Half Year 2018
Transaction Capital Risk Services Funder Prospectus
2
Confidentiality Disclaimer
This document, including all information regarding Transaction Capital Risk Services Proprietary Limited and its subsidiaries and associated companies, collectively referred to as “TCRS”, is
confidential and is not for discussion, circulation or publication to any third party without the prior written consent of Transaction Capital Limited. The information and financial arrangements outlined
herein are for the benefit and information of the original recipient of this document, who by acceptance of this document is deemed to have accepted responsibility for ensuring that such confidentiality
will be maintained at all times.
Contents
I Overview of TCRS…………………………………………………………… 3
II Market Context (South Africa) ……………………………………………… 11
III Business Model ……………………………………………….. ………….... 20
IV Technology & Data Platforms ……………………………………………… 25
V Transaction Capital Recoveries (“TCR”) …………………………………. 30
VI Transaction Capital Business Solutions (“TCBS”) ……………………… 41
VII Financial & Operational Performance…………………………………….. 43
VIII Other TCRS’ Companies…………………………………………………… 49
IX Growth Opportunities………………………………………………………. 53
X Funding …………………………………………………………………….. 55
Overviewof TCRS
I
4
TCRS is part of the JSE-listed Transaction Capital
A vertically integrated minibus taxi platform
incorporating a unique blend of vehicle procurement,
retail, repossession & refurbishment capabilities,
with finance & insurance competencies for focused
vehicle types. Combined with its proprietary data,
analytics capabilities & technology, SA Taxi is able
to provide SMEs operating within the minibus taxi
industry with a complete financial & allied services
offering.
A technology-led, data-driven provider of customer
management services in South Africa (SA) &
Australia. TCRS’ scalable & bespoke fintech
platform improves its clients’ ability to originate,
manage & collect from their customers. The division
leverages its technology & data to mitigate risk &
maximise value for clients throughout the customer
engagement lifecycle
CEO: Terry Kier, 11-year group tenure
R173 MILLION
HEADLINE
EARNINGS 1
R8.9 BILLION
GROSS LOANS
& ADVANCES
R258 MILLION
NON-INTEREST
REVENUE
CEO: Dave McAlpin, 10-year group tenure
R119 MILLION
HEADLINE EARNINGS 1
R1.0 BILLION
PURCHASED
BOOK DEBTS
75.6%
COST-TO-INCOME
RATIO³
R222 MILLION
PURCHASED BOOK DEBTS
ACQUIRED THIS PERIOD
CEO: David Hurwitz, 13-year group tenure
R310 MILLION
HEADLINE
EARNINGS 1
50.8 CPS
HEADLINE EARNINGS
PER SHARE
21 CPS
INTERIM DIVIDEND
PER SHARE
15%FOREIGN INVESTOR BASE
R10.4 BILLION
MARKET CAPITALISATION 2
3.7%
CREDIT LOSS RATIO
25.7%
RETURN ON EQUITY
17.2%
NON-PERFORMING LOAN
RATIO
16.5%
RETURN ON EQUITY
R2.0 BILLION
ESTIMATED REMAINING
COLLECTIONS
R854 MILLION
NON-INTEREST REVENUE
▲20% ▲15% ▲22% ▲17% ▲28% ▲11%
▲32%
HY17 3.3%
HY17 5%▲40% HY17 78.8%
▲6%
HY17 24.1%
HY17 17.2%
HY17 16.1% ▲ 33% ▲34%
Notes:
Financial ratios & results exclude once-off acquisition costs of R22 million incurred during the FY17 year.
1. Headline earnings attributable to the group, excluding minority interest | 2. Market capitalisation as at 31 March 2018 | 3. Excludes the effect of acquisitions
Results as at 31 March 2018
5
Who is TCRS?
Innovative & bespoke technology systems that drive
superior performance & efficiency
1
2 Generating in-depth insights from the continuous collection of accurate
& valuable data to develop a consolidated view of an individual that
enables precise & informed internal & external decisioning
3 Improving its clients’ ability to originate, manage & 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 & collecting non-performing loan portfolios
Proactive workforce management & technology facilitate a flexible
& dynamic servicing capability able to meet a client’s unique
requirements
Regarded as a trusted partner by large consumer-facing
businesses & credit providers across multiple industries
4
Enabling clients to generate higher risk-adjusted returns through
their engagements with their customers at the point of origination,
management & collection
5
6
7
TRANSACTION CAPITAL
RISK SERVICES IS A
TECHNOLOGY-LED,
DATA-DRIVEN PROVIDER OF
CUSTOMER MANAGEMENT
SOLUTIONS IN SOUTH AFRICA
& AUSTRALIA THROUGH A
SCALABLE & BESPOKE
FINTECH PLATFORM,
ENABLING ITS CLIENTS TO
MITIGATE RISK THROUGH
THEIR CUSTOMER
ENGAGEMENT LIFECYCLE
6
The history of the TCRS group
1900’s 2005 2010 2015 Today2000’s
1958Rand Trust is founded.
1997MBD is founded.
1999Principa Decisions is founded.
1998MBD’s first principal debt acquisition. To
fund the transactions, Gensec Bank Ltd (now
Sanlam Capital Markets) acquires equity in
MBD.
2000African Bank Investments Limited
acquires MBD.
2003The soon to be Transaction Capital
Group acquires MBD. The MBD Group
acquires competitor Asset Solutions
Company.
2004The MBD Group establishes Capital
Data a specialised business focused on
legal collections solely for debt owned
by the MBD Group.
2006MBD’s first Securitisation programme formed.
2007Transaction Capital is formed.
2008Transaction Capital acquired 90% of Rand Trust.
Rand Trusts’ first Securitisation programme
established.
2009The MBD Group merges with the CMS Group, its
competitor and second largest player in the
distressed debt collections market. MBD was at
the time the largest player – the merger results in
the formation of the most dominant collection
house in South Africa.
2012Transaction Capital Limited Lists on the JSE.
MBD and Rand Trust refinances their
respective securitisation programmes. Two
new on balance sheet structures are
established for each operation, allowing each
entity to issue secured loans. Each funding
structure is established under a common
terms agreement with the Standard Bank of
South Africa acting as facility agent.
Transaction Capital acquires the remaining
10% of Rand Trust.
2016The Transaction Capital Risk Services Group
(“TCRS”) is formed, a wholly owned
subsidiary of the Transaction Capital Limited
Group. TCRS incorporates MBD (rebranded
as Transaction Capital Recoveries), Rand
Trust (rebranded as Transaction Capital
Business Solutions), BDB Data Bureau
(rebranded as Transaction Capital Payment
Solutions (TCPS) and Principa Decisions.
2017Transaction Capital augment the TCRS group
with the acquisition of 100% of Recoveries
Corp (Australia), 75% of Road Cover and
51% of the Beancounter.
2018TCRS acquired 100% of
the ordinary shares of
Accsys Proprietary Limited
(“Accsys”).
7
TCRS’ journey since listing
81.0%
318
420
561
523 571
9301 000
2012 2013 2014 2015 2016 2017 2018
Tu
rno
ve
r Z
AR
mil
lio
n
• Transaction Capital Lists on the JSE
• Transaction Capital acquires 100% of
TCBS
• Entered the payments services sector
via the acquisition of BDB
• Entered the SA municipal collections
sector
• ISO Data security accreditation
obtained
• Management team and overarching
strategy centralised
• Early adoption of IFRS9
• Improved penetration in the Tier 1
banking and specialised lending
sectors
• Increased focus on SA
telecommunications collections sector
• Entered the SA insurance collections
sector
• TCR achieves level 3 B-BBEE rating
• Technology enhancements, including
implementation of new predictive
dialer and the creation of the Master
Data Universe
• Rebrand to leverage Transaction
Capital’s brand equity
• Acquired 75% of Road Cover
• Acquired 51% of The Beancounter
• Transaction Capital augment the
TCRS group with the acquisition of
100% of the Australian-based debt
recoveries specialist Recoveries Corp
• TCR obtained a level 2 B-BBEE
rating
201720162015201420132012 HY 2018
• Implementation of Work Force
Management technology to optimise
resource allocations and Payment
efficiency
• Continued acquisition of NPL
portfolio across multiple industries
using creative and bespoke capital
solution frameworks
• Ongoing refinements and
enhancements to predictive dialer
technology, including Right Time to
Call (“RTTC”) analytics
• Operational and strategic integration
of Acquisitions
• Acquisition of 100% of Accsys
Financial highlights for the Half Year ended 31 March 2018
Headline earnings Cost-to-income ratio Value purchased book
debts acquired
Employees Asset turnover ratio Return on equity
R119m R222m 3 349 48.9% 17.7%R233m FY17
8
Key operating segments in TCRS group
Transaction Capital Risk Services provides a comprehensive range of structured credit risk management, debtor management, data
management, collections, customer engagement, call centre and capital solutions to South Africa’s largest credit providers as well as
Australia’s government, insurance, banking and finance, utilities and telecommunications market sectors.
Further augmented by
acquisitions from 2016 to
2018
Provides customer management solutions leveraging its
consulting, data analytics and technology capabilities, focusing
mainly on the customer credit lifecycle.
Provides payment processing services through electronic funds
transfer and related products to corporate clients.
Provides invoice discounting, working capital finance &
commercial receivables management solutions to SMEs
Provides a comprehensive range of customer management and
capital solutions to South Africa’s largest credit providers.
Pre
vio
usly
kn
ow
n a
s
CS Holdings
A technology-led, data-driven analytics driven provider of
customer management and capital solutions in South Africa and
Australia, that enables its clients to effectively manage their
customers through their lifecycle.
Empowers South African consumers with the knowledge of their
personal credit information.
9
Led by an experienced management teamTransaction Capital and TCRS’s executive management team holds extensive experience in the disciplines that make the company uniquely
successful as a customer management solution provider.
Dave McAlpinTCRS | Chief Executive OfficerGroup tenure – 10 years
MBA, Bcom, Associate of the Chartered
Institute of Management Accounts
(A.C.M.A.)
• Appointed as TCRS CEO in 2014
• Over 15 year’s experience both in South
Africa and international retail
• Joined the Transaction Capital Group in
2008 as the Chief Executive Officer of
Principa Decisions
• Served as the CEO of Forza Group for 4
years
• Held various senior positions within the
Massmart and Wooltru Group
Stephan VenterTCR | Debt Acquisition
ExecutiveGroup tenure – 11 years
BSc Mathematical Statistics &
Mathematics
• Joined MBD in December 2007 after
spending three and a half years at FNB
• Served as the Head of Sales & Solutions in
the Private Label Department at FNB
• Prior to FNB, headed up an African Bank
subsidiary providing working capital solutions
to SMMEs
• Honed his analytical, financial and strategic
skills in his time as an equities analyst with
CSFB and an actuarial assistant with Liberty
Life
Rob MonteithTCRS | Chief Information
OfficerGroup tenure – 3 years
MBA, BSc Engineering, Metallurgy
• Appointed as TCRS CIO in 2015.
• Chairman of Principa & TCPS
• Served as GM of Business Solutions (part of
Business Connexion)
• CEO of JSE-listed USC Software, from 2009
– 2014
• Moved into the IT space with SA Breweries.
• Gained early experience running
metallurgical extraction plants in the gold
industry, and constructing chemical and
water treatment plants
Robert AmoilsTCRS | Chief Financial OfficerGroup tenure – 1 year
B.Bus.Sci ((Hons) Finance,
Chartered accountant CA(SA)
• Appointed as TCRS Group CFO in 2018
• Served as Group CFO and co-head of M&A
for Vestacor Limited for 12 years
• Held various executive and non-executive
directorships within the Vestacor Group
(Property and Retail focused)
• Co-founder and Financial Director of
Vividend Income Fund Limited for 3 years
• Served as Group CEO of Stuttafords Stores
for 3 years
• Served articles at Kessell Feinstein
Edward KhouryTCRS | Business DevelopmentGroup tenure – 3 years
Bachelor Degree in Commerce
• Appointed as business development
executive in 2015
• 30 year’s experience in the Credit Bureau
industry
• CEO of TransUnion Credit Bureau and was
later promoted to Group CEO for TransUnion
Africa
• Worked with the Credit Regulator
representing the Credit Bureau Industry
interest in the formulation and
implementation of the National Credit Act
Dineo SekweleTCRS | Executive Group HR Group tenure – 1 year
Masters in Management and Innovation.
Qualification in Construction
Management Program & BA HR and
Economics.
• Over 19 year’s experience in HR
• Previously HR Director of Group Five’s
Engineering and Construction (Building) and
later promoted to Cluster HR Director within
the Investment and Concessions Cluster
• Passionate about unleashing potential and
developing people, creating a positive
environment engaging, motivating & inspiring
to bring the best results
10
Led by an experienced management teamDeon PienaarTCBS | Chief Executive OfficerGroup tenure – 10 years
B.Compt (Hons) & Chartered accountant
CA(SA)
• Appointed CEO of Transaction Capital
Business Solutions in February 2012
• CEO of Mortgage Capital from September
2010
• Deon joined Transaction Capital Recoveries
in 2007 with responsibility for the governance
function (Risk, Internal Audit, Compliance
and Legal) and special projects
• Completed his articles with PWC before
joining the Nedbank Group in Internal Audit
Marnus BroodrykTransaction Capital SME
Services | Chief Executive
OfficerGroup tenure – 18 months
B.Compt (UNISA), Professional
Accountant (SAIPA)
Jaco RossouwPrincipa|Chief Executive OfficerGroup tenure – 13 years
BSc majoring in mathematics and
computer science
• Appointed CEO of Principa in 2016.
• Over 26 years of experience specialising in
the insurance, private banking retail and
financial services industries.
• A technologist and analyst at heart with a
track record of delivering innovative
business solutions over a wide geographical
region from South Africa to the Middle East
and Europe.
• Serving as leader, motivator, imagineer, to
one of the finest collections of data, business
and computer scientists in SA.
Eugene BeckRoad Cover | Chief Executive
OfficerRoad Cover tenure – 13 years
Entrepreneur
Carl de VilliersTCR | Managing DirectorGroup tenure – 15 years
B.Acc and B.Acc (Hons); Chartered
accountant CA(SA); Chartered
Management Accountant (A.C.M.A.).
• MD of TC Recoveries since 2016.
• TCRS exco member.
• Appointed as Chief Revenue Office of TC
Recoveries in 2014.
• Joined TC Recoveries as Group FM in 2003
and has been in the group ever since
• Attended the Executive leadership program
at Harvard Business School, Boston, USA in
2011.
• Served articles at PWC.
Teryl SchroennAccsys | Chief Executive OfficerGroup tenure – 16 years
MMI-Damelin. Finalist at the 2016
National Business Awards
Nicholas HarrakRecoveries Corp | Chief
Executive OfficerGroup tenure – 18 years
LBLS
David HurwitzTC | Chief Executive OfficerGroup tenure – 13 years
BAcc (Hons) HDipTax (University of
Witwatersrand), Chartered accountant
CA(SA)
• Appointed as Transaction Capital CEO in
2014.
• Served as head of capital markets team, SA
Taxi CFO and Transaction Capital CFO.
• Joined Transaction Capital’s founding
shareholders in 2005 upon the acquisition of
SA Taxi following which Transaction Capital
was formed.
• Active in debt capital markets since 1997.
• Served articles at Grant Thornton.
Market
Context (South Africa)
II
South African consumers remain vulnerable, with
persistently high levels of household debt-to-
disposable income, low economic growth and high
unemployment. Of the 25.3 million credit-active South
African consumers at December 2017, 9.7 million had
impaired credit records.
This climate favours the acquisition of non-performing
loan portfolios as a principal asset. Although these
macro- and socio-economic challenges affect
consumers’ ability to repay debt, regulatory changes
regarding affordability assessments have prompted
more responsible and lower levels of credit extension,
particularly in the retail sector. This is expected to
result in earlier rehabilitation of the consumer over the
medium term.
Market overview
South African
consumers with
impaired credit records
9.7m
Credit-active South
African consumers
25.3m
13
TCRS competitive advantages
PERFORMANCE
ANALYTICS
• Predictive & 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 PROPRIETARY DATA
• Database of South Africa’s distressed consumers
• Continuously enriched (with collection &
ContactAbility results)
SCALABLE TECHNOLOGY PLATFORM
• Dialer enhances scale of ContactAbility
› Enabled over any omni-channel
› ~38 million outbound calls per month
› ~6 million voice interactions per month
› ~600 000 payments received per month
• Workforce management enables
› Flexible work-hour scheduling
› ▲ talk time
› ▲ activations
› ▼ staff turnover
› ▼ cost of collection
REPUTATION OF PERFORMANCE
• Only local listed industry participant
(TCRS is a subsidiary of TC a listed
entity)
• Diverse range of local & international
stakeholders
• Ranked as 1st or 2nd in 89% of
mandates
INVESTMENT IN COMPLIANCE
• Fair treatment of our clients’ customers
• Compliant with legislation
• Active membership across various professional
bodies
• Benchmarking against international best
practices
14
It is a challenging consumer credit environment
9.7 MILLION(~40%) NON-PERFORMING
CREDIT CONSUMERS
(NCR 31 December 2017)
ELEVATED LEVELS OF
UNEMPLOYMENT
AT 26% (▼from 27.7% high)
25 MILLION
Credit Active Consumers
in South Africa
71.9% HOUSEHOLD DEBT
TO DISPOSABLE INCOME
REMAINS HIGH (▼from a high of 74.4%
as DEBT GROWTH < INCOME GROWTH)
ESCALATING COSTS OF
HOUSEHOLD ESSENTIALS
OVER THE MEDIUM-TERM
AT 5.3% (▼from 6.4%)
2014: SOUTH AFRICANS
WERE THE BIGGEST
BORROWERS IN THE WORLD
(WORLD BANK REPORT)
15
The unsecured consumer non-performing market is growing
Non-Performing Loan Market Size & Growth (Rbn)
Unsecured finance in South Africa has grown over 3 of the last 6 years. This
unsecured finance segment is TCRS’s target market.
Macro-& socio-economic environment
o Increased number & size of NPL portfolios
available to acquire as a principal asset
from clients preferring immediate recovery
from their NPLs
o Consumers’ disposable income stressed,
negatively affecting their ability to repay
debt
o Increased cost & extended time to collect
Regulatory environment
o Stable over the past 18 months
o Regulatory changes regarding affordability
assessments result in more responsible &
lower levels of credit extension
o Earlier rehabilitation of consumers over
medium-term
41 49
70 80 84 83 79 76
135120
114 104 102 102
115114
-
20
40
60
80
100
120
140
160
180
200
2010 2011 2012 2013 2014 2015 2016 2017
Bill
ions
Unsecured finance Mortgages & secured finance
16
TCRS is the largest market player across multiple metrics
Other fragmented
participants in
addressable market
such as
of 201 mandates on client panels where TCRS are represented:
TCRS rank
1stor 2nd
73%
16%
in 89%R21BILLION¹Acquisition of
non-performing
loans as acquired
as principal
R585MILLION
Gross loans & advancesTransaction CapitalBusiness Solutions
R76bn¹FACE VALUE OF NON-PERFORMING
UNSECURED CONSUMER DEBT
MONITORED BY NCR
R21BILLION¹Contingency &FFS collections
Sectors split by revenue per segment as at 31 March 2018
1. R76 billion comprises credit monitored by the NCR as at 31 December 2017. TCRS’ target market & assets under management also includes sectors not regulated by the NCR, being SMEs, education, insurance, public
sector, telecommunications, SOEs & utilities
17
TCRS also benchmarks itself against leading listed peers globally
Different geographies use different languages to describe solutions and services
BRAZIL
Acquirer of NPL portfolios as principal
(unlisted)
EUROPE
Acquirer of NPL portfolios as principal
AUSTRALIA
Predominantly an acquirer
of NPL portfolios as principal
SOUTH AFRICA & AUSTRALIA
Acquirer of NPL portfolios as principal,
contingency & FFS collection services
Diversification supports performance in varying market conditions
o Diverse revenue model: Acquisition of NPL portfolios vs Contingency & FFS collector
o Spread across various consumer credit sectors: Banking, specialist lending, credit retail, utilities, telcos,
insurance & public sectors
o Spread across 2 geographies: South Africa & Australia
THAILAND
Acquirer of NPL portfolios as principal,
contingency & FFS collector
UNITED STATES & EUROPE
Acquirer of NPL portfolios as principal
18
TCRS contributes to the effectiveness of the credit system
1 in 6
1 in 4credit active people
1 in 2non-performing credit consumers
TCRS talks to…
Resulting in
…each month
5.7m
South African adults
Unique customers
R300m
Collections each month
600k
Number of payments received each month
38m
Outbound calls per month
Voice interactions each month
6m
19
Keeping abreast of best practices
TCRS is a member of the following
professional bodies:
• Council for Debt Collectors
• ADRA (Association for Debt Recovery
Agents)
• Institute of Credit Management
• SACRRA (South African Credit & Risk
Reporting Association)
• Business Process enabling South Africa
(BPeSA)
The following are other memberships that
are maintained in order to keep abreast of
best practices in the industry and to have
representation on industry bodies
including:• National Credit Regulator (NCR)
• Business Process enabling South Africa
(BPeSA)
• Institute of Credit Management
• Consumer Payments Association (CPA)
• ACA International
TCRS ensures it keeps up to date with the regulatory environment in which it operates as well as best practices in the industry both
globally and locally.
The collections and credit industry news update & regulatory developments for
2017 and 2018:
• Amendments were introduced in the Magistrates Court Act relating to the regulation of EAOs
• The National Credit Regulator has targeted a number of retailers regarding the inclusion of
club fees in credit agreements. The High Court confirmed that Club Fees and extended
warranties sold were not in contravention of the NCA.
• The Financial Sector Regulation Act introducing the first phase of Twin Peaks was
promulgated in August 2017. Debt Collectors are now subject to the Financial Sector
Conduct Authority.
• The National Credit Amendment Bill 2018 was published for comment in December 2017,
followed by Parliamentary Hearings in January / February 2018. Highlights of the Bill include:
o Proposed once-off Debt Intervention which could result in the extinguishing of unsecured
debt of over-indebted consumers who apply for debt intervention
o The proposed criminalisation of contraventions of section 126B which prohibits the sale
and collection of prescribed debt
• SARS implemented a debt collection strategy which included the appointment of debt
collection companies to recover billions of outstanding taxes. TCR has been included in the
SARS panel of debt collectors.
• The High Court ruled in favour of retailers in finding that certain sections of the NCA dealing
with credit assessments of consumers be set aside. In effect, credit providers are no longer
required to collect particular forms of documents proving a consumer’s income (i.e. three
months bank statements) when the consumer applies for credit.
Changes to legislation regarding non-authenticated early orders (NAEDO),
which would require consumers to confirm with their bank before an early debit
order becomes active on their account, has been delayed to October 2019.
The business continually evaluate the impact of any changes on the valuation of its existing
purchased debt portfolio and there are no material changes in this regard.
Transaction Capital Recoveries’ exposure to
emolument attachment orders (EAOs) is
insignificant due to no new EAOs being
initiated for a number of years
Business Model (South Africa)
III
21
TCRS bespoke value proposition
Originate1 Manage2 Collect3
Rehabilitating customers and solving
our clients’ impaired debt problems
through capital solutions
Identifying and winning new
customers by taking advantage of
world class data analytics
Enabling frictionless payment
processes and insightful customer
management
Customer engagement lifecycle
Customer management solutions
Capital solutions
Clie
nt e
ng
ag
em
en
t m
od
el
“TCRS provides solutions at the intersection of
our clients and their customers”
The Transaction Capital Risk Services division operates across three aspects of the value chain – originate, manage and collect. TCRS will
sustain its growth by applying its capabilities across each of those three segments in different client sectors, leveraging the businesses according
to the value chain segment they’re strongest in.
22
Service offering for clients throughout their customers’ lifecycle
Originate1 Manage2 Collect3
Rehabilitating customers and solving
our clients’ impaired debt problems
through capital solutions
Identifying and winning new
customers by taking advantage of
world class data analytics
Enabling frictionless payment
processes and insightful customer
management
Customer engagement lifecycle
Clie
nt e
ng
ag
em
en
t m
od
el
Custo
mer
ma
na
ge
me
nt
so
lutio
ns
Ca
pita
l so
lutio
ns
Lead generation &
customer acquisition
Payment & account
managementCollection services
SME financing Debt purchasing
23
Services performed by various providers in the TCRS group
Originate1 Manage2 Collect3
Customer engagement lifecycle
Clie
nt e
ng
ag
em
en
t m
od
el
Custo
mer
ma
na
ge
me
nt
so
lutio
ns
Ca
pita
l so
lutio
ns
• Leads generation
• Predictive & prescriptive modelling
• Segmentation modelling
• Systems (Smart & FICO)
• Analytics
• Bespoke value added services and
solutions
• Customer retention, profitability,
predictive & prescriptive modelling
• Systems (Smart & FICO)
• Analytics
• Payment processing
• Receivables management
• Systems (Smart & FICO)
• Analytics
• Early stage rehabilitation
• Late stage collections
• Legal recoveries
• B2B collections
• Invoice discounting
• Trade financing
• Property financing
• Spot book acquisition
• Structural outsourcing
• Forward flow agreements
Lead generation & customer
acquisition
Payment & account
managementCollection services
Debt purchasingSME financing
24
Services are offered in a variety of industries
Originate1 Manage2 Collect3
Customer engagement lifecycle
Clie
nt e
ng
ag
em
en
tm
od
el
Custo
mer
ma
na
ge
me
nt
so
lutio
ns
Ca
pita
l so
lutio
ns
Lead generation & customer
acquisition
Payment & account
managementCollection services
Debt purchasingSME financing
100%
SMEs
7%
84%
1%8%
Creditretail
Valueaddedservices
Telcos & OtherInsurance
19%
2%
15%
47%
14%3%
Creditretail
Banking
Specialist lending
Insurance & telcos
OtherPublicSector
18%
8%3%
8%10%
51%
2%
26%
30%
14%
30%
Creditretail
Banking
Insurance &Other
Public sector
Telcos
Australia
Specialist lending
AUSTRALIA
Insurance
Public sector
Facilities, Telcos & Other
Banking & commercial
25%
32%
37% 6%
Creditretail
Banking
Specialistlending
Other
Sectors split by revenue per segment as at 31 March 2018
Technology & Data Platforms (South Africa)
IV
26
Data and technology are used throughout
Identify priority in which to contact
customers and collect debts based on
individual customer data from the Master
Data Universe (MDU)
Individual customer data from the MDU
indicates the optimal contact channel and
time, allowing for higher contact success
and optimal workforce productivity
Predictive dialler optimises connections
enabling efficient workforce management
and better conversion
Receive PTP from the connected base,
each rated as to the probability of
payment for increased accuracy in
payment prediction
On receipt of PTP, payment probability
platforms and conversion rates are
continually monitored/reassessed to
maximise collection efficiency.
Surrogate datasets determine the value of the book Determine the purchase price or agency
fee based on similar database behaviours
and success rates
Value of debts on book
38 million call attempts per month
5.8 million
connections made
per month
~50% Promise-to-
Pay (PTP)
~50%
Pay
Enriched
customer
behaviour data
enables higher
contact and
conversion rates
Data is processed and fed back into the
MDU at the end of each day to optimise
prioritisation and enable the updating of
contact details.
As the data becomes enriched, the
funnel narrows, increasing accuracy and
predictability
Focus is on tailored
message content, enabled
by individual customer
behaviour data
~15% Right party
contact madeRight party contact made is ~ 15% of the
5.8 million connections made per month
27
Enriched data on each individual
Enriching the data creates an exponential effect on efficiency in contactability, which in turn translates into propensity to pay.
The Master Data Universe and its applications are constantly evolving and enhanced with new technologies.
• Opportunity to monetise data
• POPI compliant
Data is current,
relevant &
accurate as per:
CREDIT
BUREAU
DATA
OTHER DATA SOURCES
such as the Department of Home
Affairs & the Deeds Office
Data from
PRINCIPAL
PORTFOLIOS
ACQUIRED
Data sourced
from MDU
for maximised
ContactAbility
Transactional Data
enriched with collection
& ContactAbility results
MASTER DATA UNIVERSE (MDU)
9.2 MILLION
UNIQUE & VALID ID NUMBERS
Each uniquely scored with a TCRS
propensity to pay score
94%
COVERAGE OF SOUTH
AFRICA’S
NON-PERFORMING
CREDIT CONSUMERS
2 in 5South African adults
2 in 3credit-active people
Up to 5
per unique ID number
ASSOCIATED
TELEPHONE NUMBERS
6 MILLION
POSTAL
ADDRESSES
unique & valid
>
• WHEN to contact
• HOW to contact
• WHICH address/number to
use
• Propensity to pay
120 000UNIQUE & VALID company
registration numbers
28
Systems
Via inter-connected systems, the operations can run seamlessly from start to finish.
MDU
CORE TRANSACTIONAL
SYSTEM
• Customised per client
• Ease of use
• Quick to train
• Decrease staff turnover
• Decrease cost of collection
CAMPAIGN BUILDER
• Real-time management tools
• Automated messaging
• Champion Challenging
Predictive analytics to determine:
• Propensity to pay
• Right time to call
• Right day to pay
• Dynamic matter prioritisation
DIALER & WORKFORCE
MANAGEMENT
• Enhances scale of contactability
• Schedule the workforce
• Flexible work hour selection
• Increase talk time (more than 3
hours per 6 hour shift)
• Increase activations (deeper
penetration of customer base)
MANAGEMENT & BUSINESS
INFORMATION
• Customised value-add insights
to clients
• Allows TCRS to win more
mandates
• Enhanced management of
compliance and reputation
ENABLED OVER MULTIPLE OMNI-CHANNELS
• Capability to contact customer by preferred contact method
COLLECTIONS
• Promise-to-pay management
• Multiple payment channels
1 2 3 4
5
6
Data sourced
from MDU
for maximised
ContactAbility
Transactional Data
enriched with collection
& ContactAbility results
29
Technology is a barrier to entry
• Data is gathered and constantly enriched over time
• Generation of in-depth insights
• Continuous and consistent collection of accurate and valuable data
• Development of a consolidated view of an individual
• Enabling precise and informed internal and external decisioning
Data & Analytics
• Proactive workforce management & technology
• Facilitation of a flexible & dynamic servicing capability able to meet a client’s unique
requirements
• Technical and specialist skills required
People & Skills
• Cost of systems and data processing ability
• Book buying and data collectionInvestment
• Advanced technology at the forefront of technical capability
• Sizeable, scalable platform positioned for growth
• Robust systems to support the technology, data and processing required
• Use and prioritisation of technology during the development stages of the business has
resulted in a bespoke and scalable system that is purpose-built and streamlined
Technology &
Systems
Transaction Capital Recoveries (“TCR”)
V
Transaction Capital Recoveries (previously known as
MBD), is the leading independent provider of credit
management solutions in Southern Africa.
Its core service is the collection of accounts
receivables encompassing the entire credit cycle
using both call centre and legal collection frameworks
and methodologies. It has clients in both the private
and public sector, with substantial portfolios of
accounts receivables. Inherent in this service is an
option to acquire accounts receivables portfolios and
its strong balance sheet is a key differentiating factor
in unlocking value for its clients.
Ancillary services provided to credit providers include
administration, back-up service provider, consulting,
data analytics and software services.
32
Within TCR services are performed
Collect
Clie
nt e
ng
ag
em
en
t m
od
el
Cu
sto
me
r
ma
na
ge
me
nt
solu
tions
Ca
pita
l so
lutio
ns
• Systems (Smart & FICO)
• Analytics
• Early stage rehabilitation
• Late stage collections
• Legal recoveries
• Spot book acquisition
• Structural outsourcing
• Forward flow agreements
Collection services
Debt purchasing
Offering a truly comprehensive range of credit
management solutions, TCR has positioned itself as
the leader in the South African corporate, commercial,
retail and public sectors, along the way developing
technology and infrastructure unrivalled in its ability to
offer clients the competitive edge. TCR perfected the
proprietary operational processes and protocols
essential in delivering the best results whilst keeping the
focus on customer centricity and unrivalled service,
always measuring itself by the value added to the
bottom line.
While the core offering provides pre-legal (early stage
and late stage) collections, legal collections and debt
acquisition solutions, TCR’s trusted reputation and
strategically aligned relationships with leading
companies enables it to extend its core service offering
in the form of pre-billing, billing, and insurance claims
outsourcing solutions.
33
TCR offers bespoke collection services
Optimal business to customer
collection solutions
When it comes to revenue
continuity, efficient management and
optimal control over the collections
cycle is undoubtedly one of the most
critical deliverables in business
today. TCR provides a collection
solution aimed at ensuring the best
results when it comes to delivery on
revenue targets.
Consumer Collections Business Collections Public Sector Solutions
World-class business to
business conversion solutions
Professionals who trade business-
to-business understand that the
reality of non-performing debt can
often mean a compounding threat to
revenue stability.
TCR understands and implements
the critical commercial conversion
solutions essential for bottom line
success, spanning across most
industries, and applying the latest
trend and conversion
methodologies.
Extensive experience in debt
collection and debt book
analysis
TCR has been assisting various
public sector entities with their
revenue enhancement and data
analysis, offering receivables
management solutions that span the
entire collections lifecycle. TCR
recognises that the public sector
operates within a complex
regulatory framework and requires
unique revenue management
solutions and strategies.
34
Key services powered by bespoke, scalable systems
Hosting and administration
TCR offers a range of account hosting
and administration services to clients
scalable to both Private and Public
sector organisations.
Debt acquisition
TCR offers strategic assessment and
evaluations of clients’ debtor books and
can assist with valuation, restructuring,
acquisition and servicing of accounts
receivable portfolios.
Specialised legal collections
Once all means have been exhausted
to collect on arrear accounts using our
pre-legal solutions, it may be time to
engage in more rigorous decisive
legal campaigns.
Third party collections: early to late stage
TCR offers professionalism and
collaboration of seasoned industry experts
renowned for “all-stage” collection
success.
Credit intelligence and strategic consulting
TCR’s dedicated Business Knowledge
division offers clients access to the credit
industry’s top business minds.
Full Service Collections Solutions
Delivering every stage of the collections life cycle.
Using wold-class call centres alongside specialised legal collection services, TCR offers a comprehensive range of receivables
revenue collection solutions, whether one day old or many years older. Using leading collection solutions, TCR manages non-
performing debt, delivering results in any stage of the collections life cycle, simply and conveniently.
35
TCR provides services to a variety of credit providers
Select
clients
$
36
Agency “fee for service” vs purchase book buying “principal” revenue
Agency “Fee for service” revenue
TCR was the first debt buyer in South Africa, and to date is a
dominant player in this market. Purchase books are generally sold
by credit providers after being worked by “fee for service” agents and
approximately 18 months post write off.
Its scale and significant database provides TCR with an inherent
competitive advantage in pricing and onboarding of new books.
Once purchased, all collections accrue to TCR instead of just the
percentage commission as with agency revenue.
Right to Collect: In certain cases, where transfer of ownership of the
book is problematic or prohibited by law, TCR acquires the exclusive
right to collect on a book for a specified period of time, thus providing
the credit provider with a partial upfront recovery in addition to a
recurring recovery percentage over time
TCR offers strategic assessment and evaluation of clients’ debtor books and can assist with valuation, restructuring, acquisition
and servicing of accounts receivable portfolios.
TCR offers a host of outsourced customer management and
collections services from day 1 delinquency reminders for payment
(pre-write off) to legal collection services on long-outstanding
receivables (post-write off).
TCR responds to specific client needs and tailors its campaigns
according to clients’ recovery objectives.
TCR is generally appointed to panels and competes with in-house
collections teams as well as competitors.
TCR earns a pure success based commission on collections.
In some cases TCR works accounts as an agent before they are
sold off by the client
Purchase book buying “principal” revenue
37
Identify clients who TCR would like to collect on behalf of.
Present the business to them and add to pre-approved client
list.
Invitation to bid to be agency collector received by TCR via
an RFP. Formal response submitted with relevant
documents.
Formal response submitted with relevant legal documents.
Client adjudicates tender and provides a score to bidders
and responses.
Price is offered to the client via tender or set by client. Commission rates are
reasonably standardised based on the ageing of the
book.
The client generally appoints a panel with minimum 2 and
maximum 10 collecting agencies.
Client divides book based on the number of collectors on
the panel.
Performance is monitored on an ongoing basis, and clients generally favour successful collectors in the allocation of
matters, subject to concentration risk constraints,
to maximize value.
1
2
3
5
6
4
7
8
Formal and competitive bid for agency collection process
38
Invitation to bid for book received by TCR or book is placed on the market via an
open tender process.
Completion of registration documents including NDA and
submission of regulatory compliance documents.
Receipt of data either via secure FTP site or password encrypted medium. Draft sale agreement is distributed for
comments. due diligence and compliance processes
commence.
Valuation process begins on data received. An initial price
is arrived at using various valuation methodologies.
Valuation meeting is held where the valuation is
disseminated and critically discussed considering risk
factors. A price range is developed.
An investment committee (Invesco) document is
completed with the business case and projected financials
A pre-Invesco meeting is held to discuss the final pricing and a final proposal is completed for discussion at the Invesco.
An Invesco meeting (with shareholders depending on threshold) is held whereby a final decision is made on the
bid price and strategy.
An official bid is placed with the seller either via an auction process or through a formal
written offer document.
Formal and competitive book purchasing process
Sale is concluded with successful bidder and final agreement is concluded between parties.
Purchase price is paid to seller and final data and document is forwarded to purchaser.
1
2
3
5
6
4
7
8
9
39
• In duplum - Anomalies in the In Duplum calculation
• Prescription - Data Integrity & time to prescription & interruption opportunity
• NCA compliance
• All verifiable information
• Data set is complete and has integrity to be able to place reliance on analysis done
• Collection cost
• Contactability
• Link analysis to MDU
• Dependent on type of book
• Valuation relevant
• Looking at key metrics of the book
• Expected average payments
• Expected number of payments
• How credit was extended – credit extension policy
• Current collection strategies
• Enforceability of claims
.
Regulatory
and legal
Credit granting
& recovery
process
Data
Integrity
Debtor
portfolio
analysis
Individual
debtor
Choice of
valuation
methodology
VALUATION
Due diligence processTCRS maintains a Business Knowledge team made up of actuarial scientists, engineers and statisticians who run all our statistical
valuation models on existing books as well as on potential acquisitions. TCRS normally receive a full data set from the books offered
to us for purchase. Once received, the following is considered during the due diligence process:
40
First Principles Approach
Surrogate activation yields are incorporated to estimate the number of accounts that will be activated over the next 𝑥 number of months.
Here, 𝑥 is linked to the average number of months until impairment (for the portfolio under valuation).
Valuation methodologiesValuation is based on the use of surrogates which are based on existing books, segmented to create statistically reliable predictors of the
book being valued. Full investment process involving a formal investment committee that involves senior TCRS executives (as well as
Transaction Capital board members when acquisitions are material).
First Principles (Per Recency, Score etc.)
Similar to the First Principles Approach discussed above, this method utilizes in-house experience of activations and drop-offs.
However, for this method activation yields are segmented based on payment recency or propensity to pay score, obtained from relevant
surrogates.
Markov Chain Legal Model (Legal accounts)
TCRS adopts a time-homogeneous, absorbing Markov chain model as a stochastic measure of how accounts move through the legal
process over time.
Yield Per Recency
Yields from appropriate surrogates are segmented according to payment recency and said yields are projected onto the portfolio under
valuation.
Payer Run-down
When a portfolio consists mainly of accounts with recent payment information (paid in the last 6 months), a Payer Run-down is
implemented to estimate future cash flows.
Amortised Cost
Using actual performances of surrogates, TCRS estimate expected cash flows and GP’s for a 60-month period. This model is based on
a number of Sigmoidal functions.
Transaction Capital Business Solutions (TCBS)
VI
Transaction Capital Business Solutions (“TCBS”)
forms part of Transaction Capital Risk Services,
having started out as the very familiar brand, Rand
Trust, it has been assisting businesses with credit
solutions for over 60 years by developing new cash
flow and credit risk solutions for businesses
TCBS provides its clients with a fully outsourced
debtor administration service. In addition, the
company specializes in advancing working capital
finance to credit approved clients using pre-
determined credit criteria. Funds are advanced to
clients in the form of a purchase price as TCBS
purchases eligible receivables to its clients where
tangible security exists.
As an ancillary product, TCBS also advances
secured loans to its clients with tangible assets,
including the debtor books where applicable, serving
as security for the loans. The ancillary products
constitutes a smaller portion of the company’s
business, being (circa 36%) while invoicing
discounting constitutes the balance (circa 64%).
Accordingly, TCBS owns a debtors book of short-
term discounted invoices and loan receivables which
are secured.
Financial & operational performance
VII
44
TCRS operational performance
RESULTING IN
Transaction Capital
Recoveries SA South Africa
Australia
$30m
Average
collections per
month
Average number of
outbound calls per month
Average number of voice
interactions per month 267 k
Average number of payments
received per month 121 k
1.4m
~267 000
~121 000
R300m
Average
collections per
month
Voice interactions per
month 5.8m
Outbound calls from the
dialer per month 38m
~250 000
Disbursements
for clients each
month
~630 000Debit Orders & Naedo
transactions
processed for clients
each month
~R2.5bn
Of payments
processed for
clients each
month
South Africa
45
TCRS Group Financial
Highlights as at 31 March 2018
Headline Earnings
R119m
Assets under
Management
R51.4bn
Return on Assets
7.9%
Return on Equity
17.7%
Asset turnover ratio
48.9%
Estimated remaining
collections
R2.0bn
Books in total
219
Portfolios acquired for
R218m
17
Notes: Figures include South Africa and Australia0
46
TCRS financial performance as at 31 March 2018
• Core headline earnings ▲28% to R119m
› Headline earnings organic growth ▲>15%²
› Accretive cash deployment converting cash yield
into earnings
• Contingency & FFS revenue
› Growing revenue from adjacent sectors
› Insurance, telecommunications & public sector
contributing 38% of SA agency revenue
(HY17: 20%)
• Cost-to-income ratio improved (excluding the effect
of acquisitions)
› Total costs ▲4%²
› Continued investment in data (MDU), technologies
(dialer & workforce management) & analytics
yielding efficiencies
› Frugal cost management
70 93 119
97
143
186
524
715
938
571
930
1 03
0
81.5 80.381.0
51
44
34
2016 2017 2018
Headline earnings (Rm) Services EBITDA² (Rm)
Total income (Rm) Purchased book debts (Rm)
Cost-to-income (%)¹ Principal/contingency collections revenue split
1.Core EBITDA (excluding Transaction Capital Business Solutions)
2.Excluding the effect of acquisitions
47
TCRS financial performance: purchased book debts
• Current South African economic context favours acquisition of
NPL portfolios
• 17 portfolios acquired for R218m with a face value of R8.3bn
(HY17: 13 portfolios for R210m with a face value of R2.8bn)
• Further investment of R4m in Australian portfolios
• 219 portfolios (including 7 Australian portfolios) owned in total
with a face value of R20.6bn
• Purchased book debts ▲11% to R1 030m (includes Australia of
R9m) (HY17: R930m)
• 2018 ERC of 2.3 times (> internal target of ~2.2 times)
• ERC ▲34% to R1.99bn (includes Australia
of R12m)
• Longevity in the yield of principal portfolios on book, expected to
support future positive performance
• Asset-turnover ratio remains high at 48.9% (diluted by high
value of portfolio acquisitions – including Australia)
Vin
tag
e
ESTIMATED REMAINING COLLECTIONS (ERC)
VINTAGE PERFORMANCE AS AT 31 MARCH 2018
Collection multiple of Rand value deployedto acquire purchased book debt portfolios
2.1
2.1
1.7
1.5
0.8
2.3
2.7
2.7
3.2
2.2
2018
2017
2016
2015
2014
Collections to date (31 March 2018) 96-month ERC
1.4
1.7
1.0
0.6
0.2
TCRS invests in its
peopleEach member of the dynamic and growing team
shares a common passion and commitment for what
TCRS does and the role it plays in touching the lives
of South Africans, through personable care and
attention, an unwavering culture of customer service
and an unbridled obsession for nurturing
relationships.
TCRS recognizes that people provide it with the most
dynamic competitive advantage. The ethos is
positive and inspirational and the people flourish not
only as individuals but also as part of a team.
Individual excellence is nurtured and rewarded.
Performance and incentives are closely aligned with
business strategy and consistently managed at every
level of the business.
Total Headcount
3 349
Black employees
74%
Female employees
63%
Training per employee
22.2hrs
Other TCRS Group Entities
VIII
50
Principa
Experts in using data insights to predict human behaviour and drive the optimal outcome: from identifying the most profitable
customers or account holders to target to identifying the most cost-effective marketing initiative for a defined market segment.
Principa aims to turn data into wisdom that enables companies to work wonders
Data scientists, developers and consultants work together to develop data analytics products and solutions that derive answers,
predictions and recommend actions from large and complex data sets for over 150 companies in 30 countries in Africa, Middle East
and Europe.
• Commitment to confidentiality and integrity
• Proven track record – over 150 blue-chip client references
• Member of the Consumer Credit Association
• Member of the Institute of Credit Management in Southern Africa
• Member of the Transaction Capital Group
Our CustomersSoftwareConsultingData Analytics
51
International and local acquisitions made
• Agency debt collector and insurance claim administrator
• Founded in 1991 in Melbourne Australia
• Acquisition date – 1 January 2017
• Provides customer management solutions to a well-diversified blue-chip client base
within government, insurance, banking & finance, utilities & telecommunications market sectors
• Services include debt recovery solutions, insurance claims recoveries, customer services, & litigation management services
• Offices in Melbourne & Sydney, Australia in addition to a near-shore call centre & corporate services centre in Suva, Fiji
• Employs ~600 staff members
• Rationale:
› Strong entry point into Australian market, earning hard currency based returns
› High quality business generating predictable earnings with high cash conversion rates & strong organic growth prospects
› Australian debt collection industry highly fragmented (with ~20 companies accounting for 85% of the market) providing an opportunity to
expand acquisitively
› Transaction Capital will apply its expertise & capital to the purchase of non-performing loan portfolios in Australia
› Recoveries Corporation’s expertise in insurance recoveries will be applied to Transaction Capital’s fledgling insurance recoveries
business in South Africa
100% OF RECOVERIES CORPORATION GROUP LIMITED
• Value added services focusing on subscription based products
• Founded in 2005
• Acquisition date – 1 December 2016
• Offers proprietary value-added services to mass consumer market on a subscription basis
• Services include administration of RAF claims, COID Act claims & claims against various road agencies & municipalities
• Products typically embedded in other subscription-based products in insurance, banking, motor & retail industries, & are also distributed to
consumers via direct marketing channels
• Rationale:
› Strong entry point into the value added services market in South Africa
› High quality business generating predictable earnings with high cash conversion rates & strong organic growth prospects
› Partnering exceptional entrepreneur to develop the business to its full potential
› Offer Road Cover’s products to mass consumer market through TCRS’s existing banking, retail, insurance, telecommunications clients
› Road Cover’s products can be offered into SA Taxi’s client & commuter base
› Efficiencies achieved with regard to client origination, management (i.e. payment) & collection processes
75% OF ROAD COVER
52
International and local acquisitions made
• Cloud-based accounting service aimed at SMEs
• Founded in 2008
• Acquired 51% of Beancounter on 1 December 2016
• Provides full outsourced accounting, payroll and tax services through “software-as-a-service” technology to SMEs on a monthly retainer basis
• Rationale:
› Early entry into the specialist, cloud accounting services market in South Africa
› Well-positioned with solid organic growth prospects
› Partnering young entrepreneur to develop the business to its full potential
› Augment Transaction Capital Business Solutions’ existing offering to its SME clients
› Working capital funding offered into The Beancounter’s SME client base
MAJORITY SHARE OF THE BEANCOUNTER
• Payroll services outsourcer
• Founded in 2005
• Acquired 100% of Accsys on 1 December 2017
• Accsys is a provider of Human Capital solutions, TCRS believe that there are synergies to be extracted by offering the Accsys’ service to TCBS,
Bean Counter and TC Payment Solutions customers . In addition, TCRS will seek to sell the services of these group entities (TCBS – working
capital finance, Bean Counter – accounting solutions including payroll services, consulting services and time and attendance offerings and TC
Payment Solutions – payment services) to Accsys’ customers.
• TCRS plan to offer a bundled service (incorporating a full product suit with other Group services) to new and existing customers following the
purchase.
• Rationale:
› Group synergies and cross-sell of group services and product solutions into the existing customer base
› Bundle-service opportunities to new and existing customers
100% OF ACCSYS
Growth Opportunities
IX
54
Strategic objectives to achieve long term vision
19
Funding
X
56
Overview of debt funding
Through the TCR operation, TCRS is seeking to continue to increase the number and
size of non-performing loan portfolios it acquires, with a focus on bespoke capital
transactions with targeted clients, to acquire non-performing loan portfolios to deliver
superior risk-adjusted returns. Through its TCBS operation, TCRS will grow the
existing debt and trade finance business offerings.
TCRS 2018 funding target for the next 12 months is approximately R514 million
following R391 million raised in the 2017 financial year. It is anticipated this capital
target will be accessed from various capital pools.
Capital requirements TC group diversification & liquidity overview
Funding philosophy
Diversification of structure
Positive liquidity mismatch as at 31 March 2018
The group’s funding philosophy includes:
Innovative thinking
▪ Innovative thinking is encouraged and cultivated to develop pioneering funding
solutions
Judicious risk mitigation
▪ Optimal liquidity management between asset and liability cash flows
▪ Effective management of interest rate risk, currency risk and roll over risk
▪ Controlled exposure to short term instruments
▪ Diversification by geography, capital pool, debt investor and funding mandate
Engaged debt investor
▪ Recurring investment by debt investors motivated by performance, the ease of
transacting and appropriate risk adjusted returns
▪ Transparent and direct relationships with debt investors where necessary facilitated
by valued intermediaries
Optimal capital structures
▪ Proactively managing valuable capital and funds raised across the group
▪ Bespoke and innovative funding structures to meet the requirements and risk
appetite of a range of debt investors while also targeting an optimal WACC
▪ No cross-default or guarantees between structures
45%
51%
4%On-balance sheet
Securitisation & structured finance
Warehousing facilities
23%
20%
22%
35%Life companies
Banks
DFIs
Asset managers
Diversification of category
-
1 000
2 000
3 000
4 000
5 000
0-6months
6-12months
1-2years
2-3years
3-4years
4-5years
5+years
Assets Liabilities Cumulative
57
TCR Obligor Funding Group Other TCRS Group Entities
Funding structures within the TCRS group
Transaction Capital
Credit Health
Origin Eight Financial Services
MBD Legal Collections
Transaction Capital Recoveries
[TCR]
(87% owned by TCRS)
Transaction Capital
Payment Solutions
[TCPS]
TCBS Obligor Funding Group
Transaction Capital Business
Solutions
[TCBS]
Principa Decisions
Recoveries Corporation
Australia
[RC]
Road Cover
(75% owned by TCRS)
Bean Counter
(51% owned by TCRS)
Mortgage Capital
Transaction Capital Recoveries
Botswana
TCRS raises debt funding from the capital markets primarily for its TCR and TCBS operations in two separate funding structures. The following diagram
details the various entities that make up the group and also indicates which entities form obligors within the TCR and TCBS funding structures. These
obligors provide security to the lenders in each funding structure.
Accsys a Transaction Capita
Compnay
58
TCRS funding structure overview
TCRS offers two main funding structures to meet individual investors’ mandates and risk profiles. Each funding
structure is designed to separately finance the two largest operating entities in the TCRS group – namely TCR
and TCBS. The diagram below summarises these structures:
iThemba Trust
100%
Ordinary
shares
83% Ordinary shares 17% Ordinary
shares
On Balance Sheet
Syndicated loans
On Balance Sheet
Syndicated loans
Deb
t in
ve
sto
rs
Debt arranger Facility agent
SOURCE | Transaction Capital Half Year Results 2018
Debt outstanding as
at 31 March 2018
R413m
Committed unused
facilities as at 31
March 2018
-
R250 m
R500 m
R750 m
R1 000 m
R1 250 m
R1 500 m
-
3
6
9
12
15
2010 2011 2012 2013 2014 2015 2016 2017 2018HY
Debt issued (RHS) # of unique investors
TCR
R527mTBS
R130mTCR
R234mTBS
59
Structural features
Structure type On balance sheet On balance sheet
Listing / credit rating Unlisted / unrated Unlisted / unrated
First issue date 31 July 2006 30 May 2008
Revolving period Open ended Open ended
Final legal maturity date N/A N/A
Investor appetite Local banks, life company & asset managersDevelopment financial institutions, local banks & asset
managers
Capital structureSenior loans < 55%
Equity funding > 45%
Senior loans < 90%
Subordinated funding > 10%
Debt outstanding 31 March
2018R413m R527m
Current funders 2 8
Security SPV Diotrim Proprietary Limited Almemax Proprietary Limited
Facility agent Standard Bank of South Africa Limited Standard Bank of South Africa Limited
Key covenants
Senior debt service cover > 1.5 times
Senior interest cover > 3.0 times
Senior debt to asset < 70%
Equity % of debt > 82%
Senior Net Debt Interest Cover > 1.35 times
Subordinated Debt to Senior Debt > 10%
Senior Net Debt to Portfolio Value < 66%
TCR TCBS
60
The TC group is both locally and internationally funded
TC has traditionally raised funding from a number of banks, institutional investors and asset managers.
TCs current funders include the following:
2014 2005 - 2018 2008 - 2018 2007 – 2008 & 2010
2006 - 2018
2011 - 2018
2016 - 2018
2014, 2016 - 2018
2017
2012, 2014 , 2015 & 2017 -2018
2007 - 20182011. 2013, 2015 -
2018 2015 - 20182017
2010, 2013, 2015 -
2017
2015 & 2016
2013 & 2015
2017
2015 & 2016
2010, 2013 & 2015
2017 2010, 2014 & 2017 2017
2018
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Contact List
SA TaxiTransaction Capital Risk Services
Dave McAlpin
Chief Executive Officer
Phone: +27 (0)11 560 6262
Email: [email protected]
Robert Amoils
Chief Financial Officer
Phone: +27 (0)11 560 6110
Email: [email protected]
David Hurwitz
Chief Executive Officer
Phone: +27 (0) 11 049 6733
Email: [email protected]
Phillipe Welthagen
Investor relations
Phone: +27 (0) 11 049 6729
Email: [email protected]
Mark Herskovits
Capital Markets Director
Phone: +27 (0)11 550 9303
Email: [email protected]
Matthew Simpkins
Capital Markets | Deal Origination Head
Phone: +27 (0)11 592 8649
Email: [email protected]
Mohammed Antuley
Capital Markets | Senior Deal Originator
Phone: +27 (0)11 550 9554
Email: [email protected]
Megan Morreira
Capital Markets | Funder Relations
Phone: +27 (0) 11 592 8409
Email: [email protected]
Head Office
342 Jan Smuts Avenue
Hyde Park
Johannesburg
Head Office
230 Jan Smuts Avenue
Dunkeld West
Johannesburg
Head Office
179 15th Road
Randjespark
Midrand, Johannesburg
Transaction Capital
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SA Taxi Development Finance (Pty) Ltd is a registered Developmental Credit Provider : NCRCP4754SA Taxi Finance Solutions (Pty) Ltd is a registered Developmental Credit Provider : NCRCP4373SA Taxi Securitisation (Pty) Ltd is a registered Developmental Credit Provider : NCRCP2617Potpale Investments (Pty) Ltd is a registered Developmental Credit provider : NCRCP6238SA Taxi Protect (Pty) Ltd is a registered Financial Services Provider : FSP29354