CFSL - Annual report 2018

BUSINESS REVIEW CIM FINANCE The Finance cluster consists of Cim Finance Ltd, Cim Agencies Ltd, Cim Forex Ltd, and the newly acquired subsidiary Mauritian Eagle Leasing Company Limited, with each business being separately licensed and regulated. CimFinanceLtd is the largest of thebusinesses and is regulated both by the Bank of Mauritius and the Financial Services Commission. Cim Finance Ltd plays an important role in the Mauritian economy with the focus of Cim Finance Ltd being very much “mass market” retail and SME financing. Cim Finance and Cim Agencies recorded impressive growth during financial year 2018 (FY18). Revenue grew 7% from MUR 1.25bn in FY17 to MUR 1.34bn in FY18, with profit after tax increasing by 8% from MUR 345m to MUR 372m. Cim Finance’s total loan disbursements for the year grew by 5% to MUR 9.5bn. In total Cim Finance’s balance sheet loan portfolio grew by an impressive 11% from MUR 9.4bn to MUR 10.4bn as at end September 2018. Business unit reviews Cim Finance Ltd has four main business units: Consumer Finance, Leasing, Cards & Payments and Factoring. Consumer Finance Cim Finance Ltd started its Consumer Finance activities with the launch of its hire purchase product in 1987. As highlighted in last year’s review, the significantly reduced hire purchase rate to 12% from 19% since 2015 adversely distorted loan pricing at the lower end of the mass market. This rate is significantly below unsecured personal loans as well as credit card borrowing rates. Since 2016 we moved away from offering finance via HP contracts and opted to finance retail point-of-sale (POS) purchases via Credit Finance Agreements (CFA) to enable our clients to finance their purchase of consumer electronic goods and furniture. Despite the market entry of a new competitor, the Consumer Finance business unit has grown from strength to strength with total loan disbursements growing by 7% from MUR 5.5 billion to MUR 5.9 billion. Cim Finance’s CFA loan portfolio remains the largest part of the business, comprising close to 50% of the value of the company’s total asset book. Our unsecured lending product, Cim MoCredit, has now been on the market for three years. Our customers use Cim MoCredit to finance their needs beyond retail financing requirements for life needs such as renovations, weddings and funerals. This is a 4-year loan product vs. the average loan tenure for CFA of 2 years. We have been cautious in not growing the unsecured loan portfolio too quickly given the typically higher risk of unsecured loans and longer duration of the product. The unsecured loan portfolio now represents 20% of the value of the company’s total asset book. Cim Finance’s retail point-of-sale model for its Consumer Finance business unit is a key strength from which we originate customer loans and facilitate monthly instalment repayments. In-store counters grew from 84 at the end of FY17 to 85 at the end of FY18 and we also added two standalone branches in Vacoas and Goodlands to our existing four branches to enable better customer service. The number of unique individual clients grew from 233,000 at the end of FY17 to 235,728 at the end of FY18. Leasing Cim Finance Ltd was one of the pioneers in the Mauritian leasing market, starting leasing operations in 1996. Cim Finance Ltd has grown its leasing book at a compound annual growth rate over the last 5 years of close to 10% per annum – approximately 50% higher growth than the average for the rest of themarket combined. We consider leasing to be one of Cim Finance’s core businesses and will look to continue investing into the business. As mentioned in the Group CEO’s report, we acquired Mauritian Eagle Leasing Company Limited (MELCO) during the year. The acquisition of MELCO’s leasing book takes Cim Group to second position in terms of market share in Mauritius. Cim Finance Ltd leasing has traditionally been very strong in the second hand and reconditioned car market as well as with SME clients. The acquisition will help us to diversify our portfolio into larger corporates and the new car market, as well as strengthening our position in the operating lease market. Cards & Payments Cim Finance Ltd was the first non-bank financial institution (NBFI) in sub-Saharan Africa to receive MasterCard accreditation in 2005 and we started issuing credit cards shortly thereafter. In 2008 we started debit and credit card acquiring activities. In 2010 we received Visa accreditation and started credit and debit card acquiring for Visa, and in 2011 launched Visa credit cards. 20 CIM FINANCIAL SERVICES LTD ANNUAL REPORT 2018