[TOP STORY] Vunani almost at critical mass, well positioned going forward

We’ve had some good growth in assets over the last few years … you do get over a hump where your costs start to stabilise and revenue starts to increase: CEO Butana Khoza.

SIMON BROWN: I’m chatting now with Vunani CEO Butana Khoza. Results for the year-end February: revenue – this is all continuing operations – up 17%, profit up 257%, headline earnings at 34.7 cents. That’s up from 7.2 cents. I can’t do the math on that – a giant number. And dividend of 14c, up from 7.5c . Butana, I appreciate the early morning time.

Looking at the operations in the business two things really strike me. The first is very much a Pan-African sort of financial services business, perhaps SADC more than pan-African. These results show that you’ve almost stepped it up to a critical-mass level and [are] well positioned going forward.

BUTANA KHOZA: Yeah, that’s spot-on, Simon. Definitely a contribution from our pan-African operations and influence. I think last year didn’t work out as well for us, because one of our exposures is insurance in Eswatini and a big player in that particular market, and we are still feeling the big effects of Covid coming on from 2020, although tapering off in the second half of the financial year. So in that particular country that influence.

And then very nice growth in our asset-management business in Botswana. So those two operations had a big influence in the last financial year, and we think they’ll be big contributors going forward.

SIMON BROWN: Your Botswana business, Vunani Fund Managers – Botswana, if my memory serves that was a business you bought out from Stanlib and, to your point, you’ve practically doubled funds under management to just over R9 billion.

BUTANA KHOZA: Yeah, absolutely. It performed well [and] I think came to the party pretty early in our journey. I think it’s a solid team, obviously very well schooled, coming out of a good stable – probably a business just a bit too small for Stanlib.

I think we are a much smaller group. We were able to actually get in there and help the team get in and about, be a little bit entrepreneurial. They were very fortunate to land ‘humdinger’ clients. I think that would give it a very good base going forward, and already just leading into the current financial year [we are] seeing some really good signs in that business.

SIMON BROWN: One of the important things, and we see it – we were looking at Coronation results earlier in the week – you sort of get to that critical mass and your costs are now covered. As asset-management businesses your clients are broadly, I would imagine, fairly sticky. Now your costs are kind of fairly fixed, and it’s just about that growth.

BUTANA KHOZA: Yeah, I think that is correct. I think we’ve had some good growth in assets over the last few years, and you do kind of get over a hump where your costs start to stabilise and your revenue starts to increase. It then [starts] having quite an effect on your earnings. We’d like to believe that that business has gone over that hump, and hopefully with good growth we should see a bigger increase or contribution to earnings going forward.

SIMON BROWN: You mentioned your insurance business in Eswatini. They actually recorded a loss in the year to February 2021, [and are] now back in profit. I was looking at some of the other long-term insurers [which are] more South Africa-focused, and they actually saw an uptick in death claims for the 2021 year. Yours seem to have gone the other way around, where things seem to have actually improved in terms of, I imagine, the claims for the last financial year.

BUTANA KHOZA: Yeah. I think that’s right. I think pretty much the trend for all insurers was the same. I think the exception there is that it’s not really a strong retail business. It’s more EB (employment benefits), and so the live component sits in an employee-benefits stable, and in many ways you are quite reliant on the role of a corporate to let you know about death claims and you are kind of subjected to their own administration systems.

In 2020/21, if you remember, for almost half the year we were in a lockdown period, and so those claims effectively came quite late. So we didn’t really see the full brunt of the impact of 2020 claims until probably the first half of [the] 2021/2022 financial year, and so our first half of the financial year – that’s where we saw a spike in our death claims. But it kind of tapered off in the second half of the year, when all that admin backlog kind of got processed. I think the situation is much better now. So, yeah, it’s just really admin there.

SIMON BROWN: I take your point and it’s a timing issue, perhaps, more than anything else.

We’ll leave it there. Butana Khoza, CEO of Vunani, I appreciate the early morning, sir.



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