A South African debt collector is coining it in Australia – where household debt has reached 199% of income

Business Insider SA
  • JSE-listed Transaction Capital is expanding its debt collection services in Australia, which is currently seeing high personal debt levels.
  • The company's local taxi business continued to see strong profit growth, despite higher fuel and vehicle prices.
  • Its share price is close to record levels.
  • For more stories, go to Business Insider SA.

South African company Transaction Capital is seeing “excellent results” from its debt collection operations in Australia.

Its Australian subsidiary Recoveries Corporation Group collects outstanding debts on behalf of government, utilities as well as finance and telecommunication companies.

Average household debt in Australia has reached 199% of personal income, which according to some estimates is the highest in the world. Household debt has deteriorated in part due to a decline in property values, according to Transaction Capital. On average, Australians spend 51% of their income on servicing debt.

In South Africa, household debt-to-income has fallen from 86% to 71.9% over the past decade, with banks and retailers much stricter in extending credit in a tough economy.

Some of Transaction Capital Australian's debt collection services have now been outsourced to its South African operations, which are much cheaper.

This has contributed to a 13% increase in its half-year headline earnings (R134 million) from its South African and Australian debt collections and related services. Income from this business climbed by 12% to above R1 billion.

Transaction Capital is also buying more non-performing loans (NPL) from Australian companies. Consumers have fallen behind in repaying these loans, and instead of trying to recoup the money themselves, the companies sell these loans to Transaction at a discount.

“Although the Australian debt collection market is highly fragmented, we estimate the annual aggregated purchases of NPL portfolios at A$600 million (R6 billion), many times larger than the South African market.

“This gives some indication of the growth opportunity,” says Transaction Capital.

At 31 March 2019, Transaction owned 254 NPL portfolios with a face value of R23.5 billion, valued at R1.7 billion, up 68% from a year ago.

SA Taxi posts 31% profit growth

Apart from debt services, Transaction Capital also owns SA Taxi, which sells, finances, and insures minibus taxis. Since 2008, the division has provided loans to taxi operators of more than R23.8 billion. Last year, the SA National Taxi Council (Santaco) took a 25% stake in the business as part of a R1.7 billion deal.

See also: After a R1.7 billion deal, taxi operators who don’t pay back their loans will answer to their peers

In the first half of 2019, SA Taxi grew headline earnings by 31%. The company says that while higher fuel and vehicle prices took a toll, demand has remained strong.

Including all of its businesses, Transaction Capital posted a 17% hike in headline earnings to R363 million. Its share price remained flat at R19.50 – only 2% below a record level.

Transaction Capital's share price. (Sharenet)
Transaction Capital's share price. (Sharenet)

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