| Wed 6 Feb 2008, 7:05 | | ABL / ABLP - ABIL - Trading Update For The First Quarter Ending 31 December 2007 |
|
ABL ABLP
ABL
ABL / ABLP - ABIL - Trading Update For The First Quarter Ending 31 December 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)
("ABIL")
TRADING UPDATE FOR THE FIRST QUARTER ENDING 31 DECEMBER 2007
ABIL issues quarterly updates in order to provide investors with more timely
insights into strategic and operational performance trends. These updates cover
certain key metrics but are not in themselves indicators of the group`s
profitability.
For the first time, this update incorporates information relating to the
operational performance of Ellerine Holdings Limited ("Ellerines") for the four
months from its financial year-end to the end of December 2007. However, given
that ABIL acquired effective control over Ellerines in January 2008, the
financial results for this period will fall in the pre-acquisition period.
For the purposes of this trading update, the operations of Ellerines (including
its financial services activities) have been addressed separately under the
heading Ellerines, whilst the ABIL business prior to the acquisition of
Ellerines is dealt with separately under the heading of African Bank. When ABIL
reports it`s interim results for the period ended 31 March 2008, the group will
provide further segmentation of the results into financial services and retail
operations in order to allow for more meaningful comparisons to be made to the
relevant sectors in which ABIL operates.
African Bank
Demand for credit remained strong during this quarter, resulting in sales of new
loans granted, increasing by 46% to R2,6 billion over the equivalent period last
year and 25% over the fourth quarter of the 2007 financial year. Advances grew
by 13% in the quarter from R10,9 billion to R12,3 billion and 45% in the 12
months to 31 December 2007. This quarter is traditionally the busiest in terms
of sales volumes and accordingly the above growth percentages should not be
extrapolated for the rest of the year. Sales and advances growth for the full
year are expected to be at the upper end of the previously communicated 2008
target ranges.
The latest series of price cuts which took place in September 2007, and a
continuing shift in the weighting of sales to the medium and low risk clients is
expected to result in the decline in the total average yield being on target for
the full year.
Asset quality has been impacted by the tighter credit cycle and changes to debit
order collection mechanisms (NAEDO) introduced in 2007. However, the group`s
vintage charts continue to perform within the targeted range and have begun
trending lower following certain underwriting changes made over the last year.
The average term of new loans granted reached a peak of 34 months in October
2007, but was reduced through underwriting interventions to 31 months by
December 2007. Application approval rates have also declined in the quarter to
an average of 68% from over 70%, due to tighter affordability criteria across
all risk bands.
Non-performing loans (NPLs) rose in the quarter from R3.0 billion to R3.3
billion, and as a percentage of gross advances declined to 26,5% (September
2007: 27.6%). This ratio is however, distorted by the rapid growth in advances
on which NPLs have not yet emerged. NPL provision coverage remained steady at
63,4% (September 2007: 63,0%). The bad debt charge to average gross advances for
the year is expected to be at the upper end of the targeted range.
A continuing focus on cost management and strong growth in the advances book
will result in operating costs to average gross advances being at the lower end
of the 2008 targeted range. This, together with the ongoing refinement of our
credit underwriting models, will allow the group to continue to effect price
reductions to its customers.
Ellerines
Sales of merchandise for the period ending 7 January 2008 increased by 3% over
the equivalent period last year as consumers felt the effect of rising inflation
and interest rates. Sales in the credit brands increased by 6% while the cash
brands decreased by 5%. The group`s brands that target consumers in the lower
income sector increased sales by 13%, whilst those that target consumers in the
middle and higher income sector had a decrease in sales of 7% and 3%
respectively, as consumers in these markets are most affected by rising interest
rates. After adjusting for new stores and store closures, the like for like
increase in sales for this period is 1%.
An immediate key area of focus is the development of strategies to compensate
for these difficult trading conditions, including further segmentation of the
credit risk underwriting models with the aim of offering meaningful price
reductions in the cost of credit for the majority of its customers.
The asset quality has been negatively impacted by poorer collections which has
resulted in the arrears to gross advances increasing from 16,4% in August 2007
to 16,6%. ABIL will during the period to the interim results, translate the
asset quality ratios and trend indicators for Ellerines to bring them in line
with group practice.
General
The strategic integration of Ellerines into ABIL commenced in January 2008, with
the aim of optimizing the opportunities available to the enlarged group to play
a leading role in the reshaping of the retail and financial services offerings
to this market. The current market conditions provide the ideal platform to
validate these strategies. Further details in this regard will be provided at
the interim reporting stage.
The capital optimization plan is on track to release surplus capital within 18
months and the group expects to commence shortly with the implementation of a
black economic empowerment programme for Ellerines.
ABIL Group targets
As communicated previously, revised targets for the new ABIL group will be
announced at the interim reporting stage together with separate targets for the
African Bank and Ellerines businesses.
Changes to the boards and management structures
As a result of the acquisition of the Ellerines group, ABIL has made certain
changes to its board of directors and management structures. Please refer to the
SENS announcement of 4 February 2008 for further detail.
On behalf of the board
6 February 2008
This announcement, together with a short presentation, is available on the
African Bank Investments Limited website at http://www.africanbank.co.za.
CONFERENCE CALL
Leon Kirkinis, CEO, will conduct a conference call for investors, fund managers
and analysts on Wednesday 06 February 2008. The conference call will take the
form of a short presentation, followed by questions. Interested parties are
invited to download the presentation from our website prior to the conference
call.
CONFERENCE CALL TIMES
South Africa: 16:00pm
United States: 09:00am Eastern Time
United Kingdom: 14:00pm
Access numbers for participants dialling from their country:
South Africa Toll 011 535 3600
Toll Free 0800 200 648
United States Toll 1 412 858 4600
Toll Free 1800 860 2442
United Kingdom Toll Free 0800 917 7042
PLAYBACK
A replay of the recording will be available for 48 hours should you be unable to
participate in the call and wish to listen to the trading update.
To access the replay please call:
South Africa +27 11 305 2030
Code 2134#
USA 1 412 317 0088
Code 2134#
UK 0808 234 6771
Code 2134#
Date: 06/02/2008 07:05:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
