Transaction less exposed to consumer credit pressures

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Transaction less exposed to consumer credit pressures

The financial services group, which operates in asset-backed lending, serving small to medium enterprises, and credit services, oversaw the sale of two of its subsidiaries – Paycorp and Bayport – during the first half of 2014.

“Transaction Capital [has] operated a portfolio of assets substantially different from those reported on at the end of the 2013 financial year. The change in portfolio, occasioned by the sale of two subsidiaries, was a response to emergent opportunities to realise value for shareholders while reducing the range and complexity of risks facing the group,” it said.

(READ MORE: Actis to acquire Transaction Capital’s Paycorp in R937 mln deal)

The sale of Paycorp, a diversified Southern African payments services group, became effective on 1 November 2013 while the sale of Bayport Financial Services, which yielded a profit of 234 million rand and a 32.6 per cent internal rate of return, came into effect on 31 December 2013.

“The South African consumer economy continued to soften during the first half of the 2014 financial year. The Monetary Policy Committee increased the repo interest rate by 50 basis points to 5.5 per cent, placing added pressure on the consumer. It is important to note that following the sale of Bayport, Transaction Capital is less exposed to the consumer credit environment.”

However, [DATA TCP:Transaction Capital] also indicated that uncertainty regarding the residual regulatory environment still remained.

“The process followed in approving the National Credit Amendment Bill was uncoordinated from multiple, and sometimes competing, ministries, assessment of the consequences of the proposed legislation was inadequate, and little response was afforded to business comment on the proposed legislation,” the company said.

“Transaction Capital thus continues to engage regularly with its regulators, particularly the National Credit Regulator and Financial Services Board.”

(READ MORE: Transaction Capital reports satisfactory FY results)

The group reported net interest income growth of 20 per cent for the half year ending 31 March 2014 while profit before tax rose 23 per cent to 192 million rand from 156 million rand in the first half of 2013.

Headline earnings decreased by 27 per cent from 233 million rand in 2013 to 169 million rand in 2014 and headline earnings per share dropped to 29.1 cents from 39.9 cents.

“Notwithstanding the challenging consumer environment, the underserved and growing small and medium-sized enterprise (SME) finance market continues to present Transaction Capital with significant opportunity,” it said.

“Following the disposal of Paycorp and Bayport, as well as the capital distribution, Transaction Capital’s equity and debt capital position remains robust. The capital adequacy level is significantly higher than the medium term target and the group is well positioned to take advantage of and fund organic and acquisitive growth opportunities.”