| Thu 29 Mar 2007, 9:00 | | CPI/CPIP - Capitec - Extracts from the audited fin |
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CPI CPIP
CPI
CPI/CPIP - Capitec - Extracts from the audited financial statements for the year
ended 28 February 2007
Capitec Bank Holdings Limited
Registration number: 1999/025903/06
Registered bank controlling company
Incorporated in the Republic of South Africa
JSE ordinary share code: CPI & ISIN code: ZAE000035861
JSE preference share code: CPIP & ISIN code: ZAE000083838
EXTRACTS FROM THE AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED
28 FEBRUARY 2007
* Headline earnings per share up 35%
* Final dividend per share - 60 cents
* Return on equity - 26%
* Clients 1 million
* Shareholders funds R1.1 billion
2007 2006 Change 2005 2004
OPERATIONS %
* Branches 280 253 11 251 265
* Employees 2 129 1 901 12 1 708 1 402
* Active clients `000 1 010 706 43 513 399
* Own ATMs 264 210 26 180 75
* Partnership ATMs 143 - - - -
* Mobile banking
facilities 53 - - - -
* Capital expenditure Rm 86 72 19 84 44
SALES
Loans
* Value of loans advanced Rm 3 449 2 863 20 2 259 1 904
* Number of loans
advanced `000 2 924 2 650 10 2 486 2 617
* Average loan amount R 1 180 1 080 9 909 728
* Interest from loans
advanced Rm 924 768 30 534 393
* Loan fee income Rm 77 - - -
* Net loan impairment
expense Rm 161 96 68 39 29
* Net impairment to
repayments % 4.12 2.85 45 1.45 1.43
Deposits
* Value of savings
deposits Rm 554 314 76 74 4
* Number of savings
clients `000 583 375 55 143 18
* Net transaction fee
income Rm 35 15 133 4 -
PROFITABILITY
Earnings attributable to
ordinary shareholders
* Basic Rm 159 115 38 67 45
* Headline Rm 160 116 38 70 47
Operating expenses Rm 614 506 21 392 307
Cost to income ratio
- banking activities % 60 66 (9) 73 76
Return on ordinary
shareholders equity % 26 23 13 16 12
Earnings per share
* Attributable Cents 221 163 36 98 67
* Headline Cents 222 165 35 101 70
* Diluted attributable Cents 209 155 35 92 63
* Diluted headline Cents 211 156 35 95 65
Dividends per share
* Interim Cents 20 - - - -
* Proposed final Cents 60 45 78 30 20
Dividend cover x 2.8 3.7 (24) 3.4 3.5
ASSETS
* Total assets Rm 2 191 1 251 75 805 512
* Net loans and advances Rm 803 455 76 208 135
* Cash and cash
equivalents Rm 1 044 582 79 363 160
* Investments Rm 112 7 - 17 -
* Other Rm 232 207 12 217 217
LIABILITIES
* Total liabilities Rm 1 074 687 56 332 86
* Deposits Rm 897 595 51 281 49
* Other Rm 177 92 92 51 37
EQUITY
* Shareholders` funds Rm 1 117 564 98 473 426
* Capital adequacy ratio % 84 56 50 84 98
* Net asset value per
ordinary share Cents 1 175 784 50 672 619
* Share price at
28 February Cents 3 700 3 105 19 1 490 580
* Market capitalisation
at 28 February Rm 3 031 2 233 36 1 072 399
* Number of share options
outstanding `000 6 191 5 841 6 6 753 7 860
* Average share option
strike price Cents 1 151 648 78 271 153
* Average share option
time to maturity Months 24 28 (14) 25 22
* Charge on settlement of
share options Rm 22 31 (29) 16 2
Number of ordinary shares
* At year end `000 81 928 71 928 14 70 442 68 743
* Weighted average `000 72 120 70 555 2 68 860 67 028
* Diluted weighted
average `000 76 043 74 534 2 73 536 71 868
BASIC BANKING
At Capitec Bank we focus relentlessly on basic bank products. This does not mean
that we offer hand-written savings books. Our products are all electronically
delivered and easy to use. We offer the highest interest rate on savings and the
most affordable bank and loan products in the country. Our branches are close to
our clients and our bank hours are longer than those of any other bank. With
"basic banking" we simply mean that we do not offer products like cheque
accounts, foreign currency or corporate banking.
It is not particularly easy to focus on basic banking. We are a clearing bank,
which means that together with the big banks we manage the flow of money through
the banking system. Our cards are accepted worldwide. We have been in the
forefront of developing new realtime clearing products, which means that a
client can transfer money immediately from one bank to another. Previously, even
electronic transfers between banks took place overnight.
We have a nationwide network of 280 branches, many in remote parts of our
country. During the past year we opened 29 new branches, less than the 50 we had
planned because of the time involved in obtaining good sites. Our ATM network
has grown faster than the increase in our branch numbers. Accessible banking
means that we place our bank facilities where clients live, shop, commute and
work. We have expanded our ATM network in partnership with two independent
service providers by over 140, bringing our total network at our branches and in
retail shopping areas to over 400.
To help clients use debit cards with confidence we place balance readers in
supermarkets where clients can verify their balance before making a purchase. We
offer zero fees on purchases with our debit card and the number of card
transactions continues to grow exponentially.
ONE MILLION CLIENTS AND BEYOND
We have prior to February 2007 not invested in advertising. We have relied on
word of mouth and strong communication through our branches to attract clients.
Notwithstanding this, we managed to increase our client numbers to over one
million by the end of February 2007.
We acquired nearly one thousand new savings clients per day and grew our total
number of savings clients from 375 000 to 583 000 by year end. The balance of
retail deposits increased from R314m to R554m and a large proportion of savings
are in fact held in Focus Save accounts, a savings account that clients can name
themselves. The fact that Capitec Bank has consistently offered a 10% interest
rate on savings, has obviously contributed to this growth.
RESULTS
Headline earnings grew to R160 million for the financial year. This was
primarily through income from lending of R1 billion and income from bank fees of
R94 million.
Personal loans remain the main source of Capitec Bank`s income. Six years ago we
started with small, one month loans. We have now added loans with a fixed term
of up to twenty four months. The value of all loans disbursed during the year
increased by 20% to R3,4 billion. The value of three month loans has declined
slightly, while all other loans grew on a year on year basis. Because of the
longer average term of our loans, our net loan book has increased from R455
million a year ago to R803 million.
During the year we introduced a new lower loan price structure which conforms to
the National Credit Act. This means that a portion of our revenue, previously
charged as interest income is now charged as a loan origination fee and a
monthly loan administration fee. This however, has a VAT impact. The fact that
the new price structure was introduced in October 2006 means that the current
year`s results are a mixture of the old and new price structures.
Eighteen and 24 month loans were launched during October 2006. These made up 39%
of the net outstanding loan book at year end. The advantage of the longer term
products is that our branch infrastructure is used less frequently and we
receive revenue and recover loan granting expenses over a longer period. The
increase in revenue from loans therefore exceeded the increase in the value of
loans disbursed, but was lower than the increase in the outstanding book.
The impact of errors during the loan granting and collection process is far more
severe on the longer term products and we manage this carefully. We introduced
strict credit scoring and affordability calculations on these products, combined
with continuous refinement of our instalment collection and follow up
procedures.
We currently receive electronic credits of approximately R750 million per month
(mainly due to receipts of client salaries) and the flow of these funds through
our deposit book led to significant growth in our transaction fee income. The
cost of processing electronic banking transactions such as debit card
transactions, electronic fund transfers, debit orders and stop orders are mainly
fixed and the underlying systems are in place, which places us in a strong
position for revenue growth from these products. We believe that the increasing
levels of sophistication in our target market create the opportunity to move
away from expensive cash based transactions to more profitable electronic
banking. Our association with large retailers such as Shoprite, Checkers and
Pick `n Pay supports this concept.
Our balance sheet structure changed with the issue of perpetual preference
shares to the value of R154 million in August 2006. Dividends attributable to
preference shareholders therefore have to be subtracted from the income
statement figure to arrive at the profit attributable to ordinary shareholders.
The preference shares enabled us to increase the gearing on ordinary share
capital without weakening our capital adequacy ratio, which remains highly
conservative.
We also invested R90 million of our excess cash in listed perpetual preference
shares issued by other banks.
Our tax loss was fully utilised by the end of the last financial year, placing
us in a tax paying position for the future. This will have an impact on the
cash flow generated by the business.
REGULATORY RISK
Regulatory risk could make us vulnerable as a result of our focus on the market
for basic banking. In June 2007, the National Credit Act will come into force.
The act aims to protect the credit consumers. The main way to achieve this is to
enforce transparency. Whilst we support the aims of the Act, it unfortunately
also prescribes maximum price levels, which will have an effect on our
profitability. Increased efficiency and volumes will partly counter this impact.
PEOPLE: RECRUIT FOR POTENTIAL AND TRAIN FOR SKILL
Finding the right people in the banking industry is not easy. Systems, controls
and procedures are rigid and demand a high level of training before staff can be
fully operational. Our approach is to recruit for potential and train for skill.
Few of our consultants worked in the bank industry before we appointed them.
Every month staff from across the country attend a two week intensive training
course in Stellenbosch. This process is preceded by a two week training
assignment in branches and is concluded by a three week apprentice period before
a consultant is certified as competent to serve clients. The expense is quite
staggering: in the past year 1 883 people attended training at a cost of R15
million. We spend 10% of our operations salary bill on training.
OUR SHAREHOLDERS
Just before year end shareholders approved a transaction in terms of which
Capitec Bank Holdings issued 10 million new shares at R30 - then market price -
to a consortium of black companies, trusts and individuals. Funds of R285
million were provided by the IDC. The Capitec Bank Group Employee Empowerment
Trust acquired a 5% interest in the consortium for R15 million. This share
transaction amounts to 12% of Capitec. In total 16% of our shares are now held
by black shareholders.
The R300 million capital which we raised is in excess of our current needs.
Together with retained earnings, our shareholders` funds have increased from
R564m last year to R1,1 billion. Our return on equity, as a result, will drop in
the new financial year. Our return for the current year would have been 19%
instead of 26% if this transaction had been done at the beginning of the year.
INVESTING FOR FUTURE GROWTH
The business model provides a low cost platform from which to expand our
aggressively priced bank offer. We shall invest a significant amount, in our
terms, in the next financial year to expand our service offering and client base
in the future.
We shall continue to expand our product portfolio, distribution channels and
branch platform. We believe we are at a stage of our overall product and service
offering, which warrants building awareness in the market place. We therefore
have invested in an advertising campaign for the first time. Over R20 million
will be spent on television and print communication to convey our unique
positioning and product offering to our target market.
Our distribution platform will be expanded by a further 65 branches and 300 ATMs
by February 2008, resulting in a service infrastructure of 345 branches and in
excess of 700 ATMs. This wider level of access to transacting, will be enhanced
by 100 additional balance card readers and an expanded point-of-sale transacting
network at retailers. Our mobile banking facilities will be expanded to 100
units to support clients with access to bank products and services at the
workplace. Our employer sales and support team will increase, by over 40%, to
grow and improve service at employers.
Our confidence in our business model means we will be aggressive in the
execution of our expansion plans. However, we remain careful in the planning of
the expansion, as uncertainties regarding the reaction of competitors to the
changing regulatory environment exist. This, together with the prescription of
maximum price levels, has resulted in us budgeting for lower growth for next
year. Capitec Bank continues to pursue its ambition to revolutionise banking in
and beyond South Africa.
DIVIDENDS
An interim dividend of 20c was paid in December and the Directors declared a
final dividend of 60c per share, an increase of 78% over last year.
The following dates apply for participation in the dividend payment:
Last day to trade cum dividend - Friday 8 June 2007
Trading ex dividend commences - Monday 11 June 2007
Record date - Friday 15 June 2007
Payment date - Monday 18 June 2007
Share certificates may not be dematerialised or rematerialised between Monday,
11 June 2007 and Friday, 15 June 2007, both days inclusive.
On behalf of the board
Jannie Mouton
Chairman
Riaan Stassen
Chief executive officer
Stellenbosch
28 March 2007
GROUP BALANCE SHEET
Audited Audited
February February
2007 2006
R`000 R`000
ASSETS
Current assets
Cash and cash equivalents 1 043 746 582 293
Investments at fair value 111 933 7 149
Loans and advances 695 151 443 504
Inventory 10 928 11 800
Other receivables 9 685 7 077
Non-current assets
Loans and advances 108 109 11 157
Property and equipment 155 640 133 956
Intangible assets - banking system 42 604 47 688
Deferred income tax assets 13 846 6 648
Total assets 2 191 642 1 251 272
LIABILITIES
Current liabilities
Deposits at amortised cost 586 795 337 067
Deposits held at fair value 2 149 2 149
Trade and other payables 85 815 63 696
Current income tax liabilities 79 133 22 493
Provisions 3 850 300
Non-current liabilities
Trade and other payables 8 833 5 971
Deposits at amortised cost 255 377 200 827
Deposits held at fair value 52 233 54 953
Total liabilities 1 074 185 687 456
EQUITY
Ordinary share capital and premium 647 363 347 865
Non distributable reserves 2 439 710
Retained earnings 313 049 215 241
Ordinary shareholders` funds 962 851 563 816
Non-redeemable, non-cumulative,
non-participating preference shares 154 606 -
Total equity 1 117 457 563 816
Total equity and liabilities 2 191 642 1 251 272
GROUP INCOME STATEMENT
Audited Audited
Year Year
ended ended
February February
2007 2006
R`000 R`000
Interest on loans advanced 924 370 767 624
Interest on cash and cash equivalents 43 158 16 278
Interest expense (69 836) (40 079)
Net interest income 897 692 743 823
Net fee income 111 557 14 942
Loan fee income 76 943 -
Transaction fee income 93 671 44 314
Transaction fee expense (59 057) (29 372)
Dividend income 1 469 1 015
Net impairment charge on loans and
advances (161 271) (95 625)
Net movement in financial instruments
held at fair value (857) 1 430
Other income 75 4
Non-banking gross profit 8 025 6 563
Non-banking sales 134 888 131 368
Non-banking cost of sales (126 863) (124 805)
Income from operations 856 690 672 152
Banking operating expenses (606 705) (500 074)
Non-banking expenses (6 808) (5 965)
Operating profit before tax 243 177 166 113
Income tax expense (76 253) (50 832)
Net profit attributable to equity holders 166 924 115 281
RECONCILIATION OF ATTRIBUTABLE EARNINGS TO HEADLINE EARNINGS
Audited Audited
Year Year
Ended Ended
February February
2007 2006
R`000 R`000
Net profit attributable to equity holders 166 924 115 281
Less preference dividend (7 617) -
Net profit attributable to
ordinary shareholders 159 307 115 281
Exceptional items after tax:
- Loss on disposal of fixed assets 1 085 1 111
Headline earnings 160 392 116 392
GROUP CASH FLOW STATEMENT
Audited Audited
Year Year
Ended Ended
February February
2007 2006
R`000 R`000
Cash flow from operating activities 223 768 294 042
Cash flow from operations 333 780 291 614
Increase in loans and advances (366 867) (308 745)
Increase in other liabilities,
provisions and deposits 325 128 335 050
Tax paid (21 520) (2 560)
Dividends paid (46 753) (21 317)
Cash flow from investment activities (194 170) (61 523)
Net investment in equipment and software (85 809) (71 502)
(Increase) / decrease in other investing
activities (108 361) 9 979
Cash flow from financing activities 431 855 (13 099)
Shares issued 454 104 -
Shares acquired and options settled (22 249) (13 099)
Increase in cash and cash equivalents 461 453 219 420
Cash and cash equivalents at beginning
of year 582 293 362 873
Cash and cash equivalents at end of
year 1 043 746 582 293
GROUP STATEMENT OF CHANGES IN EQUITY
Audited Audited
Year Year
ended ended
February February
2007 2006
R`000 R`000
Equity at beginning of year 563 816 473 418
Net profit attributable to equity holders 166 924 115 281
Ordinary shares issued 299 434 -
Preference shares issued 154 606 -
Loss on settlement of share options net
of share based staff costs (18 244) (29 021)
Tax on settlement of share options 5 291 7 931
Shares utilised - 17 524
Dividends declared (54 370) (21 317)
Equity at end of year 1 117 457 563 816
SEGMENTAL RESULTS
Wholesale
Banking Distribution Total
R`000 R`000 R`000
Audited
Year ended February 2007
Revenues 1 139 686 134 888 1 274 574
Headline earnings 160 133 259 160 392
Assets 2 174 708 16 934 2 191 642
Audited
Year ended February 2006
Revenues 829 235 131 368 960 603
Headline earnings 116 860 (468) 116 392
Assets 1 237 114 14 158 1 251 272
COMMITMENTS
Audited Audited
February February
2007 2006
R`000 R`000
Guarantees
- Non-banking institutions 7 500 10 206
Capital commitments approved by the
board
- Contracted for 23 855 3 927
- Not contracted for 141 481 79 985
Unutilised loan facilities to
clients 135 701 79 700
Operating lease commitments
< 1 year 60 331 47 378
1 to 5 years 145 371 118 850
> 5 years 4 340 4 203
NOTES
1. ACCOUNTING POLICIES
The summarised audited consolidated financial statements have been prepared in
accordance with IFRS, including IAS34. The accounting policies applied in the
preparation of the summarised audited consolidated financial statements conform
to that of the previous year.
The unmodified audit reports from PricewaterhouseCoopers Inc. on the annual
financial statements for the year ended 28 February 2007 and the summarised
audited consolidated financial statements contained herein are available for
inspection at the registered offices of the company.
REGISTERED OFFICE
10 Quantum Road, Techno Park, Stellenbosch 7600, PO Box 12451, Die Boord,
Stellenbosch 7613
www.capitecbank.co.za
TRANSFER SECRETARIES
Computershare Investor Services 2004 (Pty) Limited (Registration number:
2004/003647/07)
Ground Floor, 70 Marshall Street, Johannesburg 2001, PO Box 61051, Marshalltown
2107
COMPANY SECRETARY
Christian George van Schalkwyk, BComm, LLB, CA(SA)
DIRECTORS
JF Mouton (Chairman), R Stassen (CEO)*, AP du Plessis (CFO)*, MS du P le Roux,
Prof MC Mehl, Ms NS Mjoli-Mncube, CA Otto, JG Solms, Dr J van Zyl Smit
*Executive
SPONSOR
PSG Capital (Pty) Limited
ANNUAL GENERAL MEETING
30 May 2007 at 12:00, Grand Ballroom, NH The Lord Charles, Corner of Main Road
and R44, Somerset West
Date: 29/03/2007 09:00:01 Produced by the JSE SENS Department.
