Absa Business Banking - Fuel Retail Industry James Noble - Department Of Energy
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Absa Business Banking
Fuel Retail Industry
James Noble
1
About Absa
Barclays Africa Group Limited, listed on the JSE Limited is one of South Africa's largest financial services groups. Absa
is a subsidiary of Barclays Bank PLC (Barclays), which owns 22%. We offer a complete range of retail, business,
corporate and investment banking, insurance and wealth management products and services. The Group's business is
conducted primarily throughout Arica.
Interesting facts
Extensive local distribution network in South Africa serving over 9.2. million clients
We have 789 branches,22 cash centres and 9467 ATM’s nationwide (1900 cash accepting ATM’s)
More than 100 000 Point of Sale Devices
Over 1.9 million Absa Reward members
Largest banking footprint in South Africa with more than 30,000 staff
2
2
We understand your challenges in the Fuel Retail Industry
Fixed margin per liter Impact on industry Fuel Price fluctuations
sold impacting on working
capital needs
Price of fuel R 12.50 Cost per litre
Credit card 1.55% R 0.19
Debit card 0.54% R 0.07
Impact of shortages High Interchange Rates Transformation and
and security of supply and Credit Card Enterprise Development
Transactions
5
Fuel Prices since 2006
• Annual fuel retail industry turn over ±R220bn YTD August 2014 YoY 2015 YoY 2016 YoY 2017 YoY
• Since 1980 the fuel price doubles every 6.5 Petrol -5.38% 3.84% -0.55% -1.52%
years (slowed down since 2014) Diesel 0.74% 8.80% -15.33% 3.01%
Year 2010 2011 2012 2013 2014 2015 2016 2017 IP -6.12% 19.81% -5.86% 26.54%
Total -2.27% 6.75% -8.60% 1.34%
Ave 95 ULP price 826 998 1,156 1,292 1,384 1,239 1,263 1,353
Ave % increase 11.67% 20.77% 15.88% 11.75% 7.09% -10.46% 1.90% 7.15% Ave Fuel Price 10.89% -12.58% 1.94% 6.11%
Absa Relationship Approach - We’re Accessible
Fuel Retail
• BP
Client (Fuel Retailer) • ENGEN
Relationship
• CHEVRON
Primary
• Sasol
• Shell
Relationship • Total
Executive
Transactional Credit Services Enablement Sector
• Personal Services & Analytics
Banker Analyst
• Financial Services Acquisition
• Health and
Retail
Beauty
Industry Sector Support
• Pick ‘n Pay
• Telecoms
Specialist Areas • Business-to-
• SPAR
Business Industry • Build It
• OK
• Buildings, Office
and Home
Focus • MICA
Commercial Commercial
Asset Property • Education &
Finance Finance Training
• Real Estate
• Automotive Regional Enablement
Franchise &
International Specialists Acquisition
Electronic Banking
Relationship
Banking
Secondary
Card Acquiring/ Insurance/
Restaurants, Quick Service Restaurants,
Issuing Assurance
Absa Entertainment and Leisure
• KFC
Franchise • STEERS
Working Capital • Debonairs
ATM Solutions • WIMPY
Solutions
• Mugg & Bean
6
Holistic Solution
Franchise Headquarters Oil Company
In our customer value proposition we have classified Shell as a Top Tier brand
Franchise Operations This entitles Shell Dealer Network to our exclusive and preferential target market
criteria of lending and banking solutions
Absa Rewards programme rewards our members for banking with us. It does this
by giving cash in the member’s pocket (Cash Rewards).
Customer Level In addition to offering the member special offers and access to a range of value
added services
Help me grow my
business
Help me protect my
business
Help me start my
business
Start-Up Run, Manage & Grow Mature
We have target market solutions that cater for the needs of our customers’ business of personal lifecycle stage
7
Value Added Solutions
Cash Handling Services
Lending Merchant Payment
Solutions
Lending
Solutions
Investments Card Issuing
Merchant Cash
Payment Solutions
ATM Solutions Solutions Barclays Wealth,
Investment Management
and Insurance (WIMI)
Transactional Banking
Islamic Banking
Workplace Banking
8
Our Solution to Fuel Retailers - Lending Options
• Overdraft Facility
• Term Loan
Absa Business • Bank Guarantee or OneSure
• Mortgage Back Business Banking and M&F
Loan • Commercial Asset Finance
• Commercial Property • Card Acquiring Solutions
Finance • Cash Management Solutions
• Short-term Insurance
• Investments
Business OpCo Entity
(Franchise or Supply
PropCo Entity Agreement –
C.O.D.O. vs. D.O.D.O.)
• Normally for a 10 - 20 year • Normally for 3 – 5 years
period with an option to renew
• Oil Co to register servitude for a further period
to protect interest and negotiated upfront
investment Oil Company
9
Financing a service station business - Example
Transaction detail:
Purchase Price R5,000,000 EBITDA of ±R139,000 per month
Guarantee/ LDP R 500,000 In favour of the oil company
Working Capital R1,500,000 Include wet and dry stock, operational expenses
Total finance need R7,000,000
Finance structure:
Own contribution R3,500,000 50% cash contribution of total finance need
Term loan R1,500,000 Monthly pmt of R33,000 over 5 years at 11.5% p.a.
Overdraft facility R1,500,000 Ave interest cost of R9,000 p.m. based on 60% utilisation
LDP R 500,000 Can be replaced by an Onesure/ M&F Insurance Guarantee
Total Finance Need R7,000,000
The four C’s in a lending proposal i.e. Character, Cash stake, Capability and Collateral
• Business plan and financial information • Business experience
• Proof of source of own contribution • Profile and personal background of the retailer
• Personal statement of assets and liabilities • Bank and credit Record
• Current lifestyle and salary • SecurityFinance solutions - Working capital
• 300,000 litre site (selling price of fuel at R14/ litre, cost ±R13/ litre) Facts:
• Every time the fuel
• R350,000 convenience store turn over (gross profit % of 25%) price increases by 10c
• Working capital requirement: the retailer needs
R10,000 additional
Litres Rand value working capital
2 days stock (13,000 litres per day) 26,000 338,000
• Ave fuel price increased
1 Delivery 40,000 520,000 by 35% since
Bottom waste (3 tanks) 4,000 52,000 December 2011
Fuel on credit 10,000 130,000
• Overall profitability of
Less: Deposits from debtors/ accounts 65,000 service stations
Working Capital for fuel 975,000 improved during this
period but is still under
Working Capital for shop 262,500
pressure due to fixed
Operational expenses 112,500 margins
Delays in Cash and Card Banking 150,000
• Ave overdraft facility in
Total overdraft need for working capital 1,500,000 fuel retail industry is
50% gearing/ finance of total value of business including stock ±R750,000Enterprise Development Funds and Guarantees
Common Requirements Across all Funds Absa Development Credit Fund & Absa Women Empowerment Fund
• The objective of the Funds is to provide assistance to SME’s with • Open to SMEs who want to start a businesses, expand or purchase
viable businesses but do not qualify for conventional banking as a result of existing businesses
lack of or insufficient collateral/security, lack of capital, bad credit • The minimum loan amount to be disbursed is a minimum of R50K to
history with valid reasons, proof of rectification and mitigation a maximum amount of R6mil
• The Funds are for start-ups and for SMEs with existing businesses • Products
• Applicants must be SA citizens who reside and operate in South Africa. o Reducible Overdraft which is reviewed annually
• SMEs must demonstrate skills and/or expertise relevant to business o Term Loan with a maximum term of 60 months
and/or the industry/sector o Commercial Asset Finance with a maximum term of 60 months
• Must have a well researched business plan which must include
market analysis, feasibility study and cash-flow projections
• Demonstrate profitability by means of historical financials or realistic
12 month cash flow forecast
• Evidence of revenue stream
• Absa to be main and only Banker
Thembani International Guarantee Fund SME (Small and Medium Enterprise) Fund
• Funding provided to BEE SMEs with minimum 51% black company • Contract finance — funding/credit is provided to previously
ownership disadvantage individuals where ownership, control and management
• Provides guarantees between 50% to 75% (for amounts greater than representation is strictly 100% Black( as defined by the DTI)
R3mil) of principal loans under the coverage i.e. loans amount • This fund is accessible for SMEs who have been awarded
minimum R50K and maximum guarantee amount R10 million (at 50% contracts/tenders by the Public Sector (Government Departments,
guarantee maximum loan amount will be R20 million) Municipalities and Parastatals)
• The client pays a 2.8% fee for the first year (0.5% initiation & 2.3% • 70% of the loan is paid directly to suppliers and the remaining 30% will be
guarantee fees) and 2.3% for every year for the remaining duration of the released periodically based on the assessed customer needs
loan • The loan amount applied for must be between R50K to a maximum of
• Products R3 million
o Reducible Overdraft which is reviewed annually • Products
o Term Loan with a maximum term of 60 months o Reducible Overdraft which is reviewed annually
o Commercial Asset Finance with a maximum term of 60 months
12We provide convenience by bringing Absa to your employees
Absa Workplace Banking
Building enduring relationships between employer and employee
Attract and
Retain High Preferential
Calibre Talent Life-Stage
Tailored Banking
Employee Solutions Convenience of
Solutions Workplace • Fulfilment of Life-
• Fulfilment of Life- Banking Stage Goals
Stage Goals Financial Financial
• Good Credit Ratings &
• Debt Management Empowerment Empowerment
Sound Debt
Assistance Management
Access to Financial
Convenienc
Advisors & Planning
e Banking
Experts
Specialised Simple & Streamlined
Team onboarding
OnSite
Employer Employee
• Minimising
Work
Disruptions
Attraction and retention benefits which reflect the company’s Financial Empowerment to build financial stability through
care of – and commitment to their employees preferential solution benefits
13Thank you
Questions?
James Noble
Business Development Manager: Fuel Retail Industry
jamesjn@absa.co.za
011 350 8332
082 462 3163
Absa presentation title Date of presentation
Company confidential use only / Unrestricted distributionDisclaimer
Barclays offers corporate banking products and services to its clients through Barclays Bank PLC. This presentation has been prepared by Barclays Bank PLC
("Barclays"). This presentation is for discussion purposes only, and shall not constitute any offer to sell or the solicitation of any offer to buy any security,
provide any underwriting commitment, or make any offer of financing on the part of Barclays, nor is it intended to give rise to any legal relationship between
Barclays and you or any other person, nor is it a recommendation to buy any securities or enter into any transaction or financing. Customers must consult
their own regulatory, legal, tax, accounting and other advisers prior to making a determination as to whether to purchase any product, enter into any
transaction of financing or invest in any securities to which this presentation relates. Any pricing in this presentation is indicative. Although the statements of
fact in this presentation have been obtained from and are based upon sources that Barclays believes to be reliable, Barclays does not guarantee their
accuracy or completeness. All opinions and estimates included in this presentation constitute the Barclays’ judgment as of the date of this presentation and
are subject to change without notice. Any modelling or back testing data contained in this presentation is not intended to be a statement as to future
performance. Past performance is no guarantee of future returns. No representation is made by Barclays as to the reasonableness of the assumptions made
within or the accuracy or completeness of any models contained herein.
Neither Barclays, nor any officer or employee thereof, accepts any liability whatsoever for any direct or consequential losses arising from any use of this
presentation or the information contained herein, or out of the use of or reliance on any information or data set out herein.
Barclays and its respective officers, directors, partners and employees, including persons involved in the preparation or issuance of this presentation, may
from time to time act as manager, co-manager or underwriter of a public offering or otherwise deal in, hold or act as market-makers or advisers, brokers or
commercial and/or investment bankers in relation to any securities or related derivatives which are identical or similar to any securities or derivatives referred
to in this presentation.
Barclays Bank PLC is authorised and regulated by the United Kingdom Financial Services Authority and is a member of the London Stock Exchange.
Copyright in this presentation is owned by Barclays (© Barclays Bank PLC, 2012). No part of this presentation may be reproduced in any manner without the
prior written permission of Barclays.
Barclays is a trading name of Barclays Bank PLC and its subsidiaries. Barclays Bank PLC is registered in England and authorised and regulated by the Financial
Services Authority (FSA No. 122702). Registered Number is 1026167 and its registered office 1 Churchill Place, London E14 5HP.
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