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CPI CPIP
CPI
CPI/CPIP - Capitec - Unaudited financial results for the six months ended 31
August 2007
Capitec Bank Holdings Limited
Registration number: 1999/025903/06
Registered bank controlling company
JSE ordinary share code: CPI & ISIN: ZAE000035861
JSE preference share code: CPIP & ISIN: ZAE000083838
UNAUDITED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2007
- Headline earnings per share up 15%
- Headline earnings up 31%
- Return on equity 21%
- Interim dividend 25 cents
- Net asset value up 51%
August August Growth February
2007 2006 % 2007
OPERATIONS 12 months
Branches 307 267 15 280
Employees 2 505 2 000 25 2 129
Active clients `000 1 188 852 39 1 010
Own ATMs 295 244 21 264
Partnership ATMs 273 - - 143
Capital expenditure Rm 68 35 94 86
SALES
Loans
Value of loans
advanced Rm 2 146 1 586 35 3 449
Number of loans
advanced `000 1 570 1 486 6 2 924
Average loan amount R 1 366 1 067 28 1 180
Interest and fees
on loans Rm 558 484 15 1 001
Net loan impairment
expense Rm 87 82 6 161
Net impairment to
repayments % 4.23 4.07 4 4.12
Deposits
Value of savings
deposits Rm 701 446 57 554
Number of savings
clients `000 669 468 43 583
Net transaction fee
income Rm 36 15 139 35
PROFITABILITY
Earnings attributable to
ordinary shareholders
Basic Rm 97 74 32 159
Headline Rm 97 74 31 160
Operating expenses Rm 358 299 20 614
Cost to income ratio
- banking activities % 60 60 0 60
Return on ordinary
shareholders equity % 21 26 (21) 26
Earnings per share
Attributable Cents 119 102 16 221
Headline Cents 119 104 15 222
Diluted attributable Cents 114 97 18 209
Diluted headline Cents 114 98 16 211
Dividends per share
Interim Cents 25 20 25 20
Final Cents 60
Dividend cover x 4.8 5.2 (8) 2.8
ASSETS
Total assets Rm 2 339 1 683 39 2 191
Net loans and advances Rm 1 225 476 158 803
Cash and cash
equivalents Rm 571 988 (42) 1 044
Investments Rm 267 7 112
Other Rm 275 213 29 232
LIABILITIES
Total liabilities Rm 1 207 936 29 1 074
Deposits Rm 1 055 795 33 897
Other Rm 152 142 7 177
EQUITY
Shareholders` funds Rm 1 132 747 51 1 117
Capital adequacy ratio
- Group % 49 77 (36) 84
- Bank % 47 72 (35) 79
Net asset value per
ordinary share Cents 1 193 824 45 1 175
Share price Cents 3 700 3 050 21 3 700
Market capitalisation Rm 3 031 2 194 38 3 031
Number of share options
outstanding `000 5 679 6 320 (10) 6 191
Average share option
strike price Cents 1 650 1 134 46 1 151
Average share option
time to maturity Months 27 30 (11) 24
Charge on settlement
of share options Rm 35 19 84 22
Number of ordinary
shares
At year end `000 81 928 71 928 14 81 928
Weighted average `000 81 928 71 928 14 72 120
Diluted weighted
average `000 85 119 75 897 12 76 043
MARKET CONDITIONS AND NATIONAL CREDIT ACT
Our business model is succeeding and we are confident of our ability to grow our
client numbers in future. The National Credit Act has provided us with greater
regulatory certainty and there remains a large market in need of finance for
home improvement, furniture and appliances. We have continuously reduced prices
on shorter term loans over the past five years. The requirements of the new
credit act have, however, resulted in the accelerated reduction of prices
between October 2006 and June 2007, which led to lower growth in profit.
The implementation of revised systems and procedures, resulting from the
requirements of the credit act, have gone well. We were forced, however, to
change some of our charges from interest to fees, which led to an increase in
VAT charged of R20 million for the six months to August 2007.
CLIENT GROWTH AND SALES
The growth in client numbers increased substantially over the past six months.
We now average over 40 000 new savings and loan clients per month. The total
number of active clients exceeds 1,18 million. Net transaction fee income
increased by 239% over the same period last year. The value of loans advanced
(sales) increased by 35% mainly as a result of the introduction of 18 and 24
month loans in October 2006. The loans and advances (loan book) in the balance
sheet increased by 158%. This significant growth is due to the change in
composition of the book to a longer tenure.
INVESTMENT IN GROWTH
The growth in the number of clients is the result of a significant increase in
investment in marketing and infrastructure since February 2007. These
investments have a negative short term profit effect, but will have a positive
influence on client growth and income in the longer term. Branch numbers have
increased from 280, in February 2007, to 307, with a target of 345 by year end.
Above-the-line advertising of R14 million has been spent to date, with a total
of R20 million planned for the financial year. Mobile banking units have grown
to 71 and employee numbers have grown by 376 (297 front line employees) in the
current year. We spent R8,6 million on training, up 37% on last year.
MARGINS AND PROFITABILITY
Capitec Bank`s approach to pricing remains aggressive and we strive to retain
our position as price leaders. We have largely held our prices on transacting
facilities at the same level as last year and reduced our prices on loan
products in October 2006 and May 2007 to levels below what was required by the
credit act. This reduced our margins, in line with what we planned in our
budget.
ARREARS AND PROVISIONING
August August February
2007 2006 2007
Gross bad debt expense as % % %
percentage of instalments due
One month loans 1,0 1,8 1,6
Three month loans 3,4 3,1 3,2
Six month loans 4,4 8,2 6,9
Twelve month loans 6,8 14,5 13,1
Eighteen month loans 18,0 - 24,3
Twenty four month loans 19,7 - 21,7
Weighted average 4,95 4,64 4,67
Recoveries (0,72) (0,57) (0,55)
Net bad debts 4,23 4,07 4,12
Our provisioning models are becoming more accurate as we obtain more history on
the longer term loan products. The six and twelve month products are now
mature, which means that our lower loss estimates had a cumulative impact on the
expense for this period. The loss rates on these products have stabilised
around 7% and 11% of instalments due, respectively.
We do not have arrears history for the full term of the eighteen and twenty four
month loan products and the provisions against these products therefore contain
a larger element of uncertainty. The arrears performance on these products is
however better than expected. We have noticed that the arrears performances
improve when we reduce our prices on a product, which is very positive taking
into account our recent price reductions. We have also seen an important
contribution from our credit scoring model in improving arrears rates.
CAPITAL AND RETURN ON EQUITY
The issue of 10 million shares for R300 million to a BEE consortium in February
reduced our return on equity for the period, as expected. The opportunity to
issue shares to a BEE partner at market value was seen to be of strategic
importance. The excess funds were partially invested in listed preference
shares.
The movement in financial instruments at fair value in the income statement
includes a gain of R11 million on MasterCard shares received in terms of the
conversion of MasterCard from a member owned association. R2.9 million was
received in cash as part of the redemption of class B shares and the remainder
of the shares is reflected under investments at fair value.
MOODY`S NATIONAL CREDIT RATING
In May 2007, Moody`s Investor Services raised the long-term national scale
credit rating of Capitec Bank Limited, Capitec`s banking subsidiary, by two
notches from Baa1.za to A2.za. The short-term rating at Prime-2.za remained
unchanged.
BASEL II
The Basel II requirements will change the way in which the capital adequacy of
banks will be calculated. Basel II will be implemented in South Africa on 1
January 2008. For this purpose, our risk management processes are being refined
and improved on a continuous basis.
The implementation plan is monitored continuously with regular involvement by
the board of directors. We are in line for implementation by the end of 2007.
PROSPECTS
We are positive about our prospects for the future and continue to implement our
investment and expansion plans for the 2007/8 financial year. Capitec Bank will
continue to use innovation to deliver low cost solutions to the market.
INTERIM DIVIDEND
The directors approved an interim ordinary share dividend of 25 cents per share
payable on Monday, 3 December 2007.
The following dates apply:
Last date to trade cum dividend Friday, 23 November 2007
Trading ex dividend commences Monday, 26 November 2007
Record date Friday, 30 November 2007
Date of payment Monday, 3 December 2007
Share certificates may not be dematerialised or rematerialised between Monday,
26 November and Friday, 30 November 2007, both days inclusive.
The preference share dividend of 482,26 cents per share for the six months to
August was declared on 31 August and was paid on 25 September 2007.
GROUP BALANCE SHEET
Unaudited Unaudited Audited
August August February
2007 2006 Growth 2007
R`000 R`000 % R`000
ASSETS
Current assets
Cash and cash equivalents 571 349 987 614 (42) 1 043 746
Investments at fair value 267 306 6 595 111 933
Loans and advances 1 041 723 465 003 124 695 151
Inventory 11 756 7 003 68 10 928
Other receivables 18 496 10 518 76 9 685
Non-current assets
Loans and advances 183 599 10 463 108 109
Property and equipment 188 819 142 853 32 155 640
Intangible assets - banking
system 40 149 40 181 0 42 604
Deferred income tax assets 15 593 13 116 19 13 846
Total assets 2 338 790 1 683 346 39 2 191 642
LIABILITIES
Current liabilities
Deposits at amortised cost 745 555 483 252 54 586 795
Deposits held at fair value 13 314 2 239 495 2 149
Trade and other payables 104 865 78 901 33 85 815
Current income tax 32 250 55 412 (42) 79 133
liabilities
Provisions 3 850 300 3 850
Non-current liabilities
Trade and other payables 11 118 7 088 57 8 833
Deposits at amortised cost 256 425 256 772 0 255 377
Deposits held at fair value 39 773 52 224 (24) 52 233
Total liabilities 1 207 150 936 188 29 1 074 185
EQUITY
Ordinary share capital
and premium 647 363 347 865 86 647 363
Non distributable reserves 2 439 1 710 43 2 439
Retained earnings 327 232 242 977 35 313 049
Ordinary shareholders` funds 977 034 592 552 65 962 851
Non-redeemable, non-cumu
lative, non-participating
preference shares 154 606 154 606 - 154 606
Total equity 1 131 640 747 158 51 1 117 457
Total equity and liabilities 2 338 790 1 683 346 39 2 191 642
GROUP INCOME STATEMENT
Unaudited Unaudited Audited
Six Six Year
Months Months ended
ended ended
August August February
2007 2006 Growth 2007
R`000 R`000 % R`000
Interest on loans advanced 345 786 484 068 (29) 924 370
Interest on cash and
cash equivalents 19 882 17 032 17 43 158
Interest expense (42 137) (32 219) 31 (69 836)
Net interest income 323 531 468 881 (31) 897 692
Net fee income 247 933 14 991 111 557
Loan fee income 212 074 - - 76 943
Transaction fee income 72 481 39 831 82 93 671
Transaction fee expense (36 622) (24 840) 47 (59 057)
Dividend income 10 969 187 1 469
Net impairment charge on
loans and advances (87 084) (81 946) 6 (161 271)
Net movement in financial
instruments held at
fair value 7 569 2 220 241 (857)
Other income - 11 75
Non-banking gross profit 4 997 4 016 24 8 025
Non-banking sales 68 686 65 751 4 134 888
Non-banking cost of sales (63 689) (61 735) 3 (126 863)
Income from operations 507 915 408 360 24 856 690
Banking operating expenses (354 471) (296 191) 20 (606 705)
Non-banking operating
expenses (3 863) (3 228) 20 (6 808)
Operating profit before tax 149 581 108 941 37 243 177
Income tax expense (44 280) (35 372) 25 (76 253)
Net profit attributable to
equity holders 105 301 73 569 43 166 924
RECONCILIATION OF ATTRIBUTABLE EARNINGS TO HEADLINE EARNINGS
Unaudited Unaudited Audited
Six Six Year
Months Months ended
ended ended
August August February
2007 2006 Growth 2007
R`000 R`000 % R`000
Net profit attributable to
equity holders 105 301 73 569 43 166 924
Less preference dividend (8 122) - - (7 617)
Net profit attributable to
ordinary shareholders 97 179 73 569 32 159 307
Items excluded from headline
earnings after tax:
- Loss on disposal of
fixed assets 101 927 (89) 1 085
Headline earnings attributable
to ordinary shareholders 97 280 74 496 31 160 392
GROUP CASH FLOW STATEMENT
Unaudited Unaudited Audited
Six Six Year
months months ended
ended ended
August August February
2007 2006 2007
R`000 R`000 R`000
Cash flow from operating
activities (203 248) 302 778 223 768
Cash flow from operations 184 522 149 197 333 780
Increase in loans and
advances (432 534) (26 038) (366 867)
Increase in other
liabilities, provisions
and deposits 173 075 215 813 325 128
Tax paid (79 154) (3 826) (21 520)
Dividend paid (49 157) (32 368) (46 753)
Cash flow from investing
activities (219 053) (34 503) (194 170)
Net investment in equipment
and software (68 004) (34 750) (85 809)
(Increase) decrease in other
investing activities (151 049) 247 (108 361)
Cash flow from financing
activities (50 096) 137 046 431 855
Shares issued - 154 606 454 104
Shares acquired and options
settled (50 096) (17 560) (22 249)
(Decrease) increase in cash
and cash equivalents (472 397) 405 321 461 453
Cash and cash equivalents at
beginning of period 1 043 746 582 293 582 293
Cash and cash equivalents at
end of period 571 349 987 614 1 043 746
GROUP STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
Six Six Year
months months ended
ended ended
August August February
2007 2006 2007
R`000 R`000 R`000
Equity at beginning of 1 117 457 563 816 563 816
period
Net profit attributable to
equity holders 105 301 73 569 166 924
Ordinary shares issued net
of
expenses - - 299 434
Perpetual preference shares
issued net of expenses - 154 606 154 606
Loss on settlement of share
options net of share based
employee costs (47 595) (17 560) (18 244)
Tax on settlement of share
options 13 756 5 095 5 291
Dividend declared (57 279) (32 368) (54 370)
Equity at end of period 1 131 640 747 158 1 117 457
SEGMENTAL RESULTS
Wholesale
Banking Distribution Total
R`000 R`000 R`000
Unaudited
Six months ended August 2007
Revenues 661 192 68 686 729 878
Headline earnings 96 515 765 97 280
Assets 2 318 788 20 002 2 338 790
Unaudited
Six months ended August 2006
Revenues 541 129 65 751 606 880
Headline earnings 74 291 205 74 496
Assets 1 670 995 12 351 1 683 346
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
COMMITMENTS
Unaudited Unaudited Audited
August August February
2007 2006 2007
R`000 R`000 R`000
Guarantees
- Non-banking institutions 7 500 8 139 7 500
Unutilised loan facilities to
clients 196 159 80 136 135 701
Capital commitments approved
by the board
- Contracted for 11 878 4 493 23 855
- Not contracted for 95 684 80 253 141 481
Operating lease commitments
< 1 year 55 364 46 851 60 331
1 to 5 years 144 219 116 182 145 371
> 5 years 5 671 1 681 4 340
INTERIM FINANCIAL REPORTS
The abridged interim consolidated financial statements are prepared in
accordance with IAS 34 - Interim Financial Reporting and the accounting policies
applied conform to IFRS. The accounting policies applied in the preparation of
the interim consolidated financial statements are consistent with the policies
applied in the previous year.
On behalf of the board
Michiel le Roux Riaan Stassen
Chairman Chief executive officer
Stellenbosch 27 September 2007
www.capitecbank.co.za
Capitec Bank Limited (NCR registration number NCRCP 13) is an authorised
financial services and credit provider.
Company secretary and registered office
Christian George van Schalkwyk
BComm LLB, CA (SA)
10 Quantum Road
Techno Park
Stellenbosch 7600
(PO Box 12451, Die Boord, Stellenbosch 7613)
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)
Sponsor
PSG Capital (Pty) Limited
(Registration number: 2006/015817/07)
Directors
MS du P le Roux (Chairman), R Stassen (CEO)*, AP du Plessis (CFO)*,TD Mahloele ,
Prof MC Mehl, Ms NS Mjoli-Mncube, JF Mouton, CA Otto, JG Solms, JP vd Merwe
*Executive
Date: 27/09/2007 12:00:03 Produced by the JSE SENS Department.
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