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Transaction Capital’s strategy pays off

Companies
Durban - Transaction Capital, in the six months from October 2016 to March 2017, advanced R1.4 billion of funding, created 3764 black-owned small, medium, enterprises (SMEs) and more than 18000 jobs, it said on announcing its results on Wednesday.

The group operates two divisions: SA Taxi and Transaction Capital Risk Services (TCRS). It is a provider of specialised financial and allied services in selected higher-risk and under-served segments of the financial services sector in South Africa and Australia.

Chief executive David Hurwitz said SA Taxi had launched many entrepreneurs in the past number of years.

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Transaction Capital intends to continue pursuing acquisitions as part of its growth strategy should opportunities arise, the company says. It acquired three businesses in the last three months. Photo: Supplied

“SA Taxi has enabled more than 70000 new entrepreneurs to enter and grow our local economy through the R17.1 billion of loans granted, creating 61344 black-owned SMEs and almost 300000 jobs since 2008,” he said.

SA Taxi offers several services to the taxi industry, including new and second-hand retail vehicle sales, vehicle finance, insurance and telematics data and technology services. The business model is vertically integrated, supporting margins across the value chain.

The group’s strategy is to buy and develop complementary businesses that support the growth of its divisions and to diversify internationally.

“Each business is cash generative with a proven track record and scalable business model, which the group is well placed to develop through active management and potential bolt-on acquisitions,” said Hurwitz.

The company would continue to pursue acquisitions as part of its growth strategy should opportunities arise, it said.

Transaction Capital acquired three businesses in the last six months.

Read also: Transaction Capital in R500m growth plans

Through its TCRS division, it acquired 100 percent of Recoveries Corporation in Australia, effective January 1 this year; 75 percent of Road Cover and 51 percent of The Beancounter, both effective from December 1 last year. More than R500 million was deployed to fund the business acquisitions.

“However the group remains well capitalised post R418.9 million of additional equity capital raised in February 2017, creating capacity and flexibility for further acquisition opportunities,” the group said on Wednesday.

Hurwitz said Transaction Capital’s defensive positioning within the socio-economic context was set to support the group’s strong performance, while the anticipated impact of the credit downgrade was not expected to have a meaningful impact on either SA Taxi or TCRS operations.

“The combination of robust organic growth, together with the accretive acquisitions completed, will support higher medium-term growth for Transaction Capital.

The TCRS division is well positioned to continue supporting credit retailers, banks and other consumer facing businesses in an environment where consumers are under immense pressure, while SA Taxi will continue to grow in an essential industry where our comprehensive offering remains compelling for entrepreneurs,” said Hurwitz.

The results also reflected an impressive growth for the business. The company posted 21 percent increase in core headline earnings to R254 million.

TCRS’s core headline earnings rose 33 percent to R93 million with SA Taxi gaining 22 percent to R144 million.

The board declared an interim dividend of 15 cents a share, up from 12c declared in 2016.

The other division, TCRS, acts as an agent on an outsourced contingency or “fee-for-service” basis to collect debt on behalf of clients across various consumer credit sectors, or buys loan books outright, which TCRS then collects. TCRS acquired 13 portfolios with a face value of R2.8 billion for R210 million during the reporting period. It now owns 180 principal portfolios valued at R930 million, up 63 percent from R571 million a year before.

BUSINESS REPORT

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