Sat | Aug 8, 2020

Access still looking for businesses to acquire

Published:Sunday | September 15, 2019 | 12:10 AM

Micro lender Access Financial Services Limited remains on track to surpass $2 billion this financial year, which would set a new record for the company, which is still focused on growing through acquisitions.

Access’ growth through acquisitions adds to its cost of operation, but the company says it is focused on containing expenses through efficiency measures, including synergies from its branch network.

“We are operating in a different environment. The local environment is a lot more competitive and rates are coming down, so the fact is that we have synergies that can improve our performance,” said CEO Marcus James in response to Financial Gleaner queries at the annual general meeting held at the Knutsford Court Hotel in Kingston on Wednesday.

Part of that drive saw the group acquire its first overseas venture, Florida-based Embassy Loans, last December. Access, in its annual report, stated that the group would have earned $2.2 billion in annual revenue and $680 million in net profit if it had acquired Embassy Loans about nine months earlier. That would represent a 30 per cent growth in revenue but still a 5.0 per cent drop in year-on-year profit.

Over the years, with increased local competition, Access’ return on equity dropped from 45 per cent in 2017 to 35 per cent in 2018 and 21 per cent in 2019.

“We have to find ways to be more efficient as well because we cannot go back to those margins,” James said.

Access director Christopher Williams said the company was still looking for businesses to acquire.

“We are not resting. We hope next year that we will have something to say,” said Williams. “Hold on to your shares,” he declared.

Access has been buying up other microfinancing companies since 2016 when it acquired Damark Limited, followed by Micro Credit Limited in 2017. In November 2018, both entities were merged to create Damark MCL, which operates from six locations in Jamaica. The merger resulted in more products and a larger branch network for Access.

In December 2018, Access bought Embassy Loans in a $857.5 million deal. In total, the Access group now employs 244 people.

In the quarter ending June, Access reported $539 million of revenue, up $433 million in the June 2018 period, but net profit fell to $165 million from $217 million in the similar period.

“We are confident of increased sales and loans going forward,” said James.

The company’s loan portfolio spiked 35 per cent to $4.3 billion in June, reflecting an increase of $1.1 billion, of which $670 million resulted from the acquisition of Embassy Loans.

Group assets increased 43 per cent to $5.53 billion while the company’s book value, measured by shareholder equity, was marginally lower at $2.4 billion compared to $2.5 billion a year earlier. The decline in equity arose from the increase in liabilities related to issuing a $900 million global bond in November 2018 to fund the purchase of Embassy Loans.