Walking away from property finance
AFTER ????? A LESS THAN GOOD START as a public company at listing in 2007, financial services company Finbond Property Finance has done well enough to attract the attention of respected institutional investors. It now boasts an institutional shareholder base owning close on 30% of its shares, those being Metropolitan Life, Coronation Asset Managers and Sanlam.
Grindrod Bank and Investec Bank together hold another 8,8%. Grindrod Bank (2,5%) acted as Finbond’s designated adviser and agent at listing, while Finbond’s 2008 annual report says Investec Bank bought its 14,5m shares (6,3%) in the private placement that brought Finbond to the market. That would have cost Investec R33m at the issue price of 225c/share, against the current R10,7m.
However, since listing Finbond has done relatively well for itself. The company diversified from mortgage origination to microlending in a big way. Willie van Aardt says in his six-page CE review that Finbond increased its branch infrastructure from 10 to 101 in the year to February 2008, mainly through the acquisition of Free Stateand Western Cape-based Blue Chip Finance.
That deal largely helped shield Finbond from the slump in the housing market, lowering mortgage origination’s contribution to earnings from 70% to the current 45%. That’s set to fall to 20% over the next two years as Finbond intends expanding its micro finance business. (It started by buying two branches “in Africa” – meaning outside SA – post year end and intends taking advantage of the consolidating microlending industry by buying up smaller competitors.
Van Aardt writes: “Market conditions in general, and in particular rising interest rates, could have a material adverse impact on our ability to repeat the performance of the past year during the first and second half of the new financial year.”
In an overall good annual report, what stands out are the lack of information about the group’s individual businesses and much repeating of the group’s successes.