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Results and cash dividend declaration for the half year ended 31 March 2019
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 code: ZAE000167391
Tax reference number: 9466/298/15/6
RESULTS AND CASH DIVIDEND DECLARATION
FOR THE HALF YEAR ENDED 31 MARCH 2019
COMMENTARY
HIGHLIGHTS
- SANTACO'S ACQUISITION OF 25% STAKE IN SA TAXI FOR R1.7 BILLION EFFECTIVE FROM 6 FEBRUARY 2019
- CORE HEADLINE EARNINGS PER SHARE(1) 59.4 CENTS UP 17% (2018: 50.8 CENTS)
- INTERIM DIVIDEND PER SHARE 27.0 CENTS UP 29% (2018: 21.0 CENTS)
CORE HEADLINE EARNINGS(1) ATTRIBUTABLE TO THE GROUP
- TRANSACTION CAPITAL GROUP UP 17% R363 MILLION
- SA TAXI(2) UP 22% R211 MILLION
- TRANSACTION CAPITAL RISK SERVICES UP 13% R134 MILLION
1. Transaction Capital's core financial ratios exclude once-off non-cash costs of R81 million in accordance with IFRS 2 relating to SA Taxi's
ownership transaction with SANTACO, and R3 million of early settlement debt costs, both arising in the first half of the 2019 financial year.
2. SA Taxi's total headline earnings grew 31%, and Transaction Capital's attributable portion of SA Taxi's headline earnings grew 22% in the first
half of 2019. Transaction Capital's attributable portion of SA Taxi's headline earnings is calculated as follows. For the period from
6 February 2019 (being the date of the finalisation of its ownership transaction with SANTACO) to 31 March 2019, Transaction Capital
consolidated 81.4% of SA Taxi's total headline earnings. Prior to 6 February 2019, Transaction Capital consolidated 98.5% of SA Taxi's
headline earnings.
INTRODUCTION
Transaction Capital is an active investor in and operator of credit-orientated alternative assets. Central to our business model is to identify value
assets; to apply our specialist expertise to assess, mitigate, underwrite and price the inherent credit risk of these alternative assets; and to
fund their growth with an optimal balance of equity appropriately leveraged with debt according to our well-regarded capital management
approach.
Our ability to identify, assess, develop and partner with entrepreneurial, innovative and experienced founders, owners and managers of focused
businesses, in building and scaling sustainably competitive and efficient technology-driven operational platforms underpins this business model. Our
track record for generating resilient risk-adjusted returns from value assets, enhanced by capital appreciation in the value of our operating platforms,
has been proven over nearly two decades.
Strong decentralised divisional management teams manage these assets within our well-governed and highly effective operational platforms. These
business platforms, SA Taxi and Transaction Capital Risk Services (TCRS), operate in specialised, under-served segments of the South African and
Australian financial services markets. They are strategically positioned in relation to the socio-economic dynamics in their markets and are highly
defensive, delivering shared value through good commercial returns and meaningful social impact, even in low-growth environments.
To drive future earnings growth, we continue to identify opportunities to leverage the high IP, leading technologies and low-cost operational
infrastructure established in our South African operations into alternative credit-orientated asset classes in adjacent market segments and larger
geographic markets. These new strategic growth initiatives are discussed later in this announcement.
RESULTS OVERVIEW
Over the past five years, the group has achieved compound annual growth in earnings per share of 19%. Dividends per share have grown even
faster at 35%, supported by high cash conversion rates.
In the first six months of the 2019 financial year, notwithstanding the persistent economic headwinds in South Africa, the group extended its track
record of high-quality organic earnings growth. Core headline earnings and core headline earnings per share both grew 17% to R363 million and
59.4 cents. The interim dividend per share was 29% higher at 27 cents per share. Net asset value per share increased 30% to 810.4 cents per
share from 625.0 cents per share.
The group's balance sheet remains well capitalised and liquid, with funding requirements for the 2019 financial year and beyond already secured
and excess capital of more than R1.0 billion. The group's excess capital, which has increased from R650 million a year ago to R1.0 billion, is
surplus to the capital adequacy requirements of our well capitalised divisions. Our growth expectations assume no accretive investment of the
group's excess capital, making further upside in earnings possible in the medium term.
SA Taxi's strong balance sheet subsequent to the South African National Taxi Council (SANTACO) transaction, coupled with the group's high-quality
earnings growth and healthy cash conversion rates, should enable us to maintain our dividend policy at 2 to 2.5 times cover and improve pay-out
rates over the medium term.
TRADING ENVIRONMENT
Our macro-economic outlook is similar to that at the end of the 2018 financial year.
In South Africa, economic growth will remain sluggish with gross domestic product (GDP) growth for 2019 estimated at just below 1%, constrained
by low consumer and business confidence, and high unemployment and household debt. Low wage growth, a volatile Rand, higher interest rates,
stagnating credit extension, and the rising cost of household essentials (with inflation expectations for 2019 being 4.7%) will continue to
exacerbate these constraints.
While lower fuel prices since October 2018 alleviated some pressure on household spending and debt burdens, the declines were short-lived.
Higher fuel levies since April 2019 have contributed to current fuel prices being only about 2% below the record highs set in 2018.
Confidence will remain low until government is able to effectively address unemployment (recorded at 27.1% in the fourth quarter of 2018) and,
importantly, youth unemployment of 54.7%, the highest in sub-Saharan Africa. The likelihood of meaningful macro- and socio-economic recovery
remains uncertain and will be contingent on bold structural reforms that at best will only be considered now post the national election held in
May this year.
Our economic outlook for Australia is considerably more positive, with estimated GDP growth for 2019 of 3.0%, inflation expectations of 1.7%,
low levels of unemployment (5.0% at January 2019) and a benign interest rate outlook. However, the consumer is highly leveraged and risk
aversion among credit providers is curbing credit extension.
SA Taxi and TCRS continue to demonstrate their resilience against these negative trends. We have not factored into our guidance any prospect of
an economic upturn in South Africa, so there may well be upside potential for our growth expectations over the next three to five years.
TRANSACTION CAPITAL RISK SERVICES
For the half year ended 31 March 2019
2019 2018 Movement
FINANCIAL PERFORMANCE
Headline earnings attributable to the group Rm 134 119 13%
Non-interest revenue Rm 977 854 14%
PURCHASED BOOK DEBTS
Price of purchased book debts acquired Rm 437 222 97%
Purchased book debts Rm 1 727 1 030 68%
Estimated remaining collections - 120 months Rm 3 597 2 226 62%
Market positioning and operating context
South Africa
The pressure on consumers intensified throughout 2018 and the first quarter of 2019. With the increase in the cost of household essentials
exceeding wage growth, consumers are expected to struggle to reduce debt over the medium term.
Of the 25.9 million credit-active South African consumers at December 2018, close to 40% of these (10.2 million) had impaired credit records.
TCRS maintains proprietary data on almost all these distressed consumers. Transaction Capital's Consumer Credit Rehabilitation Index (CCRI)
showed that although the South African consumers' propensity to repay debt deteriorated 0.4% in the first quarter of 2019 compared to the quarter
before, it was 0.3% better than a year ago.
Australia
Household debt-to-income levels among credit active consumers rose to 199% in the first quarter of 2019, exacerbated by a decline in property
values. Additionally, the Banking Royal Commission has seen restricted credit extension due to greater regulatory compliance and risk aversion.
However, the trading environment for debt collection in Australia remains positive, and we expect improving returns from TCRS's investments into
omni-channel collection platforms and other technology initiatives.
Collection services
Within its most significant business activity, collection services, TCRS acts either as a principal in acquiring and then collecting on non-performing
loan (NPL) portfolios, or as a service provider on an outsourced contingency or fee-for-service (FFS) basis. These business activities are diversified
across consumer and commercial sectors, clients and geographies, which lowers concentration risk and supports performance in different market
conditions.
TCRS's collection services delivered organic revenue growth of 18%.
Acquisition of non-performing consumer loan portfolios as principal
In South Africa, the economic climate continues to favour the acquisition of NPL portfolios from risk averse clients who prefer an immediate recovery
against their NPL portfolios. Whereas the division focused historically on acquiring NPL portfolios of written-off unsecured retail debt, it has
extended its focus to alternative consumer NPL portfolios such as debt prior to write-off and debt collected via a legal process. These portfolios are
typically sold on a private bilateral basis.
In the first half of 2019, TCRS acquired 13 portfolios with a face value of R2.1 billion for R404 million in South Africa, and invested a further
R33 million into Australian portfolios. At 31 March 2019, it owned 254 principal portfolios with a face value of R23.5 billion, valued at
R1.7 billion, up 68% from R1.0 billion a year ago. Estimated remaining collections stood at R3.6 billion, up 62% from R2.2 billion a year ago.
The acceleration in book acquisition is expected to continue over the financial year, supporting future revenue growth.
Although the Australian debt collection market is highly fragmented, we estimate the annual aggregated purchases of NPL portfolios at
A$600 million, many times larger than the South African market. This gives some indication of the growth opportunity for TCRS. However, as our
acquisition of NPL portfolios in Australia gains traction, underpinned by our analytics and pricing expertise and capital raising capabilities, we will
remain cautious and selective.
Contingency and fee-for-service revenue
The difficult consumer credit environment in South Africa since 2016 has resulted in lower credit extension and volumes of contingency matters
handed over for collection by banks, credit retailers and specialist lenders.
The South African contingency and FFS division is performing in line with our expectations in this environment. It continues to increase penetration in
its traditional market segments (banks, retailers and specialist lenders) and grow revenue from adjacent sectors (insurance, telecommunication and
public sectors), according to its sector specialisation strategy. In the first half of 2019, approximately 30% of local contingency and FFS revenue
was earned in adjacent sectors.
Recoveries Corporation in Australia posted a robust performance, delivering operational efficiencies. Greater management depth, investment in
data and analytics, and implementing business information, payment automation and collection technologies supported this pleasing result.
Outsourcing certain functions to our South African low-cost centre of excellence, currently in pilot phase, should support future efficiencies.
Transactional services
Transaction Capital Payment Solutions performed to expectation. It continues to invest in front-end and payment technologies to create cost
efficiencies and revenue generating opportunities.
Value-added services
Road Cover performed to expectation. The growth prospects of this business, which include applying proprietary data and analytical skills to
augment its offering, remain encouraging.
Transaction Capital Specialised Credit (TCSC)
In line with the group's business model, TCRS's deployment of permanent capital in the origination and acquisition of alternative assets in the
specialised credit sector continues to deliver growth and value in South Africa and Australia.
Specialised credit - International
After thorough analysis, we believe the fragmented segment of the European specialised credit market, which is many times larger than the South
African and Australian markets, presents an attractive growth opportunity. TCRS will target smaller portfolios of higher-yielding credit-orientated
alternative assets, originated in the corporate and consumer sectors. This will be done in partnership with private specialist credit managers who
typically acquire these niche portfolios via bespoke, off-market sales processes.
Over recent years, we have created a partner network of specialist credit managers. We will co-invest alongside them to acquire a diversified
portfolio of specialised credit related assets. This strategy will give Transaction Capital and our shareholders unique access to niche European
specialist credit managers, without concentration risk in any particular portfolio, asset class, asset originator, collection platform or geographic
market. No investment in goodwill will be required, and no business integration costs or risks will be incurred.
Although the capital earmarked for this growth opportunity is small in proportion to Transaction Capital's asset base, it will diversify TCRS's earnings
base further and we expect it to deliver low double-digit hard currency risk-adjusted interest returns. For a relatively small initial investment, the
added benefit of gaining a deeper understanding of the international credit-oriented alternative assets sector, with the potential to participate in
emerging opportunities, is already proving meaningful.
In time, we intend to build a scalable business platform to manage our international assets, leveraging off TCRS's high IP, leading technologies and
low-cost collection infrastructure in South Africa. Growing the value of this business will add capital appreciation to the total shareholder return we
expect from this venture.
To date TCRS has acquired a secured commercial property NPL portfolio in Europe for EUR1.3 million, with initial returns in line with our expectations.
Transaction Capital Business Solutions (TCBS) - South Africa
Cognisant of higher risk in the small and medium-sized enterprises (SME) sector, TCBS has intentionally curbed its lending book growth. However,
given tighter credit extension to underserved mid-tier or smaller listed corporate entities, strong demand exists for specialised finance. TCBS will extend
its offering from SMEs to include lower risk mid-tier or smaller listed corporate entities, differentiating its value proposition by offering adjacent and
complementary capital solutions that could include distressed debt, mezzanine, specialised property and principal finance.
Conclusion
Technology and operational enhancements, including the optimisation of the dialer and workforce management, have resulted in higher
productivity, effectiveness and efficiency, and lower operating costs per activity. TCRS continues to explore the benefits of implementing new
technologies, including artificial intelligence.
Combined with the effects of operational leverage, the introduction of innovative new products and cross-selling services has resulted in new clients
and mandates, and the associated benefits of scale. This drove the improvement of TCRS's cost-to-income ratio to 80.5%, from 81.0%.
Strong performances from acquiring and collecting on non-performing consumer portfolios, excellent results from Recoveries Corporation in
Australia, together with ongoing cost containment and resource efficiency, supported 13% earnings growth for the half year. Future performance is
well underpinned with the fair value of purchased book debts and estimated remaining collections both growing by more than 60%. Furthermore,
TCRS remains well positioned to take advantage of bolt-on acquisition opportunities that may arise.
SA TAXI
For the half year ended 31 March 2019
2019 2018 Movement
FINANCIAL PERFORMANCE
Core headline earnings Rm 230 176 31%
Core headline earnings attributable to the group Rm 211 173 22%
Non-interest revenue Rm 327 258 27%
Net interest income Rm 553 491 13%
Net interest margin % 11.3 11.3
Cost-to-income ratio % 46.5 46.1
CREDIT PERFORMANCE
Gross loans and advances Rm 10 113 8 907 14%
NPL ratio % 17.9 17.2
Credit loss ratio % 3.4 3.7
Market positioning and operating context
Around 69% of all South African households use minibus taxis, equating to more than 15 million commuter trips a day. Minibus taxi transport is a
non-discretionary expense for most South Africans, which supports the industry's resilience even without financial support from government. In
contrast, bus and rail are subsidised but together account for less than two million commuter trips a day.
Despite its resilience, the difficult economic conditions in recent years combined with high vehicle prices and escalating fuel costs have placed
strain on the minibus taxi industry. Minibus taxi prices have risen 2.5% since September 2018, bringing the recommended retail price for a Toyota
diesel vehicle to approximately R445 000, compared to about R355 000 four years ago. Average prices for petrol and diesel rose 12% and
18% respectively in the last 12 months.
Although these conditions necessitated higher fare increases in 2018, with fare increases expected again this year, intensifying commuter density
due to urbanisation continues to drive demand. More commuters choose minibus taxis over bus or rail due to competitive pricing, convenience and
accessibility.
SANTACO ownership transaction and industry initiatives
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 R1.18 billion net proceeds from the transaction, SA Taxi settled about 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),
and the operational benefits of a stronger relationship with SANTACO, have been accretive to SA Taxi's and Transaction Capital's earnings. We
expect these benefits to support earnings growth over the medium term.
In the first half of 2019, SA Taxi grew headline earnings 31%, with the group's attributable portion up 22%. From February 2019, 81.4% of SA
Taxi's earnings are consolidated compared to 98.5% previously.
Working closely with SANTACO leadership, SA Taxi has made good progress on initiatives designed to deliver sustainable benefits to its clients
and the industry as a whole. These initiatives will support growth in SA Taxi's finance, insurance and retail businesses, and unlock opportunities to
provide allied services to the broader taxi community, enabling deeper penetration of the total addressable market.
The transaction will also augment SA Taxi's social impact, which extends to financial inclusion, job creation, skills development and economic
transformation. Since 2008, the division has provided loans to taxi operators of more than R23.8 billion, supporting the creation of an estimated
76 685 SMEs, and more than 138 000 direct and 230 000 indirect jobs. More broadly, by enabling taxi operators to replace old vehicles with
new, safer and lower emission minibus taxis, SA Taxi assists in improving the quality of this critical component of South Africa's integrated public
transport network.
Vehicle and Auto Parts retail
SA Taxi's dealership sells new and pre-owned minibus taxis. The division's vertically integrated business model enables it to rebuild and retail high
quality income-generating pre-owned minibus taxis, providing operators with a more affordable alternative to purchasing new vehicles. Furthermore,
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.
Despite the 2.5% increase in Toyota vehicle prices since September 2018, SA Taxi's retail dealerships showed strong momentum in the first half of
2019, with revenue of about R500 million. New dealerships are being considered.
Taxi Auto Parts (TAP) was established in March 2018 as a parts procurement and distribution, and vehicle salvage operation. Shortly afterwards,
the TAP retail initiative was launched, to sell well-priced new and refurbished vehicle parts to taxi operators. This initiative is exceeding our initial
expectations and presents a promising organic non-interest revenue growth opportunity.
Vehicle insurance
SA Taxi's insurance business is the main driver of non-interest revenue, growing faster than the vehicle financing business. In the first half of 2019,
gross written premium grew 22% to R401 million. Broadening its client base and product offering, and enhancing customer service and benefits,
supported this result.
SA Taxi insures more than 85% of its financed clients, with other reputable providers insuring the remainder. On average, SA Taxi's insurance clients
each have more than two insurance products. New product launches are being planned in collaboration with the minibus taxi industry.
The broker network distribution strategy initiated in 2018 continues to deliver strong growth in the number of open market clients (insurance clients
not financed by the division) and further penetration of SA Taxi's financed customer base.
The larger proportion of insurance claims processed via SA Taxi's combined autobody and mechanical refurbishment facility, and operational
efficiencies within this facility, have improved claims ratios in the financed and open market insurance portfolios. TAP's ability to procure parts more
efficiently has improved this further. As SA Taxi expands its refurbishment capacity over the medium term and processes more insurance claims itself,
as opposed to outsourcing to approved panel beaters, we expect claims ratios to continue improving.
Vehicle financing
SA Taxi's loans and advances portfolio, comprising 31 543 vehicles, grew 14% to R10.1 billion. Growth of 9% in the number of loans originated
and the increase in minibus taxi prices supported this result. Consistent loan origination strategies focusing on lower risk customers resulted in higher
credit quality, with 73% of loans originated in better risk categories and repeat loans to existing clients at approximately 30% of new loans
originated.
Net interest income grew 13% to R553 million. Effective capital management contributed to SA Taxi's net interest margin of 11.3%, which is
expected to improve over the rest of the year due to the settlement of debt in February 2019. Risk-adjusted net interest margins remained robust at
7.9%. The credit loss ratio improved marginally to 3.4% and remains within our risk tolerance of 3% to 4%. The difficult economic conditions,
partially offset by robust collection performance, high quality of loans originated and conservative credit granting criteria, resulted in a marginal
increase in the NPL ratio to 17.9% compared to 17.7% at the 2018 financial year end.
The marginally higher NPL ratio, offset by a reduction in the average cost to repair repossessed vehicles, and higher recoveries on the re-sale of
these vehicles, resulted in the division reducing provision coverage slightly to 3.9%, from 4.0% at year end.
SA Taxi's funding requirements into the 2020 financial year are already secured, with a diversified funding base of approximately 40 distinct debt
investors. The business continues to balance its cost of debt against the benefit of committed facilities and longer duration debt from a diversified
and international funding base.
SA Taxi launched Transsec 4, a R2.5 billion Moody's credit rated and JSE-listed debt securitisation programme, in March 2019. Its initial issuance
was increased to R1.0 billion from R700 million due to strong investor demand. At a weighted average cost of 175 basis points above three-
month JIBAR, this was our lowest priced Transsec issuance ever.
Autobody repair, mechanical refurbishment, salvage and part procurement and distribution
SA Taxi's repair and refurbishment facility is designed to reduce the cost of refurbishment, lowering both insurance claim costs and credit losses in
the event of repossession. Enhancing the value of repossessed vehicles through a high quality and efficient refurbishment process enables the
division to recover more than 75% of loan value on the sale of repossessed vehicles.
TAP has contributed to improved efficiencies. TAP enables SA Taxi to import and locally procure new parts at lower cost, and recover quality
refurbished parts via its salvage operation. These are distributed to SA Taxi's refurbishment centre as well as its network of preferred external
autobody repairers. TAP also optimises the salvage value of vehicles, and retails auto parts.
Connected services
Through engagement with the industry, SA Taxi aims to leverage off of its telematics systems and Black Elite fuel rewards programme to develop its
Connected Services offering. Its growth strategy will be focused on transacting with South Africa's 250 000 minibus taxi operators.
With approximately 14 000 cards distributed and in excess of 6.5 million litres of fuel pumped since its launch in April 2018, the Black Elite fuel
programme delivers commercial benefits to SA Taxi and its clients. Further rewards programmes are under consideration.
Technology and telematics
Data and telematics 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. In addition, it
continues to invest in information technology, data management and predictive analytics to inform credit and underwriting decisions, prevent
insurable events and reduce the cost of insurance claims, and to improve processing capabilities and operational efficiencies.
Conclusion
SA Taxi's operational, credit and financial performance remains robust. This is evident in 14% growth in gross loans and advances, net interest
margins at 11.3% and good credit quality in a challenging environment; the 27% growth in non-interest revenue from insurance, retail and
connected services, now comprising 37% of revenue after interest expenses (2014: 24%); and a cost-to-income ratio of 46.5%. These factors
supported the 31% growth in SA Taxi's core headline earnings and the 22% growth in the group's attributable portion of core headline earnings to
R211 million for the half year.
GROUP EXECUTIVE OFFICE
The executive office added R18 million to the group's headline earnings for the half year, from efficient management of excess capital, which has
increased to R1.0 billion from R650 million a year ago. A portion of this excess capital has been deposited into conservative money market funds,
with the remaining R418 million advanced to TCRS in the form of a short-term loan, all available on demand. The Transaction Capital holding
company balance sheet is strong and debt free, with ample capacity to fund growth.
CHANGES TO THE BOARD
Olufunke Ighodaro resigned as an independent non-executive director and chairman of the audit, risk and compliance (ARC) committee with effect
from 30 November 2018. Diane Radley was appointed as chairman of the ARC committee on this date.
Buhle Hanise was appointed to the board as an independent non-executive director with effect from 1 January 2019, and serves as a member of
the ARC committee and the asset and liability committee.
Ronen Goldstein resigned as financial director of the company with effect from 1 June 2019, and will remain employed by the company until
31 August 2019 to facilitate an effective handover to his successor. In this regard, Sean Doherty has been appointed to the board as an executive
director of the company, in the capacity of chief financial officer, with effect from 1 June 2019.
PROSPECTS AND STRATEGY
Transaction Capital's entrepreneurial management teams will continue to invest in and implement the growth strategies described above, with
discipline and precision. We expect this to translate into robust organic earnings and dividend growth over the medium term, at least in line with
the group's past performance.
The main driver of organic growth within TCRS will be the accelerated bespoke or bilateral acquisition of NPL portfolios in South Africa and
Australia. Future performance will be underpinned by significant growth of more than 60% in the fair value of purchased book debts and estimated
remaining collections at half year. Expanding and enriching its database, and ongoing investment in new technologies, should enable TCRS to
deliver even higher productivity and operational efficiency.
In the medium term, the division's organic growth will be complemented by the growth opportunities within TCSC. The progression and pace of
capital deployment in this business will be conservative, and dependent on the risk-adjusted returns achieved on the initial investments we make.
At SA Taxi, broadening its insurance client and product base is expected to drive further organic growth. There is still scope to reduce the cost of
insurance claims and credit losses via technology, data management and predictive analytics, along with procurement and operational efficiencies
in its enhanced autobody repair facility, combined with TAP initiatives.
SA Taxi will continue to grow its parts retail offering within the wider taxi industry. Retailing well-priced parts to taxi operators through TAP will also
support the expansion of SA Taxi's national dealership network.
With SANTACO now a shareholder, SA Taxi aims to leverage its unique position to drive growth over the medium term, and to the benefit of taxi
operators and the broader industry. This will include identifying commercial opportunities such as accessing cheaper funding, expanding its market
share of vehicles financed through a finance product targeting low-risk customers currently financed by traditional banks, growing its open market
insurance book and designing bespoke insurance offerings for the uninsured minibus taxi market.
In addition, SA Taxi continues to leverage its Black Elite rewards programme to expand and establish a tailored rewards programme within the
minibus taxi ecosystem, with the ultimate intention of transacting with South Africa's 250 000 minibus taxi operators. Once established, reward
programme initiatives within SA Taxi's Connected Services division could serve as a gateway to provide relevant financial products and services to
the 9.9 million households or 15 million commuters who use SA Taxi's minibus taxi infrastructure every day.
DIVIDEND DECLARATION
In line with our stated dividend policy of 2 to 2.5 times, the board has declared an interim gross cash dividend of 27 cents per share (2018:
21 cents per share) for the six months ended 31 March 2019 to those members on the record date below. The dividend has been declared out of
income reserves. A dividend withholding tax of 20% will be applicable to the dividend for all shareholders that are not exempt from the dividend
withholding tax, resulting in a net dividend of 21.6 cents per share. The salient features applicable to the final dividend are as follows:
Issued shares as at declaration date 611 652 198
Declaration date Wednesday 15 May 2019
Last day to trade cum dividend Tuesday 4 June 2019
Ex-dividend Wednesday 5 June 2019
Record date Friday 7 June 2019
Payment date Monday 10 June 2019
Tax reference number: 9466/298/15/6
Share certificates may not be dematerialised or rematerialised between Wednesday 5 June 2019 and Friday 7 June 2019, both dates inclusive.
On Monday 10 June 2019 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 2019 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 2019.
BASIS FOR PREPARATION
The condensed consolidated interim financial results have been prepared under the supervision of R Goldstein (CA) SA. The financial information
on which this announcement is based has not been reviewed and reported on by Transaction Capital's external auditors. The unaudited results of
the group for the half year ended 31 March 2019 have been prepared in accordance with the requirements of the JSE Limited Listings
Requirements for interim reports, and the requirements of the Companies Act, 71 of 2008. The Listings Requirements require interim reports to be
prepared in accordance with, and containing the information required by, IAS 34: Interim Financial Reporting and 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 in terms of IFRS and are consistent, in all material respects, with those detailed in Transaction
Capital's prior year annual financial statements, except for the adoption of IFRS 15 - Revenue from Contracts with Customers.
Any forecast financial information has not been reviewed or reported on by the company's auditors.
APPROVAL BY THE BOARD OF DIRECTORS
Signed on behalf of the board of directors:
David Hurwitz Ronen Goldstein
Chief executive officer Financial director
Dunkeld West
15 May 2019
Enquiries:
Investor Relations
Telephone: +27 (0) 11 049 6700
Sponsor:
RAND MERCHANT BANK
(A division of FirstRand Bank Limited)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 MARCH 2019
31 March 31 March 30 September
2019 2018 2018
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Cash and cash equivalents 1 539 904 900
Tax receivables 22 24 17
Trade and other receivables 1 158 786 1 126
Inventories 611 354 478
Loans and advances 10 246 9 054 9 592
Purchased book debts 1 727 1 030 1 374
Other loans receivable 39 38 39
Investment in joint venture 19 - -
Intangible assets 285 263 283
Property and equipment 173 156 167
Goodwill 1 155 1 103 1 142
Deferred tax assets 202 315 224
TOTAL ASSETS 17 176 14 027 15 342
LIABILITIES
Bank overdrafts 316 265 116
Tax payables 12 15 5
Trade and other payables 522 665 737
Provisions 128 123 148
Interest-bearing liabilities 10 313 8 735 9 817
Senior debt 9 758 7 668 8 753
Subordinated debt 552 1 067 1 060
Finance leases 3 - 4
Deferred tax liabilities 377 355 326
TOTAL LIABILITIES 11 668 10 158 11 149
EQUITY
Ordinary share capital 1 083 1 060 1 056
Reserves 150 (26) 52
Retained earnings 3 724 2 781 3 026
EQUITY ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT 4 957 3 815 4 134
Non-controlling interests 551 54 59
TOTAL EQUITY 5 508 3 869 4 193
TOTAL EQUITY AND LIABILITIES 17 176 14 027 15 342
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE HALF YEAR ENDED 31 MARCH 2019
Year ended
Half year ended 31 March 30 September
2019 2018 2018
Unaudited Unaudited Audited
Rm Rm Rm
Interest and other similar income 1 181 1 064 2 154
Interest and other similar expense (597) (511) (1 054)
NET INTEREST INCOME 584 553 1 100
Impairment of loans and advances (172) (164) (314)
RISK-ADJUSTED NET INTEREST INCOME 412 389 786
Non-interest revenue 1 304 1 112 2 377
Operating costs (1 305) (1 067) (2 244)
Non-operating profit/(loss) 8 (4) (3)
PROFIT BEFORE TAX 419 430 916
Income tax expense (129) (112) (218)
PROFIT FOR THE PERIOD 290 318 698
PROFIT FOR THE PERIOD ATTRIBUTABLE TO:
Ordinary equity holders of the parent 287 310 682
Non-controlling interests 3 8 16
EARNINGS PER SHARE (CENTS)
Basic earnings per share 46.9 50.8 111.7
Diluted basic earnings per share 46.4 50.3 110.6
Headline earnings per share 45.6 50.8 111.7
Diluted headline earnings per share 45.1 50.3 110.6
Transaction Capital's income statement presented above includes once-off non-cash costs of R81 million attributable to the group in accordance
with IFRS 2 relating to SA Taxi's ownership transaction with SANTACO, and R3 million of early settlement debt costs, both arising in the first half of
the 2019 financial year. Refer to the group data sheet for core results and ratios, which exclude these once-off transaction costs, as well as the
headline earnings reconciliation presented below.
CONDENSED CONSOLIDATED HEADLINE EARNINGS RECONCILIATION
FOR THE HALF YEAR ENDED 31 MARCH 2019
Year ended
Half year ended 31 March 30 September
2019 2018 2018
Unaudited Unaudited Audited
Rm Rm Rm
BASIC EARNINGS ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT 287 310 682
Headline earnings adjustments:
Profit on disposal of subsidiary (8) - -
HEADLINE EARNINGS ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS
OF THE PARENT 279 310 682
Core headline earnings adjustments:
Once-off transaction costs 84 - -
CORE HEADLINE EARNINGS ATTRIBUTABLE TO ORDINARY
EQUITY HOLDERS OF THE PARENT 363 310 682
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE HALF YEAR ENDED 31 MARCH 2019
Year ended
Half year ended 31 March 30 September
2019 2018 2018
Unaudited Unaudited Audited
Rm Rm Rm
PROFIT FOR THE PERIOD 290 318 698
OTHER COMPREHENSIVE (LOSS)/INCOME
Movement in cash flow hedging reserve (10) (13) 2
Fair value (loss)/gain arising during the period (14) (18) 3
Deferred tax 4 5 (1)
Exchange gain/(loss) on translation of foreign operations 6 (61) (14)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 286 244 686
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO:
Ordinary equity holders of the parent 283 236 670
Non-controlling interests 3 8 16
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF YEAR ENDED 31 MARCH 2019
Ordinary Non-
Share Retained equity controlling Total
capital Reserves earnings holders interests equity
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
Rm Rm Rm Rm Rm Rm
BALANCE AT 30 SEPTEMBER 2017 1 056 34 2 628 3 718 54 3 772
Total comprehensive (loss)/income - (74) 310 236 8 244
Profit for the period - - 310 310 8 318
Other comprehensive loss - (74) - (74) - (74)
Grant of share appreciation rights and conditional
share plans - 16 - 16 - 16
Settlement of share appreciation rights and conditional
share plans - (2) (4) (6) - (6)
Dividends paid - - (153) (153) (8) (161)
Issue of shares 8 - - 8 - 8
Repurchase of shares (4) - - (4) - (4)
BALANCE AT 31 MARCH 2018 1 060 (26) 2 781 3 815 54 3 869
Total comprehensive income - 62 372 434 8 442
Profit for the period - - 372 372 8 380
Other comprehensive income - 62 - 62 - 62
Grant of share appreciation rights and conditional
share plans - 16 - 16 - 16
Dividends paid - - (127) (127) (3) (130)
Issue of shares 1 - - 1 - 1
Repurchase of shares (5) - - (5) - (5)
BALANCE AT 30 SEPTEMBER 2018 1 056 52 3 026 4 134 59 4 193
Total comprehensive (loss)/income - (4) 287 283 3 286
Profit for the period - - 287 287 3 290
Other comprehensive loss - (4) - (4) - (4)
Disposal of subsidiary - - - - (3) (3)
Transactions with non-controlling interests - 100 604 704 496 1 200
Grant of share appreciation rights and conditional
share plans - 19 - 19 - 19
Settlement of share appreciation rights and conditional
share plans - (17) (15) (32) - (32)
Dividends paid - - (178) (178) (4) (182)
Issue of shares 38 - - 38 - 38
Repurchase of shares (11) - - (11) - (11)
BALANCE AT 31 MARCH 2019 1 083 150 3 724 4 957 551 5 508
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE HALF YEAR ENDED 31 MARCH 2019
Year ended
Half year ended 31 March 30 September
2019 2018 2018
Unaudited Unaudited Audited
Rm Rm Rm
CASH FLOW FROM OPERATING ACTIVITIES
Cash generated by operations 808 670 1 464
Income taxes paid (44) (39) (87)
Dividends paid (182) (161) (291)
CASH FLOW FROM OPERATING ACTIVITIES BEFORE CHANGES IN OPERATING ASSETS
AND WORKING CAPITAL 582 470 1 086
INCREASE IN OPERATING ASSETS (1 267) (945) (2 057)
Loans and advances (830) (765) (1 457)
Purchased book debts (437) (180) (600)
CHANGES IN WORKING CAPITAL (352) (142) (520)
Increase in inventories (133) (143) (265)
Decrease/(increase) in trade and other receivables 1 (124) (430)
Decrease in other loans receivable - 3 2
(Decrease)/increase in trade and other payables (220) 122 173
NET CASH UTILISED BY OPERATING ACTIVITIES (1 037) (617) (1 491)
CASH FLOW FROM INVESTING ACTIVITIES
Business combinations (7) (35) (35)
Acquisition of property and equipment (26) (23) (59)
Proceeds on disposal of property and equipment 1 - 5
Acquisition of intangible assets (23) (31) (60)
Additional interest acquired in subsidiary (28) - -
Interest acquired in joint venture (19) - -
Net proceeds on issue of shares by subsidiary to non-controlling interests 1 128 - -
Proceeds on disposal of subsidiary 8 - -
NET CASH GENERATED/(UTILISED) BY INVESTING ACTIVITIES 1 034 (89) (149)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from interest-bearing liabilities 3 112 3 135 5 946
Settlement of interest-bearing liabilities (2 659) (2 591) (4 320)
Repurchase of shares (11) (4) (9)
NET CASH GENERATED BY FINANCING ACTIVITIES 442 540 1 617
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 439 (166) (23)
Cash and cash equivalents at the beginning of the period* 784 808 808
Effects of exchange rate changes on the balance of cash held
in foreign currencies - (3) (1)
CASH AND CASH EQUIVALENTS AT THE END OF PERIOD* 1 223 639 784
* Cash and cash equivalents are presented net of bank overdrafts.
CONDENSED CONSOLIDATED SEGMENT REPORT
Transaction Capital
SA Taxi Risk Services Group executive office* Group
Half year ended 31 March
2019 2018 2019 2018 2019 2018 2019 2018
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
Rm Rm Rm Rm Rm Rm Rm Rm
CONDENSED INCOME STATEMENT
FOR THE HALF YEAR ENDED
31 MARCH 2019
Net interest income 553 491 (4) 30 35 32 584 553
Impairment of loans and advances (168) (162) (4) (2) - - (172) (164)
Non-interest revenue 327 258 977 854 - - 1 304 1 112
Operating costs (509) (345) (783) (716) (13) (6) (1 305) (1 067)
Non-operating profit/(loss) - - 8 (4) - - 8 (4)
PROFIT BEFORE TAX 203 242 194 162 22 26 419 430
Profit attributable to ordinary equity holders of
parent 130 173 142 119 15 18 287 310
Headline earnings adjustment - - (8) - - - (8) -
Once-off transaction costs** 81 - - - 3 - 84 -
CORE HEADLINE EARNINGS ATTRIBUTABLE
TO ORDINARY EQUITY HOLDERS OF THE
PARENT 211 173 134 119 18 18 363 310
CONDENSED STATEMENT OF FINANCIAL
POSITION
AT 31 MARCH 2019
ASSETS
Cash and cash equivalents 844 689 106 170 589 45 1 539 904
Inventories 611 354 - - - - 611 354
Loans and advances 9 723 8 467 523 587 - - 10 246 9 054
Purchased book debts - - 1 727 1 030 - - 1 727 1 030
Other assets 1 503 1 264 1 508 1 404 42 17 3 053 2 685
TOTAL ASSETS 12 681 10 774 3 864 3 191 631 62 17 176 14 027
LIABILITIES
Bank overdrafts 150 265 166 - - - 316 265
Interest-bearing liabilities 9 145 7 364 1 168 996 - 375 10 313 8 735
Group loans - 1 163 418 213 (418) (1 376) - -
Other liabilities 456 519 556 617 27 22 1 039 1 158
TOTAL LIABILITIES 9 751 9 311 2 308 1 826 (391) (979) 11 668 10 158
TOTAL EQUITY 2 930 1 463 1 556 1 365 1 022 1 041 5 508 3 869
* Group executive office numbers are presented net of group consolidation entries.
** Transaction Capital's core financial ratios exclude once-off non-cash costs of R81 million in accordance with IFRS 2 relating to SA Taxi's
ownership transaction with SANTACO, and R3 million of early settlement debt costs, both arising in the first half of the 2019 financial year.
BUSINESS COMBINATIONS
FOR THE HALF YEAR ENDED 31 MARCH 2019
SUBSIDIARY ACQUIRED
Proportion
of voting
equity
interests Consideration
Date of acquired transferred
Subsidiary Acquirer Principal activity acquisition % Rm
Black Elite Benefits (Pty) Ltd Taximart (Pty) Ltd Rewards programme 01/02/2019 90 8
Taximart (Pty) Ltd, a subsidiary of SA Taxi Holdings (Pty) Ltd, acquired an additional 90% shareholding in Black Elite Benefits (Pty) Ltd on
1 February 2019, over and above the current 10% investment held. Black Elite Benefits (Pty) Ltd provides rewards to subscribed SA Taxi customers
in partnership with relevant service providers.
CONSIDERATION FOR IFRS 3 PURPOSES
Total
Rm
Cash 8
TOTAL CONSIDERATION 8
ASSETS ACQUIRED AND LIABILITIES RECOGNISED AT THE DATE OF ACQUISITION
Total
Rm
Current assets
Cash and cash equivalents 1
Trade and other receivables <1
Prepayments <1
Non-current assets
Property, plant and equipment <1
Current liabilities
Interest-bearing liabilities (2)
Trade and other payables <(1)
NET ASSETS ACQUIRED AND LIABILITIES RECOGNISED (1)
GOODWILL ARISING ON ACQUISITION
Total
Rm
Consideration for IFRS 3 purposes 8
Plus: fair value of identifiable net liabilities recognised 1
GOODWILL ARISING ON ACQUISITION 9
The consideration transferred for the business combination effectively included amounts in relation to the benefit of expected synergies, revenue
growth and future market development of the rewards programme. These benefits are not recognised separately from goodwill because they do not
meet the recognition criteria for identifiable intangible assets.
None of the goodwill arising on this acquisition is expected to be deductible for tax purposes.
NET CASH OUTFLOW ON ACQUISITION OF SUBSIDIARY
Total
Rm
Consideration paid in cash 8
Less: cash and cash equivalents balance acquired (1)
NET CASH OUTFLOW 7
IMPACT OF ACQUISITION ON THE RESULTS OF THE GROUP
Included in profit attributable to ordinary equity holders of the parent for the half year ended 31 March 2019, is a R50k profit attributable to Black
Elite Benefits (Pty) Ltd. This R50k profit relates to the post acquisition period. The impact on the group's profit is not expected to be significant for the current
financial year.
FAIR VALUE DISCLOSURE
FOR THE HALF YEAR ENDED 31 MARCH 2019
The fair values of financial assets and financial liabilities are disclosed below:
Carrying Fair Carrying Fair
value value value value
31 March 31 March 31 March 31 March
2019 2019 2018 2018
Unaudited Unaudited Unaudited Unaudited
Rm Rm Rm Rm
ASSETS
Loans and advances 10 246 10 234 9 054 9 053
Purchased book debts 1 727 1 727 1 030 1 030
Other loans receivable 39 39 38 38
Trade and other receivables* 854 854 633 633
Cash and cash equivalents 1 539 1 539 904 904
TOTAL 14 405 14 393 11 659 11 658
LIABILITIES
Interest-bearing liabilities 10 313 10 475 8 735 9 029
Fixed rate liabilities 242 244 42 46
Floating rate liabilities 10 071 10 231 8 693 8 983
Trade and other payables** 369 369 591 591
Bank overdrafts 316 316 265 265
TOTAL 10 998 11 160 9 591 9 885
NET EXPOSURE 3 407 3 233 2 068 1 773
* Prepayments and VAT receivables are not financial assets and therefore have been excluded from trade and other receivables.
** Revenue received in advance, deferred lease liabilities, VAT payables and bonus accruals are not financial liabilities and therefore have been
excluded from trade and other payables.
VALUATION METHODS AND ASSUMPTIONS
Loans and advances for premium vehicles entered into at variable interest rates approximate fair value as the estimated future cash flows are
already considered in the expected loss model. The fair value of loans and advances for premium vehicles at fixed interest rates, which is a small
component of the loan book, is determined by adjusting the discount rate from the effective interest rate of the contract to a current effective lending
rate. Loans and advances for entry-level vehicles are carried at fair value, refer "Level disclosure" on next page for additional information in this
regard.
Purchased book debts are carried at amortised cost. The amortised cost is calculated based on expected future cash flows, which are adjusted for
risk as the forecast model incorporates historical cash flows and trends. As a result the fair value of purchased book debts approximates amortised
cost.
The fair value of interest-bearing liabilities is calculated based on future cash flows, discounted using a forward rate curve plus a valuation margin.
The valuation margin is a consensus margin at which deals with similar remaining cash profiles could be secured in the market at the valuation
date.
The carrying value of trade and other receivables, cash and cash equivalents, trade and other payables and bank overdrafts approximates fair
value as they are short-term in nature and not subject to material changes in credit risk and fair value.
LEVEL DISCLOSURE
FOR THE HALF YEAR ENDED 31 MARCH 2019
31 March 2019 Unaudited
Level 1 Level 2 Level 3 Total
Rm Rm Rm Rm
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS
Loans and advances: entry-level vehicles - - 21 21
Other financial assets - - 67 67
Derivatives - 2 - 2
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE
INCOME
Derivatives - 152 - 152
TOTAL FINANCIAL ASSETS - 154 88 242
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT AND LOSS
Derivatives - 1 - 1
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH OTHER COMPREHENSIVE
INCOME
Derivatives - 5 - 5
TOTAL FINANCIAL LIABILITIES - 6 - 6
31 March 2018 Unaudited
Level 1 Level 2 Level 3 Total
Rm Rm Rm Rm
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS
Loans and advances: entry-level vehicles - - 27 27
Other financial assets - - 36 36
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE
INCOME
Derivatives - 9 - 9
TOTAL FINANCIAL ASSETS - 9 63 72
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT AND LOSS
Trade and other payables - - 34 34
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH OTHER COMPREHENSIVE
INCOME
Derivatives - 144 - 144
TOTAL FINANCIAL LIABILITIES - 144 34 178
VALUATION METHODS AND ASSUMPTIONS
The fair value of loans and advances for entry-level vehicles is calculated using an expected income approach (estimating and discounting future
cash flows) as well as the average collateral value. These represent the significant unobservable parameters applied in the fair value model. Future
cash flows are estimated using a lifetime expected loss model, which is consistent with the IFRS 9 provision methodology. The expected future cash
flows are then discounted at the market related discount rate of 25% to yield a fair value of the total loans and advances for entry-level vehicles.
The valuation of other financial assets is based on estimated future cash flows, discounted to present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. These represent the significant unobservable parameters
applied in the fair value model. The group estimates the expected cash flows by considering all the contractual terms of the financial instrument.
The discount rate applied to the expected cash flows is based on the current South African prime interest rate and is adjusted for specific risks
including government risk, customer concentration risk, limited experience with the customer and small size portfolios (i.e. valuations less than
R250 million).
The group enters into derivative financial instruments with respective counterparties. Interest rate swaps and cross currency swaps are valued using
valuation techniques, which employ the use of market observable inputs. The most frequently applied valuation techniques include forward pricing
and swap models using present value calculations. The models incorporate various inputs including the foreign exchange spot and forward rates,
yield curves of the respective currencies, currency basis spreads between the respective currencies and interest rate curves.
RECONCILIATION OF LEVEL 3 FAIR VALUE MEASUREMENTS OF FINANCIAL ASSETS
31 March 2019 Unaudited
Fair value
Fair value through other
through comprehensive
profit or loss income Total
Rm Rm Rm
OPENING BALANCE 72 - 72
Total gains or losses
In profit or loss (10) - (10)
Other movements* 26 - 26
CLOSING BALANCE OF FAIR VALUE MEASUREMENT 88 - 88
31 March 2018 Unaudited
Fair value
Fair value through other
through comprehensive
profit or loss income Total
Rm Rm Rm
OPENING BALANCE 88 - 88
Total gains or losses
Other movements* (25) - (25)
CLOSING BALANCE OF FAIR VALUE MEASUREMENT 63 - 63
* Other movements include charges on accounts less collections received and write-off's on loans for entry-level vehicles as well as movements
in other financial assets.
SENSITIVITY ANALYSIS OF VALUATIONS USING UNOBSERVABLE INPUTS
As part of the group's risk management processes, stress tests are applied on the significant unobservable parameters to generate a range of
potentially possible alternative valuations. The financial instruments that are most impacted by this sensitivity analysis are those with the more illiquid
and/or structured portfolios. The stresses are applied independently and do not take account of any cross correlation between separate asset
classes that would reduce the overall effect on the valuations. A significant parameter has been deemed to be one which may result in a change in
the fair value of the asset or liability of more than 10%. This is demonstrated by the following sensitivity analysis, which includes a reasonable
range of possible outcomes.
MOVEMENT IN FAIR VALUE GIVEN THE 10% CHANGE IN SIGNIFICANT ASSUMPTIONS
31 March 2019 Unaudited 31 March 2018 Unaudited
10% 10% 10% 10%
Favourable Unfavourable Favourable Unfavourable
LOANS AND ADVANCES: ENTRY-LEVEL VEHICLES Rm Rm Rm Rm
Significant unobservable input and description of assumption
Average collateral value 1 (1) 1 (1)
Discount rate: the rate used to discount projected future cash flows to present
value 1 (1) 1 (1)
TOTAL 2 (2) 2 (2)
31 March 2019 Unaudited 31 March 2018 Unaudited
10% 10% 10% 10%
Favourable Unfavourable Favourable Unfavourable
OTHER FINANCIAL ASSETS Rm Rm Rm Rm
Significant unobservable input and description of assumption
Cash flows: change in the expected revenue <1 <(1) <1 <(1)
Cash flows: change in expected costs 1 (1) <1 <(1)
Discount rate: the rate used to discount projected future cash flows to present
value - - <1 <(1)
TOTAL 1 (1) <1 <(1)
CHANGE IN ACCOUNTING POLICIES
FOR THE HALF YEAR ENDED 31 MARCH 2019
IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS
IFRS 15 specifies how and when an entity will recognise revenue as well as requiring such entities to provide users of financial statements with
more informative, relevant disclosures. The standard provides a single, principle-based five-step model to be applied to all contracts with customers.
IFRS 15 also includes a cohesive set of disclosure requirements that would result in providing users of the financial statements with comprehensive
information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the group's contracts with customers.
An impact analysis has been completed which indicates that the adoption of IFRS 15 does not have a material impact on the revenue recognition
of the group:
- A significant proportion of the group's revenue comprises interest and other similar income related to gross loans and advances, all of which
are accounted for in terms of IFRS 9 - Financial Instruments. Interest and other similar income therefore fall outside the scope of IFRS 15.
- Revenue earned from the group's vehicle insurance offering mainly includes insurance premiums and commission income earned from insurance
contracts, all of which are accounted for in accordance with IFRS 4 - Insurance Contracts, and therefore fall outside the scope of IFRS 15.
- The recognition of revenue earned from collecting on non-performing loan portfolios as principal is performed in accordance with the amortised
cost model under IFRS 9 - Financial Instruments, and therefore fall outside the scope of IFRS 15.
- The recognition of revenue earned from collection services as a service provider on an outsourced contingency or fee-for-service basis remains
consistent under IFRS 15, with no material impact on revenue recognition.
- The impact of IFRS 15 on other revenue earned is immaterial.
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 code: ZAE000167391
Tax reference number: 9466/298/15/6
Registered office:
230 Jan Smuts Avenue,
Dunkeld West, 2196,
P.O. Box 41888, Craighall, 2024,
Republic of South Africa
Tel: +27 (0) 11 049 6700
Fax: +27 (0) 11 049 6899
Directors:
Christopher Seabrooke* (Chairman), David Hurwitz (Chief executive officer), Ronen Goldstein, Mark Herskovits, Jonathan Jawno, Michael
Mendelowitz, Kuben Pillay*, Phumzile Langeni*, Diane Radley*, Buhle Hanise*, Roberto Rossi**, Paul Miller** (*Independent non-executive)
(**Non-executive)
Company secretary:
Theresa Palos
Auditors:
Deloitte & Touche
Sponsor:
Rand Merchant Bank (A division of FirstRand Bank Limited)
Transfer secretaries:
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue,
Rosebank, 2196.
Date: 15/05/2019 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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