| Mon 14 May 2007, 7:00 | | ABL/ABLP - African Bank Investments - Unaudited In |
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ABL ABLP
ABL
ABL/ABLP - African Bank Investments - Unaudited Interim Results For The Six
Months Ended 31 March 2007
African Bank Investments Limited
(Incorporated in the Republic of South Africa)
(Registered bank controlling company)
(Registration number 1946/021193/06)
(Ordinary share code: ABL) (ISIN: ZAE000030060)
(Preference share code: ABLP) (ISIN: ZAE000065215)
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2007
Features of the results
* Sales of new loans increased by 20%
* Larger loan sizes and longer average terms resulted in advances growth of 29%
* Price reductions resulted in overall yields declining by 5%
* Credit quality and bad debt charge in line with increased risk appetite
* Operating cost control created further operational leverage
* Headline earnings per share up 18% to 114,1 cents
* Interim ordinary dividends up 19% to 95 cents per share
OVERVIEW
ABIL generated headline earnings of R587 million for the first six months of its
current financial year (H1 2006: R498 million), up 18% on the prior year.
Headline earnings per share increased by 18% to 114,1 cents (H1 2006: 96,7
cents), while dividends per ordinary share increased 19% to 95 cents (H1 2006:
80 cents). Basic earnings of R587 million grew by a lower 10% over the
equivalent period, due to the capital profit realised on the disposal of the
Commercial Vehicle Finance division in the first half of 2006. Return on assets
remained constant at 12,7%, while increased gearing from 3,9 to 4,2 times
resulted in the return on equity increasing from 49,1% to 53,8%.
These results were achieved against a backdrop of intensifying credit supply due
to increased competitive behaviour. ABIL`s risk-based segmentation models
enabled it to focus growth during this period towards its lower risk clients.
There is some early evidence that the growth in credit supply has started to
slowly decelerate which, if sustained, should bode well for an improving credit
environment in the next eighteen months.
Key to this set of results is ABIL`s strategy of increasing volumes while
reducing prices and maintaining relatively flat operating costs. During the
current period, gross advances increased by 29% through larger, longer-term and
cheaper loans, while the overall yield on the portfolio fell by 5%. Improved
cost efficiency offset this yield decline, while credit quality remained within
expected parameters and funding costs fell further. ABIL has indicated that it
will use its high return on assets and equity to grow the business and
strengthen its competitive position. This strategy therefore has to be tested
against the economic value created for shareholders over and beyond the cost of
equity. During this reporting period, economic profit increased by 20% to R417
million.
Operational performance
The drivers of the results for the six months to 31 March 2007 were:
* Advances - Sales increased by 20% to R3,4 billion over the prior period,
which, combined with the extension of average term from 21 to 27 months,
resulted in advances growing by 29% to R9,1 billion (H1 2006: R7,0 billion). The
growth in advances, driven by the increasing average term, exceeded the growth
in sales and this trend is expected to continue for the foreseeable future.
Another result of the increasing term is that, over the past eighteen months,
the percentage of loans maturing in greater than one year has changed from 21%
to 38%.
* Yields - The overall yield on advances at 49,8% (H1 2006: 54,8%) has declined
faster than expected as a result of the greater and more rapid shift to larger
and longer-term loans at lower yields to lower risk clients. Sales volume
increases from the price reductions have again exceeded expectations. Further
price cuts will be effected by June 2007.
* Bad debts - The charge for bad debt increased by R95 million to R396 million
or 9,3% of advances (H1 2006: 8,7%), and was predominantly driven by higher
volumes and an increased risk appetite. NPL coverage was 64,1%. Write-offs of
R314 million represent 7,4% of average gross advances.
* Operating costs - Expenditure remained flat at R574 million (H1 2006: R578
million,) aided by a lower IFRS 2 charge for incentives. This resulted in the
cost to advances ratio falling from 16,8% for the prior period to 13,5%. The
group is confident that it will achieve its full year target of less than 12,5%
for this ratio.
* Funding costs - The average cost of funds fell to 9,2% as older more expensive
funding matured. The group raised R1,7 billion of new wholesale funding during
the last six months, of which 82% was for twelve months or longer.
The above drivers combined to produce a 16% increase in profit from operations
from R808 million to R936 million.
* Taxation - The all-in tax rate was 38,7% (H1 2006: 39,2%). In addition to the
normal corporate tax rate of 29%, R75 million was paid in STC (H1 2006: R65
million). Indirect taxes reduced to R21 million (H1 2006: R28 million), as a
result of the abolition of RSC levies and a more favourable VAT apportionment
ratio.
Credit rating upgrade
Moody`s announced on 25 April 2007 that it raised the long-term national scale
credit rating of African Bank from A2.za to A1.za and has affirmed the short-
term rating at Prime-1.za.
Looking ahead
ABIL`s intent is to entrench its position as the market leader in a larger, more
competitive and fast changing unsecured credit market, fuelled by the
introduction of the National Credit Act and a growing and transforming economy.
Key to achieving success in this process are the following strategies:
* Driving down overall prices further in order to make the business more
competitive and increase the demand for and affordability of unsecured credit.
This is enabled through continued refinement in the underwriting models and risk
segmentation, and tight cost control.
* Developing an unbeatable client value proposition and re-engineering the
business accordingly, to ensure that competitive pricing is backed up by
excellent service levels, fastest loan approval times and a pervasive
distribution network.
* Continuing the development and growth of the credit card product in order to
take it to scale.
* Increasing the universe of clients that we engage with through improved
leverage of our brand and distribution footprint, developing more focused
products to meet their requirements and innovating new risk models.
* Ensuring our employees have a clear understanding and buy-in to our strategy
along with focused training and development to raise the level of competencies
necessary to achieve this.
* Managing a smooth and efficient transition to the National Credit Act,
particularly with regard to the price ceilings, the debt mediation processes and
the changes to the National Payment System, in order that the opportunities
created by the Act may be pursued.
Due to the strong advances growth on the back of the success of the price
reduction strategies, ABIL has increased its targeted book growth for 2007 from
the previously stated range of 18% - 22% to approximately 30%, while it also
expects that the total yield on advances for the full 2007 year will decline by
approximately 5% from the previously stated 2% to 4%. ABIL remains on track to
achieve the financial targets it set for the 2007 financial year.
CHANGES TO THE BOARD OF DIRECTORS
ABIL announced on 12 March 2007 the appointment of Mutle Mogase as an
independent non-executive director of ABIL and African Bank Limited.
ACCOUNTING POLICIES
These condensed group interim consolidated financial statements have been
prepared in accordance with International Accounting Standard (IAS) 34 and the
requirements of the South African Companies Act, Act number 61 of 1973, as
amended.
The accounting policies of the group are consistent with those applied in the
previous year.
DIVIDEND DECLARATION
Ordinary shares Preference shares
Share code ABL ABLP
ISIN ZAE000030060 ZAE000065215
Dividend number 13 5
Dividends per share 95 cents 430 cents
Last date to trade cum- Friday, 8 June 2007 Friday, 1 June 2007
dividend
Shares commence trading Monday, 11 June 2007 Monday, 4 June 2007
ex-dividend
Record date Friday, 15 June 2007 Friday, 8 June 2007
Dividend payment date Monday, 18 June 2007 Monday, 11 June 2007
Preference share certificates may not be dematerialised or rematerialised
between Monday, 4 June 2007 and Friday, 8 June 2007, both days inclusive
Ordinary 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
Ashley Mabogoane Gordon Schachat Leon Kirkinis
Chairman Executive deputy Chief executive
chairman officer
14 May 2007
GROUP INCOME STATEMENT
for the six months ended 31 March 2007
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
% 31 Mar 31 Mar 30 Sep
R million change 2007 2006 2006
Interest income on (1) 1 514 1 526 2 974
advances
Net assurance income 80 299 166 424
Non-interest income 55 307 198 446
Total revenue 12 2 120 1 890 3 844
Charge for bad and (32) (396) (301) (606)
doubtful advances
Risk-adjusted revenue 8 1 724 1 589 3 238
Other interest income 29 67 52 113
Interest expense (15) (260) (227) (465)
Operating costs 1 (574) (578) (1 048)
Indirect taxation: VAT 25 (21) (28) (46)
and RSC
Profit from operations 16 936 808 1 792
Capital items (100) 0 45 37
Profit before taxation 10 936 853 1 829
Direct taxation: STC (15) (75) (65) (118)
Direct taxation: SA (9) (274) (252) (535)
normal
Profit for the period 10 587 536 1 176
Reconciliation of
headline earnings and
per share statistics
Profit (basic earnings) 10 587 536 1 176
Adjusted for:
Capital items 100 0 (45) (37)
Capital gains tax (100) 0 7 6
thereon
Headline earnings 18 587 498 1 145
Attributable to 11 20 18 36
preference shareholders
Attributable to 18 567 480 1 109
ordinary shareholders
Number of shares in million 497,1 496,8 496,9
issue (net of treasury)
Weighted number of million 497,0 496,5 496,7
shares in issue
Fully diluted number of million 497,4 497,1 497,2
shares in issue
Basic earnings per cents 9 114,1 104,3* 229,5
share
Fully diluted basic cents 9 114,0 104,2* 229,3
earnings per share
Headline earnings per cents 18 114,1 96,7* 223,3
share
Fully diluted headline cents 18 114,0 96,6* 223,1
earnings per share
Declared dividends per
ordinary share
Ordinary dividends per
share
Interim - declared cents 19 95 80 80
Final cents 0 0 120
Total ordinary cents 19 95 80 200
dividends
* Restated to adjust for the effect of preference dividends
GROUP BALANCE SHEET
as at 31 March 2007
Unaudited Unaudited Audited
% 31 Mar 31 Mar 30 Sep
R million change 2007 2006 2006
Assets
Property and equipment 24 128 103 116
Policyholders` investments (77) 15 65 87
Deferred tax asset 15 146 127 153
Net advances 30 7 220 5 572 6 064
Gross advances 29 9 060 7 002 7 727
Deferred administration fees 31 (238) (181) (228)
Impairment provisions 28 (1 602) (1 249) (1 435)
Other assets 44 46 32 12
Taxation (29) 10 14 7
Statutory assets - bank and 20 586 489 472
insurance
Short-term deposits and cash 0 1 312 1 311 1 252
Total assets 23 9 463 7 713 8 163
Liabilities and equity
Life fund reserve (65) 34 96 103
Subordinated debentures (100) 0 199 202
Bonds and other long-term 44 5 315 3 696 3 946
funding
Short-term money market funding 35 1 016 752 718
Other liabilities (13) 381 440 395
Taxation 46 41 28 109
Total liabilities 30 6 787 5 211 5 473
Ordinary shareholders` equity 9 2 193 2 019 2 207
Preference shareholders` equity 0 483 483 483
Total equity (capital and 7 2 676 2 502 2 690
reserves)
Total liabilities and equity 23 9 463 7 713 8 163
GROUP STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 March 2007
Ordinary Preference
share Reserves share
capital and capital
and treasury and
R million premium shares premium Total
Balance at 30 September 2005 12 2 110 483 2 605
IAS 18 adjustment to opening 0 (57) 0 (57)
reserves
IAS 39 adjustment to opening 0 (58) 0 (58)
reserves
Cancellation of shares: odd- 0 (14) 0 (14)
lot offer
Dividends paid 0 (498) (18) (516)
Share Trust shares issued to 0 16 0 16
employees
Loss incurred on Share Trust 0 (15) 0 (15)
shares
Treasury shares disposed 0 23 0 23
IFRS 2 reserve transactions 0 (18) 0 (18)
Profit for the period 0 518 18 536
Balance at 31 March 2006 12 2 007 483 2 502
IAS 18 adjustment to opening 0 (7) 0 (7)
reserves
Dividends paid 0 (399) (18) (417)
Share Trust shares issued to 0 2 0 2
employees
Loss incurred on Share Trust 0 1 0 1
shares
IFRS 2 reserve transactions 0 (31) 0 (31)
Profit for the period 0 622 18 640
Balance at 30 September 2006 12 2 195 483 2 690
Dividends paid 0 (597) (20) (617)
Share Trust shares issued to 0 4 0 4
employees
Loss incurred on Share Trust 0 (1) 0 (1)
shares
IFRS 2 reserve transactions 0 13 0 13
Profit for the period 0 567 20 587
Balance at 31 March 2007 12 2 181 483 2 676
GROUP CASH FLOW STATEMENT
for the six months ended 31 March 2007
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
31 Mar 31 Mar 30 Sep
R million 2007 2006 2006
Cash generated from operations 1 528 1 246 2 733
Increase in gross advances (1 647) (1 086) (1 987)
(Increase)/decrease in working capital (157) 3 (108)
Indirect and direct taxation paid (439) (364) (638)
Ordinary shareholders` payments and (597) (498) (897)
transactions
Preference shareholders` payments and (20) (18) (36)
transactions
Cash inflow/(outflow) from equity 3 15 (1)
accounted incentive transactions
Cash (outflow)/inflow from investing (72) 212 127
activities
Cash inflow from financing activities 1 465 561 780
Increase/(decrease) in cash and cash 64 71 (27)
equivalents
Cash and cash equivalents at the 1 363 1 390 1 390
beginning of the period
Cash and cash equivalents at the end of 1 427 1 461 1 363
the period
Made up as follows:
Short-term deposits and cash 1 312 1 311 1 252
Statutory cash reserves - insurance 115 150 111
1 427 1 461 1 363
ADVANCES ANALYSIS
% As at As at
y-o-y 31 Mar 31 Mar
R million growth 2007 2006
Retail 36 6 587 4 832
Payroll (9) 481 531
Credit card >100 258 0
Mining 26 838 663
Standard Bank JV (9) 357 394
Persal (7) 180 193
Saambou PLB (8) 359 389
Gross advances 29 9 060 7 002
ASSET QUALITY ANALYSIS
as at 31 March 2007
31 Mar % 30 Sep % 31 Mar
R million 2007 change 2006 change 2006
Gross advances
Performing 6 561 19 5 514 6 5 207
Non-performing 2 499 13 2 213 23 1 795
Gross advances 9 060 17 7 727 10 7 002
Share transfer secretaries
Link Market Services SA (Pty) Limited
11 Diagonal Street, Johannesburg, 2001
PO Box 4844, Johannesburg, 2000
Telephone +27 11 834 2266
africanbank@linkmarketservices.co.za
Board of directors
AS Mabogoane (Chairman), G Schachat (Deputy chairman)*, L Kirkinis (CEO)*, A
Fourie*, DB Gibbon, BD Goba, MC Mogase, R Naidoo, TM Sokutu*, BPF Steele, GZ
Steffens (German), DFG Tembe (Mozambique), A Tugendhaft, DF Woollam*
* Executive
Group secretary
S Martin
For a full analysis of the above results including graphs refer to
http://www.africanbank.co.za
Date: 14/05/2007 07:00:03 Produced by the JSE SENS Department.
