Finbond Group plans to sell its South African operation and delist from the JSE

Credit-provider Finbond Group says that as part of its short and medium term strategic objectives, it plans on selling its South African operations to focus on North America and Europe.

It will also delist from the Johannesburg Stock Exchange (JSE), to relist on a North American stock exchange.

The group said in a report on its financial results for the year ended 29 February 2020, that the weakening South African economy presented challenges to consumers of all income levels, “and no one was immune to these difficult conditions”.

Despite these challenges, Finbond said that it delivered acceptable results with operating profit before tax (PBT) increasing by 78%.

Finbond said its profits for the period under review remained adversely affected by the transition of Sassa customers to the South African Post Office card. Despite these adverse developments, it achieved a turnover of R2.62 billion, an increase of 1.7% over 2019.

The group noted that 56.9% or R411.1 million of EBITDA was generated in North America and 43.1% or R311.2 million in South Africa, while 82.5% or R80.6 million of basic earnings was generated in North America while 17.5% or R17 million was generated locally.

“The South African economy faced a difficult year and a much slower recovery process than predicted following the election of president Cyril Ramaphosa.

“Coupled with higher unemployment and low growth in household disposable income, South African market conditions severely limited new business growth potential,” it said.

Operating highlights

• Operating profit before tax (PBT) increased by 78% to R260 million.
• Earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 78.8% to R722.3 million
• Basic earnings per share increased by 258% to 10.6 cents
• Revenue from continuing operations increased by 1.7% to R2.62 billion (Feb 2019: R2.58 billion).
• Value of loans advanced increased by 13.5% to R5.92 billion
• Cash received from customers increased by 9.8% to R7.89 billion
• Total assets increased by 41.6% to R4.67 billion
• Cash, cash equivalents and liquid assets increased by 78.2% to R1.36 billion from R765.5 million.
• Headline earnings per share decreased by 27.5% to 10.3 cents

Finbond said that with planned growth in mind, as well as considering the current Covid-19 crisis, the board has decided not to declare a dividend for the financial year ended 29 February 2020.

In South Africa, Finbond has 430 branches of which 166 are located in Gauteng, North West, Limpopo and Mpumalanga, 66 in Kwa-Zulu Natal, 75 in the Western Cape, 60 in the Eastern Cape and 63 in the Free State and Northern Cape

During the period under review, Finbond SA’s average loan size was R1,932 with an average tenure of 3.2 months based on the total number of loans granted.

“Given the short term nature of our SA products, Finbond’s loan portfolio is cash flow generative and a good source of internally generated liquidity,” it said.

For the twelve months ended February 2020 Finbond SA granted R1.55 billion worth of loans and received cash payments of R2.31 billion from customers, the group said.

Five year strategic plan of action

Finbond said its short and medium term strategic objectives include:

• Further Improving efficiencies in its 245 branches in North America;
• Further expanding its international operations through selective strategic acquisitions in the North American and European markets;
• Expanding its Americash Loans online lending offering in the US;
• Delisting Finbond Group Limited from the JSE in order to relist the group on a North American stock exchange.
• Selling its South African operations to a group focused on South Africa in order to focus on North America and Europe, subject to all relevant regulatory approvals;
• Applying for a European Banking License.

Looking ahead, the group said that the challenging and difficult macro-economic environment, and the adverse market conditions are not expected to abate.

“In the short-term, market conditions are expected to significantly deteriorate further. It is expected that the government ordered lockdowns will have a significantly adverse short-term impact on Finbond’s results for the year ending 28 February 2021, it said.

For the month of April 2020 business volumes in South Africa were down approximately 70% and in North America business volumes were down approximately 50%, Finbond said.

The longer the draconian lockdown regulations remain in place, the more severe the effect will be, it said.

“We remain confident that the benefits of our geographically diversified business, strong balance sheet relative to the size and scope of our operations and cash generating ability will stand us in good stead, in what is anticipated to be a very difficult year ahead,” it said.