SBC Group revenue up by 13.9%
MBABANE – During the financial year 2023, the SBC Group’s revenue increased by 13.9 per cent to E434.0 million.
This was inclusive of revenue of E16.2 million (2022: E14.7m) generated from the retail and residential rentals of the Malkerns Square property development.
This is according to the financial year statement by SBC Group Limited, which owns 99.99 per cent of Select Ltd.
SBC Group Limited is listed on the Eswatini Stock Exchange and is the majority shareholder of Select Limited and Lesana Lesotho Limited since June 2023.
From a management perspective:
The Eswatini consumer lending business is housed in Select Limited.
The Lesotho consumer lending business is housed in Lesana Lesotho Limited. Pine Acres houses the property development business in Eswatini and is also reported on separately.
During the review period, the socio-economic environment remained stable in both Eswatini and Lesotho. However, the group observed an overall compression in the local Eswatini market across both our market segments and some of the wider African Alliance Group’s retail operations.
Despite these challenges, SBC showed resilience and delivered a credible result for the year ending December 31, 2023. Management focused on maintaining a strong liquidity position to support the growth of the loan book driven by disbursements, which amounted to E474 million (December 2022: E428m) for the year under review.
Impacted
Disbursements in Eswatini increased by 21 per cent to E240 million (December 2022: E198m), while disbursements in Lesotho were maintained at the 2022 levels although impacted by a slight liquidity constraint during quarter four, which impacted the total disbursements for the year.
As a result, the SBC aggregated gross loan book increased by approximately 8.5 per cent (E1.40b) compared to December 2022 (E1.29b). The SBC Group’s consumer lending revenue grew by 14 per cent to E417.7 million (December 2022: E366.4 million), mainly as a result of the substantial loan book growth in Lesotho, while maintaining a stable yield in both Select Ltd and Lesana Ltd.
The overall Eswatini yield ended consistently at 30.1 per cent, while the Lesotho yield also ended favourably at above the 30 per cent margin showing growth to prior comparable periods ending slightly below 30 per cent. The SBC Group’s revenues increased by 13.9 per cent to E434.0 million (December 2022: E381.1 million), inclusive of revenue of E16.2m (2022: E14.7 million) generated from the retail and residential rentals of the Malkerns Square property development.
The SBC Group’s total operating expenses increased by 13.5 per cent to E182.2m (December 2022: E157.6 million), mainly as a result of investing in resources in Lesana to support the substantial growth.
It is the group’s opinion and strategy to continuously empower and grow all stakeholders, including their staffing complement.
The book profit margin in both Eswatini and Lesotho was diluted compared with the prior comparable period due to the higher cost of debt, including both interest and debt-raising costs. However, the pressure on our book margin was partially offset by lower provisioning for bad debts resulting from improved collections and arrear account management.
Distressed
A stable collection performance, particularly in managing the distressed loan portfolio, enabled the total SBC Group’s impairment provision cost to end at 2.73 per cent of the gross loan book (December 2022: 2.98 per cent).
Due to the current high cost of debt interest cycle and the investment made in Ezabeni Property Holdings, finance costs (excluding interest income) of E184.8 million (December 2022: E147.6 million) increased by 25.3 per cent, which was higher than the loan book growth.
The group’s debt was mainly funded through notes issued under the MTN programmes and other promissory notes. E50.4 million (December 2022: E44.6m) of the total interest expense is attributed to the funding cost of the Malkerns Square project.
The balance of this increase was attributed to growth in the consumer lending business coupled with the cost of carrying excess funding. As a percentage of revenue, consumer lending (excluding the impact of the investment made in Ezabeni Property Holdings) net interest paid amounts to 30.82 per cent (December 2022: 28.42 per cent).
Although the profit after tax is indicative of a decline when compared with the prior comparable period at E28.9 million (December 2022: E50.6 million), this was due to the following four factors:
I. The prior year, tax expense was unusually low, due to E6.8 million of tax credits we received in our Lesana business for an overcharge of the previous year’s withholding taxes, and hence the prior year was not comparable to the current period under review.
II. The high interest rate cycle resulting in a higher interest cost of approximately E11 million, which is not a permanent occurrence and should start to move back to normalised rates in the next 12 to 24 months.
III. Additional E3.8 million cost incurred to protect our loan book from external settlements by competitors.
IV. Additional investment made in Ezabeni Property Holdings, resulting in a higher net interest expense of approximately E6 million, although substantial future, fair value gains through capital appreciation are expected.