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| SEGMENTAL
REVIEW |
| GROUP
INVESTMENTS |
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| Performance
for the year |
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2006 |
2005 |
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US$m |
US$m |
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| Revenue and other income |
22,6 |
15,9 |
| Profit from operations |
11,6 |
8,4 |
| Closing capital employed |
77,1 |
48,6 |
| Return on equity before |
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| taxation (%) |
18,4 |
17,3 |
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| Overview
and operational review of Group Investments |
| Group Investments comprises largely of Brait's
strategic non-private equity managed interest in Bayport, Capital
Alliance Finance and the newly established independent joint
venture mezzanine fund management business. It also incorporates
the group's central treasury operations. |
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| Profits from operations
and ROE |
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| Bayport |
| Overview |
Bayport is a group of micro-lending and financial
services businesses with established operations in Ghana, Uganda
and Zambia. It is currently also developing a niche opportunity
in South Africa. Established in 2002 by industry professionals
together with capital provided by Brait, Bayport has developed
from a start-up operation to a well managed and established
business, generating attractive riskadjusted returns.
Following the initial performance of Bayport and given its potential
growth opportunities, Brait provided additional capital to Bayport
in a blend of equity and interest-bearing debt financing. As
Brait is the largest debt financier of Bayport, it has voting
control of the business.
At year-end, Brait has invested US$9,9 million in Bayport in
a blend of equity and interest-bearing debt financing and in
addition thereto, has committed a further US$6,8 million of
debt which is available for draw down by Bayport.
Bayport has developed a unique model for each of the jurisdictions
in which it has established operations and has developed invaluable
relationships with local partners, each of whom has an equity
interest in the local operation. Bayport's experience in the
financial markets in which the African businesses operate, demonstrates
the commercial potential for developing micro-lending and financial
services offerings to lower-income earning employees, on a sustainable
basis, throughout the African continent.
Bayport on an ongoing basis identifies and evaluates new markets
and jurisdictions in which it believes opportunities for expansion
and development exist. As and when such opportunities arise,
Bayport establishes projects with a view to fine-tuning the
specific business model and cementing relationships with local
partners and other stakeholders. Once such projects have demonstrated
the ability to produce Bayport's targeted risk-adjusted returns,
Bayport will deploy a meaningful quantum of its own capital
into the operation and will in addition, seek to maximise leverage
from local financial institutions. |
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Bayport is structured by centrally managing a
pool of funds at the Bayport holding company level and allocating
these funds judiciously across a portfolio of various micro-lending
and financial services businesses operating throughout the African
continent.
Brait's interests in Bayport are held through Bayport Holdings
Limited. Bayport Holdings has an interest in Bayport Management
Limited, through which the African businesses are conducted
and Bayport Holdings (South Africa) (Pty) Ltd, a South African
entity through which the South African businesses are conducted.
During the year Brait completed the sale of a portion of its
equity in Bayport Holdings to strategic co-investors. In addition,
Brait and the minority shareholders in each of the African and
South African businesses sold a portion of their interests to
the Adobe Group, an investment group controlled by Sir Samuel
Esson Jonah, a pre-eminent businessman and non-executive director
and president of AngloGold Ashanti Limited. He is a director
of the African and South African businesses and is actively
involved in the strategy and operations of Bayport.
Pursuant to the sale to the strategic co-investors and to Adobe,
Brait effectively owns 41,66% of each of the African and South
African businesses. Through arrangements with the strategic
co-investors, Brait controls 53,41% of the voting rights, resulting
in the consolidation of Bayport's results, into Brait. |
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| Financial results and commentary |
The year under review saw significant continued
growth in Bayport's business. Through additional funding from
Brait as well as from funding provided by financial institutions
in the jurisdictions in which the African businesses have a
presence, Bayport has grown its loan book by 109% from US$16,2
million to US$33,8 million. At the same time bad debts written
off have been well controlled and equate to 3,5% of the loan
book at year-end. The provision at year-end for bad and doubtful
debts equates to 4,5% of the loan book. As the loan book matures
and grows to an optimal size, the bad debts written off should
tend towards the level of the provision. The organisational
infrastructure in the African business is now considered to
be optimal for the jurisdictions in which it operates. Pre-tax
earnings were US$6,4 million for the year, which represents
an increase of 276% over the US$1,7 million earned in the previous
year. With average capital employed during the year of US$8,2
million, return on equity increased to 40,0% from 28,1% in the
previous year. Brait's share of Bayport's earnings for the year
plus its interest on loan advances was US$3,3 million, 77% up
from
US$1,9 million in the prior year. |
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| Size of book |
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| Bayport |
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| Prospects |
| Brait is pleased with the development made by
Bayport and its prospects. With an experienced and capable management
team, a sound business model, a stable and fully developed infrastructure
and strong demand for its products, Bayport aims to be a truly
African micro-lending and financial services organisation. Bayport
is well positioned to become an even greater contributor to
Brait's earnings in future. |
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