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FPF
FPF
FPF - Finbond Property Finance Limited - Audited Group Results for the Year
Ended 28 February 2009
Finbond Property Finance Limited
(Previously Quantum Leap Investments 527 (Proprietary) Limited)
(Incorporated in the Republic of South Africa)
(Registration number: 2001/015761/06)
Share code: FPF & ISIN: ZAE000097259
("Finbond" or "the Company")
AUDITED GROUP RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2009
INCOME STATEMENT
Group
Figures in Rand 2009 2008
Interest income 55 196 880
63 669 346
Interest expense -15 497 772
-5 458 931
Net interest income 39 699 108
58 210 415
Net fee income 63 544 026
50 516 784
Net commission income 16 068 724
55 184 412
Other income 5 157 167
6 453 701
Fair value adjustments 24 565 646
2 733 179
Net impairment charge on loans -7 745 426
and advances -3 893 083
Operating expenses -111 368 806
-81 928 166
Operating profit 29 920 439
87 277 242
Investment revenue
- -
Impairment of goodwill and -91 237 953
intangibles -
Impairment of investments in
subsidiaries - -
(Loss)/ profit on sale of
subsidiary -740 059 -
Excess of acquirers` interest
in net assets - 1 380 750
(Loss)/ profit before taxation -62 057 573
88 657 992
Taxation 4 376 429
-25 989 173
(Loss)/ profit for the year -57 681 144
62 668 819
Attributable to:
Equity holders of the parent -60 960 431
60 265 379
Minority interest 3 279 287
2 403 440
Basic earnings per share 32.5
(cents) -22.96
Diluted earnings per share 23.8
(cents) -22.96
BALANCE SHEET
Group
Figures in Rand 2009 2008
Assets
Non-current assets
Investment property 49 599 294
8 150 000
Property, plant and equipment 8 073 375
8 659 676
Goodwill 68 873 709
115 702 796
Intangible assets 54 706 804
101 002 097
Investments in subsidiaries
- -
Loans to group companies
- -
Other financial assets 4 840 000
5 570
238 354 569
181 258 752
Current assets
Loans to group companies 3 797 683
-
Loans to directors, managers
and employees 183 918 34 935
Other financial assets 11 069 500
5 377 383
Loans and advances 118 390 972
109 116 541
Other receivables 17 571 942
36 679 826
Cash and cash equivalents
86 759 323 47 998 530
233 975 654 203 004 898
Total Assets
415 234 407 441 359 467
Equity and liabilities
Equity
Equity attributable to equity
holders of parent
Share capital and premium
166 117 212 142 059 477
Non distributable reserves
38 716 052 64 224 960
Accumulated (loss)/ profit
-11 144 128 69 984 794
Minority interest
20 196 152 16 916 865
213 885 288 293 186 096
Liabilities
Non-current liabilities
Loans from group companies
- -
Other financial liabilities 115 986 438
61 369 157
Finance lease obligation 1 354 208
754 761
Deferred tax
13 695 380 28 215 648
130 436 579 90 939 013
Current liabilities
Other financial liabilities 29 504 953
15 963 203
Loans from group companies 8 093 589
-
Current tax payable 10 004 357
18 611 698
Finance lease obligation
95 237 139 705
Trade and other payables
23 214 404 18 820 790
Shareholders for dividends
- 3 698 962
70 912 540 57 234 358
Total liabilities
201 349 119 148 173 371
Total equity and liabilities 441 359 467
415 234 407
CASHFLOW STATEMENT
Group
Figures in Rand 2009 2008
Cash flows from operating
activities
Cash receipts from customers
241 329 870 268 816 567
Cash paid to suppliers and - -204 335 893
employees 208 389 061
Cash generated by/ utilised in 64 480 674
operating activities 32 940 808
Interest paid -5 458 931
-15 497 772
Interest received on cash and 4 351 736
cash equivalents 7 534 017
Taxation (paid)/ refunded -20 428 081
-18 751 180
Dividends paid -3 016 566
-23 867 453
Net cash from operating 39 928 832
activities -17 641 580
Cash flows from investing
activities
Property, plant and equipment -2 263 999
acquired -3 976 091
Proceeds on disposals of 583 614
property, plant and equipment 1 621 796
Investment properties acquired -7 100
-16 863 949
Investments in subsidiaries
- -
Dividends received
- -
Proceeds on sale of investments 22 472 450
-
Proceeds on loans to staff 178 469
members 11 911
Expenditure to maintain operating 20 963 434
capacity -19 206 333
Business combinations and -164 577 734
disposals -
Expenditure for expansion -164 577 734
-
Net cash from investing -143 614 300
activities -19 206 333
Cash flows from financing
activities
Capital raised 146 250 000
-
Finance lease payments -949 024
-643 915
Funding/ loans (other financial 9 472 832
liabilities) raised/ (repaid) 68 159 031
Share premium expenses -4 190 753
-
Increase/ (repayment) of other
financial liabilities 8 093 589 -
Net cash from financing 150 583 055
activities 75 608 705
Increase in cash and cash 46 897 587
equivalents 38 760 793
Cash and cash equivalents at
beginning of year 47 998 530 1 100 943
Cash and cash equivalents at end 47 998 530
of the year 86 759 323
STATEMENT OF CHANGES IN EQUITY
Figures in Rand Share Share premium Treasury Total Share
Capital shares Capital
Group
Balance at 01 March 100 -
2007 - 100
Changes in equity
-
Profit for the year - -
- -
Issue of shares 130 146 250 000 - 146 250 130
Share issue cost - -4 190 753 - -4 190 753
Share reserve - -
- -
Total changes 130 142 059 247 - 142 059 377
Balance at 01 March 230 142 059 247 - 142 059 477
2008
Changes in equity -
(Loss)/ profit for - - -
the year -
Issue of shares 67 26 360 384 -2 302 716 24 057 735
Share reserve - - -
-
Dividends - - -
-
Total changes 67 26 360 384 -2 302 716 24 057 735
Balance at 28 297 168 419 631 -2 302 716 166 117 212
February 2009
STATEMENT OF CHANGES IN EQUITY (continued)
Figures in Share Accumulated Total Minority Total
Rand reserve profit/ Attributabl interest equity
(loss) e to equity
holders of
the company
Group
Balance at 9 719 415 9 719 515 9 719 515
01 March - -
2007
Changes in
equity
Profit for 60 265 379 60 265 379 2 403 440 62 668 819
the year -
Issue of 146 250 130 146 250 130
shares - - -
Share issue -4 190 753 -4 190 753
cost - - -
Share 64 224 960 64 224 960 14 513 425 78 738 385
reserve -
Total 64 224 960 60 265 379 266 549 716 16 916 865 283 466 581
changes
Balance at 64 224 960 69 984 794 276 269 231 16 916 865 293 186 096
01 March
2008
Changes in
equity
(Loss)/ - -60 960 431 -60 960 431 3 279 287 -57 681 144
profit for
the year
Issue of -64 224 960 -40 167 225 -40 167 225
shares - -
Share 38 716 052 38 716 052 38 716 052
reserve - -
Dividends - -20 168 491 -20 168 491 -20 168 491
-
Total -25 508 908 -81 128 922 -82 580 095 3 279 287 -79 300 808
changes
Balance at 38 716 052 -11 144 128 193 689 136 20 196 152 213 885 288
28 February
2009
SEGMENT REPORTING
Business segments
Mortgage
originating
and related Term Investments Consolidated
activities lending
2009 Group 12 months 12 months 12 months 12 months
ended ended ended ended
Figures in Rand 28 28 28 28 February
February February February 2009
2009 2009 2009
Segment revenue
External segment 91 273 720 134 280 35 119 255 260 673 515
revenue 540
Inter segment - - - -
revenue
Total segment 134 280 35 119 255 260 673 515
revenue 91 273 720 540
Finance costs -11 896 -8 416 440 -20 342 593
-29 156 997
Expenses -87 551 987 -104 439 -19 158 681 -211 150 542
874
Impairment loss -91 237 953 - -
-91 237 953
Segment result -87 545 376 17 943 669 7 544 134
-62 057 573
Income taxes
-10 373 422 5 089 166 907 827 -4 376 429
(Loss)/ profit for
the year -77 171 954 12 854 503 6 636 307 -57 681 144
-134% 22% 12% 100%
HEADLINE EARNINGS
41.1 Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to ordinary shareholders of the Group by the weighted
average number of ordinary shares outstanding during the year.
2009 2008
Weighted average number of ordinary 265 498 184 742 104
shares outstanding 675
41.2 Diluted earnings per share
Diluted earnings per share is calculated by adjusting the weighted
average number of ordinary shares outstanding to take into account the
any potentially dilutive ordinary shares. For 2008 the dilutive effect
was caused by the ordinary shares that would be issued as further
purchase consideration for the acquisition of the subsidiaries, where
profit warranties had been met at 28 February 2009. For 2009
potentially dilutive ordinary shares consists of share options, as
well as ordinary shares to be issued in terms of the NET1 deal and
acquisition of investment property as discussed in note 18. In terms
of the share options, a calculation was performed to determine the
number of shares that could have been acquired at fair value
(determined as the average annual market share price of the company`s
shares) based on the monetary value of the subscription rights
attached to outstanding options. The number of shares calculated was
compared with the number of shares that would have been issued
assuming the exercise of the share options. The difference would be
added to the denominator as an issue of ordinary shares for no
consideration, but had an anti-dilutive effect, therefore no
adjustment to the dilutive calculation. In terms of the ordinary
shares to be issued an anti-dilutive effect also resulted as the net
loss per share decreased based on the weighted average number of
diluted ordinary shares increasing to 304 214 727, therefore would be
ignored in the dilutive calculation.
2009 2008
Weighted average number of diluted 265 498 675 252 329
ordinary shares outstanding 987
41.3 Headline earnings per share attributable to
ordinary shareholders is determined as follows:
Figures in Rand 2009 2008
Net (loss)/ profit attributable to -60 960 431
ordinary equity holders of the parent 60 265 379
Adjusted for:
Excess of acquirer interest in net -
asset value -980 333
Loss on sale of 636 451
subsidiary -
(Profit)/ Loss on disposal of property, -23 937
plant and equipment 848 727
Goodwill and 78 899 275
intangible -
impairment
Revaluation of -21 143 397
investment -2 336 869
properties
-2 592 039
57 796 905
Headline earnings -1.0
per share (cents) 31.3
Diluted headline earnings per share -1.0
(cents) 22.9
COMMENTS
General Overview
South Africa`s economy shrank by an annualised 6.4 percent quarter-on-quarter
in the first 3 months of 2009, far worse than the 3.9% expected by the market
and the biggest fall in 25 years, confirming the first recession since 1992.
In the context of this recessionary environment where the scale and
suddenness of the economic downturn has left economic forecasters scrambling
to keep up, the Group achieved satisfactory trading results for the twelve
months under review; the result of sustained progress in the execution of the
Group`s diversification strategy out of the mortgage origination industry.
The year ending February 2009 was an extremely difficult and challenging
period that was brought about by adverse market conditions and a significant
decrease in the rate at which banks are approving the mortgage applications
submitted by Finbond`s Mortgage Origination division. Monthly mortgage
origination volumes measured by formal grants by the four major banks have
declined from R1,8 billion in May 2007 to to R1,17 billion in November 2007,
R934 million in March 2008, R580 million in November 2008, R346 million in
December 2008 and R198 million in April 2009. The aforementioned had a
material negative impact on volumes and profits in Finbond`s Mortgage
Origination division that will continue in the year ahead. Given this rapid
deterioration of the mortgage origination market that is not expected to
recover in the short or medium term we have impaired R91 million against
goodwill and intangibles emanating from investments in the mortgage
origination business.
Due to the re-positioning of the Group in the Micro Finance market, the
company`s positioning with Strategic Funding Partners FMO and Standard
Chartered Bank, innovative product design and development, long term funding
versus a short term lending product, strong liquidity position, cost
containment and significant national distribution channels, the Group is well
positioned to weather the current storms.
Business Division Review
Mortgage Origination
Total segment revenue declined by 54,1% to R91 million from R199 million in
2008. Mortgage origination activities reported a decline in net commission
income of 70,9% to R16 million (2008 R55 million). Further decline is
expected in the year ahead.
Given the rapid deterioration of the mortgage origination market that is not
expected to recover in the short or medium term we have impaired R91 million
of goodwill and intangibles emanating from investments in the mortgage
origination industry.
Mortgage advances by the four major banks have slowed significantly over the
past year and dramatically so in the last quarter of the financial year.
Standard Bank withdrew from the mortgage origination market and is not
accepting any business from mortgage originators. The other three major banks
are declining approximately 70% - 90% of mortgage applications submitted by
originators. Finbond submitted 7,499 applications in February 2009 of which
712 were approved.
Mortgage advances are expected to continue their declining trend in 2009 and
well into 2010, largely driven by the much stricter lending criteria of the
major banks, the lagged effect of rising interest rates experienced in 2008,
the effect of the National Credit Act, the demanding financial conditions
consumers are experiencing in general, the slowdown in the housing market,
and the worldwide financial and liquidity crisis and its effects on credit
extension by Banks to consumers.
Micro Finance
Total segment revenue from Micro Finance activities made up of both interest
and fee income (portfolio yield) grew 48,8% to R134 million (2008 : R90
million).
Bad debts experienced during the period remained well below industry averages
with a net impairment loss ratio of 5,3% of total loans and advances.
The gross loans and advances portfolio grew 10,4% from R139 million to R154
million. If one takes into account that the Union Business, Blue Dot, with a
gross loan portfolio of R33 million, was sold on 1 March 2008, the real
growth in gross loans and advances totalled 44,2% from R107 million to R154
million.
Finbond`s debtors book is geared lower than one times. This is well below
the industry average .
Finbond`s liquidity is excellent R87 million cash in bank and R70 million in
undrawn facilities at year end. All Finbond`s funding facilities are three to
five year facilities with the term of advances ranging between 30 days and
twelve months. Finbond borrows long term and lends short term. From a
maturity analysis perspective the Gross Loan Portfolio with a maximum
exposure to credit risk of R154 million that includes Gross Loans and
Advances and Deferred Future Income, R43 million is repayable within 30 days,
R85 million is repayable within two to six months, R24 million is repayable
within seven to twelve months.
The recent acquisition (effective 1 March 2009) of the business of Moneyline
Financial Services and New World Finance from NASDAQ listed Net1 UEPS
Technologies Limited not only expanded Finbond`s branch network from 119 to
179 branches (60 new branches) across South Africa , but also introduced new
products such as prepaid electricity and cellular airtime vouchers via the
Net 1 kiosks that are now being rolled out across the network.
Strategic initiatives underway includes:
- Expanding the product offering to include longer-term loans as well as
increasing the size of average loans;
- Offering credit and funeral insurance products at all branches, an
initiative expected to contribute significantly to Net Operating Profit;
- Offering cell phone air time and pre paid electricity at all branches;
- Expanding the branch Network in the Southern Cape, Northern Cape , North
West and Mpumalanga.
Finbond is well funded and positioned for the implementation of its growth
and expansion plans in the micro finance market in South Africa and Africa.
Restructuring Initiatives
The Group undertook a comprehensive restructure of its operations in the
financial year under review following a Capacity Building Study part
sponsored by the Netherlands Development Finance Company FMO NV and
recommendations by Pricewaterhousecoopers. In terms of this restructure, the
organization moved from a decentralized approach to a centralized operating
model. Loan distributions are actively monitored by the various regions and
the Finbond Group Head Office (Finance and Internal Audit) on a daily basis.
With the alignment of best practices across the division by February 2009 -
these best practices include policies, procedures, internal controls,
internal audits, and security. All Finbond Branches have been Delfin system
and finger print technology. All Micro Finance Branches are in the process of
being rebranded Finbond Micro Finance.
Our three Mortgage Origination businesses were rationalised and consolidated
in order to contain costs and attempt to remain profitable. The services of
approximately 66% of staff in this division have been terminated and given
the current recessionary environment, the mortgage origination business will
be further rationalized and restructured.
Strategy
It remains our strategy to focus on the further expansion of our Micro
Finance Division. The expansion of our Micro Finance activities will ensure
medium and long term sustainability. To this end, during the twelve months
under review, Finbond expanded its Micro Finance branch network from 101 to
180 branches. We also acquired branches in Namibia and Botswana. Our African
expansion is on track and on schedule.
Despite the major challenges facing Finbond in the current business
environment, we remain committed to the Group`s principle objective of
maximizing shareholder value.
Finbond now has a sound platform and strategic base in the Micro Finance
market from which to grow. The focus for the year ahead will be bedding down
the various acquisitions in the micro finance market, further diversification
into the micro finance market, funding, optimal capital utilisation,
operational efficiency and further rationalization of our mortgage
origination division.
Prospects
The challenging macro-economic environment, recession in South Africa, and
adverse market conditions are not expected to abate for the year ahead and
will continue to impact extremely negatively on Finbond`s Mortgage
Origination Division.
Although confident that we have the required resources and depth in
management to successfully confront these challenges, market conditions in
general, and in particular further declines and potential losses in our
mortgage origination business could have a negative impact on the performance
during the year ahead.
We believe that the continued expansion into the Micro Finance market in the
implementation of our strategic action plan will ensure that we achieve
results in the medium and long term.
Dividend
It is the Group`s policy to consider the declaration of a dividend annually.
Given the current economic climate and the need to protect the Group`s
balance sheet the Board of Directors have decided not to declare a dividend
for the year ending 28 February 2009.
For and on behalf of the Board
Dr. Malesela Motlatla Dr. Willie van Aardt
29 May 2009
Directors
Chairman: Dr. MDC Motlatla*( BA , D Com HC (Unisa)); Chief Executive Officer
: Dr. W van Aardt ( B- Proc (Cum Laude) , LLM (UP) , LLD (PU CHE) Admitted
Attorney of The High Court of South Africa, Admitted Solicitor of The Supreme
Court of England and Wales, QLTT (England and Wales UK) ; Chief Compliance
Officer: H J Wilken ( BCom Honss ( UNISA); Chief Risk Officer: DC Pentz (B
Comm Honns , CA SA) , Chief Financial Officer: G Labuschagne B. Com Fin Acc
(Cum Laude) B Com Acc Honns/CTA (UP) CA SA; N Mapetla*.( BA (Lesotho) MBA(
UK); Adv. J Noeth SC* ( B Iuris LLB). * Non- Executive
Transfer secretaries
Link Market Services South Africa (Proprietary) Limited
(Registration number 2000/007239/07)
11 Diagonal Street
Johannesburg, 2001
(PO Box 4844, Johannesburg, 2000)
Finbond Property Finance Limited
Finbond Property Finance Limited
(Registration Number : 2001/015761/06) TA Finbond Property Finance TM
337 Veale Street , Brooklyn, Pretoria
PO Box 2127 Brooklyn Square, 0075
www.finbondlimited.co.za
Designated Advisor:
Grindrod Bank Limited
Date: 29/05/2009 17:11:02 Produced by the JSE SENS Department.
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