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CPI / CPIP - Capitec Bank Holdings Limited - Extracts from the audited financial
statements for the year ended 29 February 2008
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
29 FEBRUARY 2008
* Headline earnings per share up 16% to 259 cents
* Final dividend per share - 75 cents
* Return on equity - 22%
* Clients 1.37 million
* Shareholders funds R1.2 billion
2008 2007 Change 2006 2005
08/07
PROFITABILITY
Income from operations Rm 1 095 857 28% 672 491
Operating expenses Rm (771) (614) 26% (506) (392)
Tax Rm (95) (76) 25% (51) (32)
Preference dividend Rm (17) (8) 123% - -
Earnings attributable to
ordinary shareholders
Basic Rm 212 159 33% 115 67
Headline Rm 212 160 32% 116 70
Cost to income ratio
- banking activities % 58 60 (3%) 66 74
Return on ordinary
shareholders equity % 22 26 (17%) 23 16
Earnings per share
Attributable Cents 258.8 220.9 17% 163.4 97.9
Headline Cents 259.0 222.4 16% 165.0 100.9
Diluted attributable Cents 250.3 209.5 20% 154.7 91.7
Diluted headline Cents 250.5 210.9 19% 156.2 94.5
Dividends per share
Interim Cents 25.0 20.0 25% - -
Proposed final Cents 75.0 60.0 25% 45.0 30.0
Dividend cover x 2.6 2.8 (7%) 3.7 3.4
ASSETS
Total assets Rm 2 936 2 191 34% 1 251 805
Net loans and advances Rm 2 019 803 151% 455 208
Cash and cash
equivalents Rm 618 1 044 (41%) 582 363
Investments Rm 14 112 (87%) 7 17
Other Rm 285 232 23% 207 217
LIABILITIES
Total liabilities Rm 1 719 1 074 60% 687 332
Deposits Rm 1 528 897 71% 595 281
Other Rm 191 177 7% 92 51
EQUITY
Shareholders` funds Rm 1 217 1 117 9% 564 473
Capital adequacy ratio % 36 79 (54%) 56 84
Net asset value per
ordinary share Cents 1 297 1 175 10% 784 672
Share price Cents 3 900 3 700 5% 3 105 1 490
Market capitalisation Rm 3 195 3 031 5% 2 233 1 072
Number of shares in issue `000 81 928 81 928 - 71 928 71 928
Share options
Number outstanding `000 5 159 6 191 (17%) 5 841 6 753
Average strike price Cents 1 815 1 151 58% 648 271
Average time to
maturity Months 24 24 - 28 25
Charge on settlement Rm 48 22 118% 31 16
OPERATIONS %
Branches 331 280 18% 253 251
Employees 2 800 2 129 32% 1 901 1 708
Active clients `000 1 371 1 010 36% 706 513
Own ATMs 328 264 24% 210 180
Partnership ATMs 437 143 206% - -
Mobile banking
facilities 86 53 62% - -
Capital expenditure Rm 117 86 36% 72 84
SALES
Loans
Value of loans advanced Rm 5 162 3 449 50% 2 863 2 259
Number of loans
advanced `000 3 155 2 924 8% 2 650 2 486
Average loan amount R 1 636 1 180 39% 1 080 909
Loan revenue Rm 1 284 1 001 28% 768 534
Net loan impairment
expense Rm 231 161 43% 96 39
Net impairment to
repayments % 5.10 4.12 24% 2.85 1.45
Deposits
Value of savings
deposits Rm 842 554 52% 314 74
Number of savings
clients `000 783 583 34% 375 143
Net transaction fee
income Rm 79 35 128% 15 4
"IS IT A BIRD? IS IT A PLANE? NO, IT`S CAPITEC BANK!"
Suddenly Capitec Bank is everywhere. During the year we launched our first large
advertising campaign and our name is now recognised in our target market as much
as the weakest of the four traditional banks. We have 331 branches, one in every
corner of the country, 51 more than last year and we have a network of 765 ATMs.
Our internet bank is available to customers in the Eastern and Western Cape, and
will soon be available everywhere. We are building an ubiquitous bank, providing
all basic banking services, including those required by the young and modern. We
have over 1,3 million clients, 36% more than last year.
PROFIT - R212 MILLION
Headline earnings grew by 32% to R212 million. Headline earnings per share,
however, grew by 16% on 2007, but one should bear in mind that we issued 10
million new shares to our BEE partners at the end of the previous financial
year. This latter percentage is the most modest growth per share since Capitec
Bank`s inception. Income from lending grew by 28% to R1,3 billion and
transaction fee income grew by 80% to R168 million. Our expenses increased by
26%, as we invested heavily in branch expansion, system development and training
of staff. Notwithstanding this, we reduced our cost to income ratio from 60% to
58% during the year.
At Capitec Bank we have followed a consistent approach to the high interest
rates charged to consumers: in every year our rates were lower than in the
previous year. This has resulted in growth in both the size of loans and number
of loans, the support of higher income clients who are more credit worthy and
overall lower default rates. At the same time we have had to balance a reduction
in rates carefully with our cost structure, the investment needed to grow and
the profit expectations of the market. During the year this approach was
accelerated to comply with the price regulations in the new National Credit Act.
We also introduced a new loan price structure during the 2007 financial year,
comprising an initiation fee, interest and a monthly fee. The current year
interest income is therefore significantly lower, with a related increase in
loan fee income. We are building a bank with capacity to do much more business
in future. Under the circumstances, we regard this year`s profit growth as
satisfactory.
Our larger capital base means that our return on capital decreased during the
current year from 26% to 22%. This is temporary and will be nullified as our
business grows. This time last year, we felt that the additional capital of R300
million we raised was in excess of our needs but we did the transaction to
increase our BEE shareholding. We are now glad that we did. The American
subprime crisis has resulted in a tightening of funding markets in South Africa,
making a strong capital base a big asset.
MOODY`S NATIONAL CREDIT RATING
During the year Moody`s Investor Services upgraded the long-term national scale
credit rating of Capitec Bank Limited, Capitec`s banking subsidiary, by two
notches to A2.za. The short-term rating at Prime-2.za remains unchanged.
INSTANT GRATIFICATION
The customer walks into a shop, buys a can of beans, and walks out. What`s the
big deal? This is exactly what we do: the client walks into Capitec Bank,
applies for a loan, and walks out with the money. If it`s a new client, we have
to open an account, issue a card and make the loan accessible via the card.
What`s the big deal? The big deal is that no private bank in South Africa does
this, not even for a client of thirty years` standing.
At traditional banks, a client request results in the opening of a file (in
modern banks an electronic file) which will wind its way through various
departments and committees, before the bank will respond to the client. We
regard the client`s request as an opportunity to complete the transaction. If we
need credit bureau information, that information is immediately retrieved
electronically. If we need to verify information, that verification is done
immediately. This is not only what the client wants, it is also a very efficient
way of doing business. Every file with unfinished business represents an
impediment to the flow of new business.
We are the only bank with no administrative back office in every branch.
Everything is done on-line, the client is never required to fill in forms and
every transaction is verified by the electronic fingerprint of a consultant.
We look carefully at what our clients require. The first ATM transaction that
our clients do, is to check the balance on their account. We offer it free, on
the first screen that opens on our ATMs.
We are building a bank that will provide banking to all South Africans who need
basic banking products. Doing banking the Capitec way should be as painless as
buying bread.
Our fees are low and easy to understand. For instance: our new internet banking
has no monthly fee and we charge R1,75 for a payment, irrespective of size. Our
banking products offer the best value in the market.
OUR PEOPLE
Not many of our consultants worked in the bank industry before being employed by
us. We recruit for potential and train for skill. Every new recruit goes through
a two week training assignment in branches, a two week intensive training course
in Stellenbosch and a three week apprentice period in the branch before being
certified as a consultant. We spent R19,2 million on training our staff in 2008,
28% higher than our expenditure last year and 9% of our total operations salary
bill.
MILLIONS OF CLIENTS
When we started we believed we needed two million clients to be a success. We
have more than 1,3 million clients and in a good month we open 45 000 new
accounts. Many of the targets we set ourselves seem easy by the time we attain
them and our target now is many more than two million clients.
The value of retail savings deposits increased by 52% on last year to R842
million at year-end. The number of active savings clients increased by 200 000.
We introduced a 36 month loan product in October 2007 with a maximum size of R50
000. The market response to this has been very good, even though we set high
credit standards for clients to qualify for such loans.
The value of all loans advanced during the year increased by 50% from R3,4
billion to R5,2 billion. We made 3,2 million individual loans during the year.
Our total loan book at year end (that is the value of loans still outstanding at
that date), grew by 151% from R803 million to R2,0 billion in 2008.
BAD AND DOUBTFUL DEBTS
Credit scoring and affordability measures are continuously being improved to
limit delinquency on loans. We are cautious in granting longer term loans as the
economy slows down.
Our loan impairment expense as a percentage of instalments due by product
compared as follows against last year:
2008 2007
1 month % 1.05 1.61
3 Month % 3.83 3.16
6 Month % 5.14 6.85
12 Month % 10.18 13.13
18 Month % 12.99 24.30
24 Month % 15.78 21.65
36 Month % 29.37 -
Gross bad debt% % 5.86 4.69
Recoveries % (0.76) (0.57)
Net bad bebt% % 5.10 4.12
We measure arrears and impairments against instalments due and not outstanding
balances because a large part of our short-term loans are repaid before month
end and are therefore not reflected on our balance sheet at month end or year
end.
All loans are written off 90 days after a loan goes into arrears. For short term
loans the write offs reflect a current reality, but need to be carefully
interpreted as an impairment of 1,05% on a one month loan means that we expect
to write off 12 times that percentage over a 12 month period.
Longer term loans are more complex and provisioning against these loans contains
less certainty. The impact of a missed instalment is more severe at the
beginning of a loan, as the full loan amount may be at risk. Therefore the
provision as a percentage of instalments is higher for a new and growing loan
book. Over time every new product reverts to a normal distribution of arrears.
This is why the impairment expense of 18 and 24 month loans has improved
significantly and why the new 36 month loans start with a high level of
impairment. We expect the 36 month figure to reduce significantly towards
maturity.
We consider the current provisions to be adequate, given our clients` payment
history and the current economic environment.
FUNDING
The growth in the loan book significantly reduced our excess funds during the
second half of the year. We disposed of our investment in listed preference
shares, where some of our excess funds were placed and we successfully obtained
additional wholesale funds through the issue of commercial paper. We recently
obtained a rand-based loan from PROPARCO (the French development agency) after
year end and plan to continue to approach the corporate market for further
funding. We continue to manage liquidity cautiously.
BASEL II AND CAPITAL ADEQUACY
The Basel II requirements changed the way in which the capital adequacy of a
bank is calculated. We successfully completed the implementation on 1 January
2008. We are one of the first banks in South Africa to publish capital figures
in terms of the amended Banks` Act and related Regulations as part of the year
end reporting process.
It is our intention to implement the Alternative Standardised Approach for the
calculation of the operational risk capital requirement in order to enhance
capital efficiency. Our application to the South African Reserve Bank is
following the normal regulatory approval process.
THE BOARD OF DIRECTORS
Jannie Mouton has been our chairman since Capitec Bank was founded in 2001.
Jannie was an early and staunch supporter of the Capitec Bank revolution.
Without his support and the support of the PSG Group (of which he is the founder
and chairman and which remains our largest shareholder), Capitec Bank would
never have come into being. A year ago I took over as chairman from Jannie, at
his request. Since then Jannie has also retired as a director of Capitec Bank.
At the same time Jacobus van Zyl Smit retired as director. He was chairman of
the audit committee, and also a constant source of advice, given his vast
experience and knowledge.
We thank Jacobus van Zyl Smit and Jannie Mouton for their loyalty and wisdom.
During the year four new members were appointed to our board: Tshepo Mahloele
(CEO of Pan African Infrastructure Development Fund and Deputy chairman of
Circle Capital Ventures), Piet Mouton (Managing director of Thembeka Capital),
Pieter van der Merwe (after his retirement as Executive Director of Absa
responsible for Group Administration, IT, Information management, Credit and
Risk) and Kevin Hedderwick (Chief Operating Officer of Famous Brands, well-known
for its Steers and Wimpy restaurants). They bring a wide range of experience
with them.
It is the management of the bank who are responsible for the amazing story of
Capitec Bank that we report on and we remain in awe of what they have achieved.
THE FUTURE
Over the past four months world sentiment in financial markets has swiftly
turned negative. This does not impact on our customers at present, but it may
make access to funding more difficult.
We support the principle of the new National Credit Act to providing credit on
the basis of the ability of borrowers to pay, an approach we have always
applied. The act has brought stability and responsibility to the market. We
support the legislation regarding debt mediation and trust that sufficient
infrastructure will be put in place to regulate the industry and support clients
where necessary.
We see great opportunity in the expansion of our product range, our branch
network and our transaction platform in the coming year. Capitec Bank will
continue to revolutionise banking in South Africa.
DIVIDENDS
An interim dividend of 25c was paid in December and the Directors declared a
final dividend of 75c per share, an increase of 25% over last year.
The following dates apply for participation in the dividend payment:
Last day to trade cum dividend Friday, 6 June 2008
Trading ex dividend commences Monday, 9 June 2008
Record date Friday, 13 June 2008
Payment date Tuesday, 17 June 2008
Share certificates may not be dematerialised or rematerialised between Monday, 9
June 2008 and Friday, 13 June 2008, both days inclusive.
On behalf of the board
Michiel le Roux
Chairman
Riaan Stassen
Chief executive officer
Stellenbosch
1 April 2008
GROUP BALANCE SHEET
Audited Audited
February February
2008 2007
R`000 R`000
ASSETS
Cash and cash equivalents 617 901 1 043 746
Investments at fair value 14 424 111 933
Loans and advances 2 019 200 803 260
Inventory 17 741 10 928
Other receivables 19 347 9 685
Property and equipment 196 173 155 640
Intangible assets - banking system 37 619 42 604
Deferred income tax assets 13 967 13 846
Total assets 2 936 372 2 191 642
LIABILITIES
Deposits at amortised cost 1 475 696 842 172
Deposits held at fair value 52 425 54 382
Trade and other payables 143 368 94 648
Current income tax liabilities 47 456 79 133
Provisions - 3 850
Total liabilities 1 718 945 1 074 185
EQUITY
Ordinary share capital and premium 647 363 647 363
Non distributable reserves - 2 439
Retained earnings 415 458 313 049
Ordinary shareholders` funds 1 062 821 962 851
Non-redeemable, non-cumulative,
non-participating preference shares 154 606 154 606
Total equity 1 217 427 1 117 457
Total equity and liabilities 2 936 372 2 191 642
GROUP INCOME STATEMENT
Audited Audited
Year Year
ended ended
February February
2008 2007
R`000 R`000
Interest on loans advanced 709 166 924 370
Interest on cash and cash equivalents 30 897 43 158
Interest expense (101 449) (69 836)
Net interest income 638 614 897 692
Net fee income 653 400 111 557
Loan fee income 574 584 76 943
Transaction fee income 168 361 93 671
Transaction fee expense (89 545) (59 057)
Dividend income 15 392 1 469
Net impairment charge on loans and
advances (230 879) (161 271)
Net movement in financial instruments
held at fair value 7 818 (857)
Other income 8 75
Non-banking gross profit 10 938 8 025
Non-banking sales 159 122 134 888
Non-banking cost of sales (148 184) (126 863)
Income from operations 1 095 291 856 690
Banking operating expenses (762 540) (606 705)
Non-banking expenses (8 405) (6 808)
Operating profit before tax 324 346 243 177
Income tax expense (95 281) (76 253)
Net profit attributable to equity holders 229 065 166 924
Earnings per share (cents)
Basic 258.8 220.9
Diluted 250.3 209.5
RECONCILIATION OF ATTRIBUTABLE EARNINGS TO HEADLINE EARNINGS
Audited Audited
Year Year
Ended Ended
February February
2008 2007
R`000 R`000
Net profit attributable to equity holders 229 065 166 924
Less preference dividend (17 011) (7 617)
Net profit attributable to
ordinary shareholders 212 054 159 307
Exceptional items after tax:
- Loss on disposal of fixed assets 145 1 085
Headline earnings 212 199 160 392
GROUP CASH FLOW STATEMENT
Audited Audited
Year Year
Ended Ended
February February
2008 2007
R`000 R`000
Cash flow from operating activities (260 872) 270 521
Cash flow from operations 445 732 333 780
Increase in loans and advances (1 277 943) (366 867)
Increase in other liabilities,
provisions and deposits 680 986 325 128
Tax paid (109 647) (21 520)
Cash flow from investment activities (12 709) (194 170)
Net investment in equipment and software (116 071) (85 809)
(Increase) / decrease in other investing
activities 103 362 (108 361)
Cash flow from financing activities (152 264) 385 102
Shares issued - 454 104
Dividends paid (85 378) (46 753)
Shares acquired and options settled (66 886) (22 249)
Increase in cash and cash equivalents (425 845) 461 453
Cash and cash equivalents at beginning
of year 1 043 746 582 293
Cash and cash equivalents at end of
year 617 901 1 043 746
GROUP STATEMENT OF CHANGES IN EQUITY
Audited Audited
Year Year
Ended Ended
February February
2008 2007
R`000 R`000
Equity at beginning of year 1 117 457 563 816
Net profit attributable to equity holders 229 065 166 924
Ordinary shares issued - 299 434
Preference shares issued - 154 606
Loss on settlement of share options net
of share based staff costs (59 877) (18 244)
Tax on settlement of share options 17 432 5 291
Shares utilised - -
Dividends declared (86 650) (54 370)
Equity at end of year 1 217 427 1 117 457
SEGMENTAL RESULTS
Wholesale
Banking Distribution Total
R`000 R`000 R`000
Audited
Year ended February 2008
Revenues 1 498 400 159 122 1 657 522
Headline earnings 210 513 1 686 212 199
Assets 2 913 528 22 844 2 936 372
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
Audited Audited Audited
February February February
2008 2007 2006
R`000 R`000 R`000
Guarantees
- Non-banking institutions 7 500 7 500 10 206
Capital commitments approved by the
board
- Contracted for 43 030 23 855 3 927
- Not contracted for 132 852 141 481 79 985
Unutilised loan facilities to
clients - 135 701 79 700
Operating lease commitments
< 1 year 69 462 60 331 47 378
1 to 5 years 158 489 145 371 118 850
> 5 years 6 665 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 of PricewaterhouseCoopers Inc. on the annual
financial statements for the year ended 29 February 2008 and the summarised
audited consolidated financial statements contained herein are available for
inspection at the registered office of the company.
REGISTERED OFFICE
10 Quantum Road, Techno Park, Stellenbosch 7600, PO Box 12451, Die Boord, 7613
TRANSFER SECRETARIES
Computershare Investor Services (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
M S du P le Roux (Chairman), R Stassen (CEO)*, A P du Plessis (CFO)*, K A
Hedderwick, T D Mahloele, Prof M C Mehl, Ms N S Mjoli-Mncube, P J Mouton, C A
Otto, J G Solms, J P van der Merwe
*Executive
SPONSOR
PSG Capital (Pty) Limited (Registration number: 2006/01587/07)
ANNUAL GENERAL MEETING
28 May 2008 at 12h00 at L`Avenir Estate, Granvin Room,
R44 Klapmuts Road, Stellenbosch
www.capitecbank.co.za
Date: 02/04/2008 09:00:03 Produced by the JSE SENS Department.
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