OVERVIEW

Triangle 17%

CORE HEADLINE EARNINGS1

R278 MILLION

(40% OF GROUP)

   

Triangle 86%

RICE OF PURCHASED BOOK
DEBTS ACQUIRED

R662 MILLION

       

Triangle 24%

ON-INTEREST REVENUE

R1.8 BILLION

   

Triangle 54%

PURCHASED BOOK DEBTS

R1.4 BILLION

       

76.8%

COST-TO-INCOME RATIO2

R1.8 BILLION

FROM 77.3% IN 2017

   

Triangle 60%

ESTIMATED REMAINING
COLLECTIONS3

R3.0 BILLION

Core financial ratios and results exclude once-off acquisition costs of R22 million incurred during 2017.

1. Headline earnings attributable to the group

2. Excludes the effect of acquisitions

3. 120 months.

STRATEGIC AND OPERATIONAL HIGHLIGHTS

ACQUISITION OF NPL PORTFOLIOS AS PRINCIPAL

  • Current economic context in South Africa favours acquisition of NPL portfolios.
  • Acquired 37 portfolios with a face value of R13.6 billion for R662 million
  • 239 portfolios (including 11 Australian portfolios) owned in total with a face value of R22.4 billion.
  • Purchased book debts increased 54% to R1.4 billion, with estimated remaining collections increasing by 60% to R3.0 billion.
  • 2018 collections multiple of 2.4 times (> internal target of ~2.2 times).
  • Estimated remaining collections are supporting longevity in the yield of principal portfolios on book and positive future performance.
  • Revenue from principal collections increased by 22%.

GROWTH TRAJECTORY EXPECTED TO SUPPORT POSITIVE FUTURE PERFORMANCE


  • MARKET CONTEXT
  • COMPETITIVE ADVANTAGES THROUGH TCRS’ MARKET POSITIONING
  • PERFORMANCE SINCE LISTING
  • BUSINESS ACTIVITIES

SOUTH AFRICA: MACRO- AND SOCIO-ECONOMIC ENVIRONMENT


 

OUTLOOK FOR SOUTH AFRICAN CONSUMERS

CONSUMER CONFIDENCE WILL REMAIN SUBDUED

unless government implements growth-boosting structural reforms

 

EFFECT ON TCRS

Should an improving consumer credit environment materialise, TCRS is expected to further improve performance due to:

  • Higher levels of consumer credit extension.
  • An increase in the number of matters handed over in agency mandates.
  • Increasing yield on previously acquired NPL portfolios.
 

SLOW DELEVERAGE OF THE SOUTH AFRICAN CONSUMER IN THE MEDIUM TERM


AUSTRALIA: MACRO- AND DEBT COLLECTION ENVIRONMENT

   
DEBT COLLECTION ENVIRONMENT
  • Strong levels of credit extension.
  • Regulatory environment and legislation more evenly balanced, with no consumer bias.
  • High ability to contact and transact through voice and digital channels.
  • Moral obligation to repay debt.

SOUTH AFRICA:

TRANSACTION CAPITAL’S CONSUMER CREDIT REHABILITATION INDEX

Launched in June 2017  

National rehabilitation prospects for third quarter in 2018

by 0.2% quarter on quarter (Q3 18 vs Q2 18)

by 0.7% year on year (Q3 18 vs Q3 17)

NATIONAL REHABILITATION PROSPECT TRENDS

   

Measures % change in rehabilitation prospects

  • Scores propensity to repay debt
  • Empirically based with a sample of >5 million South African consumers in credit default
 
   

Credit rehabilitation is a crucial element in growing an inclusive economy

  • Allows consumers to access credit and re-enter the consumer market
  • Allows lenders to maintain cleaner balance sheets to continue extending affordable credit
 

AUSTRALIA: DEBT COLLECTION ENVIRONMENT



ACQUISITION OF NPLs
AS PRINCIPAL
62.7%
 CREDIT CORP 16.4%
 COLLECTION HOUSE 12.6%
 PIONEER CREDIT LIMIT 4.8%
 ACM GROUP 4.0%

CONTINGENCY COLLECTIONS 30.5%
 ILLION (FORMERLY DUN & BRADSTREET) 3.8%
 RECOVERIES CORPORATION (TCRS) 3.5%

OTHER COLLECTIONS 6.8%

 


 

Source: Stats SA 2018. I IBIS World report ‘Debt Collection in Australia 2017/2018‘.

1. Aged 15 to 65.

2. National Credit Regulator data at June 2018.

3. Inflation measured at 30 September 2018 and 30 September 2017.

4. Transaction Capital estimates per analysis of results reported by companies mentioned.

REPUTATION OF PERFORMANCE

  • Only local listed industry participant
  • Diverse range of local and international stakeholders
  • Ranked as best or second best in 93% of mandates in South Africa
  • Ranked first or second by clients in 79% of banking, government and commercial mandates in Australia
  • Management and business information providing customised insights that add value for clients, allowing TCRS to win more mandates

TCRS’ ADVANTAGE

Better performance allows TCRS to either win more mandates or pay more for books, enhancing its ability to buy more books.

TCRS PROPRIETARY DATA

  • Database of South Africa’s distressed consumers
  • Continuously enriched (with collection and ContactAbility results)

TCRS’ ADVANTAGE

Access to large data volumes enhances TCRS’ analytics capabilities, which informs every stage of the collections process, from evaluating and buying books to business optimisation.

ANALYTICS

  • Predictive and layered voice analytics to determine:
    • Propensity to pay
    • Right time to call
    • Right day to pay
    • Dynamic matter prioritisation
    • Optimised campaign
    • Veracity of promise to pay

TCRS’ ADVANTAGE

Large data volumes and analytics allow TCRS to enhance collection decisions through a thorough understanding of customer behaviour.

SCALABLE TECHNOLOGY PLATFORM

  • Dialer enhances scale of ContactAbility
    • Enabled over any omni-channel
    • ~38 million outbound calls per month
    • ~6.1 million voice interactions per month
    • ~650 000 payments received per month
  • Workforce management enables
    • Flexible work-hour scheduling
    • talk time and activations
    • staff turnover and cost of collection

TCRS’ ADVANTAGE

Once collection decisions and campaigns are set, the technology platform allows TCRS to increase volume and reduce average cost per activity, resulting in better performance.

INVESTMENT IN COMPLIANCE

  • Fair treatment of our clients’ customers
  • Compliant with legislation
  • Active membership across various professional bodies
  • Benchmarking against international best practice

TCRS’ ADVANTAGE

Because compliance is a key requirement for clients, a reputation for applying best practice enhances TCRS’ ability to win more business.

TCRS’ COMPETITIVE ADVANTAGES RESULT IN A VIRTUOUS CYCLE WITH:

  • Analytics informing each area of the business.
  • Data supporting better collections.
  • Technology enhancing efficiency and thus costs.
  • Compliance underpins reputation.
  • Performance driving book buying, thus increasing the amount of data to further deepen and enhance its analytics capability.

Financial years 1 October to 30 September. I Adopted IFRS 9 in 2015. I 2014 numbers on a pro forma IFRS 9 basis. I 2012 & 2013 numbers on an IAS 39 basis as reported.

1. Headline earnings attributable to the group.

TCRS’ DIVERSIFIED BUSINESS MODEL

 
VALUE-ADDED SERVICES
 
   
   

VALUE-ADDED SERVICES, LEAD GENERATION AND CUSTOMER ACQUISITION

    Assists clients to identify and win new customers, and provides customer management solutions that leverage consulting, data analytics and technology capabilities.  

GROWTH INITIATIVES

  • Apply data and analytics skills to Road Cover.
  • Commercialise the master data universe (MDU):
    • Direct sales via MDU to leverage data from rehabilitated principal customers.
    Provider of proprietary value-added services to the mass consumer market on a subscription basis.  

 

 
TRANSACTIONAL SERVICES
 
   
   

PAYMENT SERVICES AND ACCOUNT MANAGEMENT

    Specialists in customised, innovative and flexible payment processing services, business solutions, data analytics and people management.  

GROWTH INITIATIVES

  • Creation of a payment services platform.
  • Cross-sell Transaction Capital Payment Solutions and Road Cover services to Accsys clients.
   
   
     

 

SME FINANCING AND SERVICES

    Provider of business support and SME finance to small businesses, including invoice discounting, trade finance and property finance.  
   

GROWTH INITIATIVES

  • Fintech opportunities in:
    • Online client portal.
    • Technology-based originations.

Sectors split by revenue per segment as at 30 September 2018.

 

TCRS’ DIVERSIFIED BUSINESS MODEL

 
COLLECTION SERVICES
 
   
   

CONTINGENCY AND FEE-FOR-SERVICE

Provider of collection and recovery services, including early stage rehabilitation, late stage collections and legal recoveries.

 

Provider of consumer management solutions, including debt recovery solutions, insurance claim recoveries, customer services and litigation management services.

 

GROWTH INITIATIVES

South Africa:

  • Expanding into new sectors across insurance, education and others.
  • Developing bespoke solutions (such as early stage collections, debt review and debt administration).
  • Increased focus on telcos and tier 1 banks.
  • Bolt-on acquisitions (in specialist collections and niche mandates).

Australia:

  • Technology to enhance operational efficiencies.
  • Bolt-on acquisitions of specialist collectors.
 

ACQUISITION OF NPL PORTFOLIOS AS PRINCIPAL

 
 


GROWTH INITIATIVES

South Africa:

  • Developing capital solutions with municipalities and stateowned enterprises (SOEs).
  • Entering bilateral forward flow and structured transactions.
  • Entering alternative asset classes (such as mortgage, vehicle asset finance, debt review and pre write-off portfolios).

Australia:

  • Exploring NPL acquisitions selectively.
  • Bolt-on acquisitions of specialist NPL acquirers.

DIVERSIFICATION SUPPORTS PERFORMANCE IN VARYING MARKET CONDITIONS AND REDUCES CONCENTRATION RISK

  • Two geographies: South Africa and Australia.
  • Three business activities: Value-added, transactional and collection services.
  • Collection services diversified by revenue model:
    • Acquisition of NPL portfolios.
    • Contingency and FFS collector.
  • Collection services further diversified across:
  • Sectors: banking, specialist lending, credit retail, utilities, telcos, insurance and public sectors.
  • Client base: 126 clients (82 in South Africa, 44 in Australia).
  • Mandates: 300 mandates (209 in South Africa, 91 in Australia).

TCRS is unique compared to most globally listed peers, which predominantly act only as acquirers of NPL portfolios as principal.