Banking and financial services group Sasfin has posted another excellent result, with headline earnings up by 41,1% to R85-million for the year to June 30 2005.
Headline earnings per share increased by 38,7%, from 236,5 cents to 327,9 cents. This increase comes on top of the 185% improvement in the previous financial year, with good improvement from virtually all business divisions.
More than half of the group’s earnings were generated by the Commercial Finance division, which experienced strong demand from growing businesses.
The Investment and Asset Management division had an excellent year, with a 7,2-fold increase in contribution to the bottom line of R20,3-million.
Sasfin Frankel Pollak Securities was buoyed by strong stock-market activity. Funds under administration grew by 61,2% to R15,5-billion. The Sasfin International Fund, managed by Edmond de Rothschild Asset Managers, Paris, in terms of an exclusive distribution agreement with Sasfin Frankel Pollak Securities, has attracted funds of nearly R80-million, though the strong rand dampened investor appetite for offshore investment.
Treasury and Securitisation increased its bottom line contribution by 43% to R15,4-million (2004: R10,8 million). The group raised R100-million through a preference share issue in November last year to fund potential black economic empowerment (BEE) and investment opportunities.
Divisional earnings included R4-million as a result of the preference share dividend being declared only after year-end. The division incurred a loss of R2,9-million from the negative carry on the preference shares.
The group is facilitating BEE within its own niche markets and recently acquired 50% of Faranani Asset Managers, a black-controlled asset-management company to be launched as soon as regulatory approval is obtained.
Sasfin is also at an advanced stage of negotiation with potential BEE partners capable of adding value to the group, has signed letters of intent with two parties in relation to a 10% interest in the bank, and is trading under cautionary pending the finalisation of these transactions.
Deposits increased by 50% to R402-million (2004: R269-million), which signifies a return of confidence in Sasfin two years after the small-banks crisis, also assisted by increased deposit volumes held for stock-broking clients and internally generated deposits.
Sixty-percent-owned Premier Freight had its best year to date and more than doubled its earnings contribution to R5,7-million (2004: R2,8-million).
This result can be ascribed to strong trading conditions in South Africa and the company’s ability to capitalise on this. The well-rated Corporate Finance unit, which advises small to mid-sized companies and counts more than 30 JSE-listed companies as sponsor clients, made a small loss during the year due to some aborted transactions, though the deal pipeline into 2006 is encouraging.
Private equity made a modest loss during the year after a decision was made to reduce the carrying cost of Sasfin’s existing holding in the fund to the price paid by Sasfin for its increased stake. The fund’s investments are mainly in mature companies and will be exited in the medium term.
Post-year-end, Sasfin increased its investor participation in the NIB-MDM Private Equity Fund 1 (the fund) from 13,6% to 49,1% and its investment in NIB-MDM Private Equity Fund Managers to 54,5%. The total consideration paid for the investment is R34,8-million, with the fund value since initial acquisition standing at R46,8-million.
The name of this entity will be changed to Sasfin-MDM to reflect this increased level of investment and, subject to Reserve Bank approval, Sasfin will shortly be launching its own Private Equity division.
Sasfin has earmarked 5% of total assets, currently the equivalent of about R85-million, for investment in private equity.
All of the group’s key ratios showed healthy improvement during the year. Return on ordinary shareholders average equity improved by 10% to 33,7%, while return on total average assets gained 17% to 5,4%. Operating expenses as a ratio of total income improved by 11% to 61%.
Sasfin CEO Roland Sassoon says the level of competition and sophistication in South Africa’s mass banking market is likely to rise with the re-entry of Barclays, which recently acquired a majority stake in Absa, to the local market.
Sasfin has carved a niche for itself in the entrepreneurial business market, and is one of the few banks to specialise in this sector.
“The group is well positioned in terms of capital adequacy, skills, systems and products to continue growing its assets and profits and its prospects are exciting,” says Sassoon. — I-Net Bridge