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Drive is GB Auto’s third financing venture. Licensed as a Fac-
toringCompany in3Q12, it extends its services to awell-diver-
sified client base, ranging from business-to-business (SMEs)
to business-to-consumer (retail), which includes auto loans
to end consumers. Drive has grown steadily since its estab-
lishment, making remarkable strides in market presence and
carving a place for itself in the very competitive automotive
financing sector as of its first year in operation. Drive antici-
pates a further boost to its operations after factoring regulations
expanded the scope of operations to allow both business-to-
consumer and business-to-business. The company has a well-
developed portfolio, offers medium-term tenors, and focuses
on risk diversification by finance product types, client base,
and brands (as far as auto loans are concerned).
Drive finances sales of GB Auto’s Passenger Cars out of the
company’s showrooms and also transacts with key indepen-
dent dealers in the company’s network. Drive is non-exclusive
to GB Auto and offers a multitude of financial solutions for
various SMEs and consumers. The company fully complies
with all regulations and operates under the auspices of the
EFSA.
Haram Tourism Transport (HTT, also known as Haram
Limousine) is GB Auto’s fourth financing businesses under
GB Capital. It operates as a car rental / quasi-operational
lease company, is the premier vehicle fleet leasing com-
pany in Egypt, and serves top-tier multinationals, financial
institutions, as well as private sector companies, with its
average tenor standing at three years. HTT supports its cli-
ents by enabling them to focus on their core competencies
and strengths while directing scarce funding resources to
mainstream operations; leaving vehicle sourcing and man-
agement to HTT. The company’s service agreements entail
acquisition, registration, and maintenance of the vehicle,
in addition to insurance that extends to third-party damage
and passengers within the vehicle. Other complementary
services include fleet management reports.
Tasaheel is the most recent addition to GB Auto’s portfolio
of financing businesses, launched in August 2015 to provide
direct microfinance lending to eligible clients, with a spe-
cific focus on group lending to women. Through Tasaheel,
GB Auto aims to help low-income earners generate higher
returns to improve their living standards, which in turn
supports overall community development and economic
growth. At the end of 2015, the company had 16 operational
branches, and aims to establish a nationwide network of at
least 100 branches and have over 2,000 people in employ-
ment by 2020.
2015 Business Review
The Financing Businesses under GB capital are on a path
of constant growth; overall revenues for FY15 increased by
44.8% to LE 1,046.2 million compared to LE 722.7 million
in FY14. Total gross profit rose to LE 233.8 million in 2015
from LE 168.6 million the year before, showing an increase
of 38.5% y-o-y.
At 22.3%, the division’s gross profit margin, albeit 1%
lower than FY14, showed consecutive quarterly improve-
ments, and remains robust compared to market norms.
Nonetheless, it is to be noted that gross profit margin is
an unusual measurement of profitability or operations for
financial institutions, as the latter focuses on net bottom
line, RoE, and portfolio quality. Along these measurement
criteria, the Financing Businesses reported a net bottom
line of LE 99.6 million for FY15, up 56.9% y-o-y, and
maintained a very healthy loan portfolio quality with non-
performing loans below 1% and with a coverage ratio in
excess of 100%. ROAE stands at 26.2%.
The Financing Business model is built on the companies’
ability to obtain leverage to fuel their lending portfolios,
which widely differs from the trad¬ing or manufacturing
business models in terms of amount of debt incurred and
the tenor of such debt by any company. All companies under
GB Capital re¬main strongly under-leveraged compared to
industry norms and regulatory caps, which in light of the na-
ture of the business (especially for GB Lease, Drive and Tasa-
heel) allows the companies to borrow up to 8x Shareholders’
Equity. Total leverage for the Financing Businesses stood at
2.74x as at December 31st, 2015.
Contribution to Group Gross
Profit
17.8
%
29 | GB Auto |
2015