| Tue 29 Sep 2009, 11:00 | | CPI / CPIP - Capitec Bank Holdings - Unaudited Financial Results For The Six |
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CPI CPIP
CPI
CPI / CPIP - Capitec Bank Holdings - Unaudited Financial Results For The Six
Months Ended 31 August 2009
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 2009
- Headline earnings per share up 48%
- Interim dividend per share - 55 cents
- Return on equity - 28%
- Capital adequacy ratio - 36%
- Clients - 2.1 million
Six Six Year
months months ended
August August Growth February
2009 2008 % 2009
PROFITABILITY
Income from banking
operations Rm 1 163 916 27 1 983
Net loan impairment
expense Rm (258) (228) 13 (468)
Banking operating
expenses Rm (637) (504) 26 (1 065)
Non-banking operations Rm 2 3 (33) 6
Tax Rm (84) (58) 45 (137)
Preference dividend Rm (8) (10) (20) (19)
Earnings attributable to
ordinary shareholders
Basic Rm 178 119 50 300
Headline Rm 178 119 50 302
Cost to income ratio -
banking activities % 55 55 54
Return on ordinary
shareholders equity % 28 22 27
Earnings per share
Attributable cents 215 145 48 364
Headline cents 215 145 48 366
Diluted attributable cents 211 142 49 357
Diluted headline cents 211 142 49 359
Dividends per share
Interim cents 55 30 83 30
Final cents 110
Dividend cover x 3.9 4.8 2.6
ASSETS
Total assets Rm 6 536 4 018 63 4 969
Net loans and advances Rm 3 680 2 662 38 2 982
Cash and cash
equivalents Rm 2 234 1 043 114 1 514
Investments Rm 282 17 150
Other Rm 340 296 15 323
LIABILITIES
Total liabilities Rm 5 031 2 739 84 3 563
Deposits Rm 4 699 2 502 88 3 317
Other Rm 332 237 40 246
EQUITY
Shareholders` funds Rm 1 505 1 279 18 1 406
Capital adequacy ratio % 36 45 43
Net asset value per
ordinary share cents 1 627 1 358 20 1 512
Share price cents 5 500 2 950 86 3 001
Market capitalisation Rm 4 564 2 443 87 2 485
Number of shares in issue `000 82 983 82 798 82 798
Share options
Number outstanding `000 5 412 7 468 5 713
Average strike price cents 2 837 2 723 2 487
Average time to
maturity months 29 35 25
Charge on settlement Rm 12 15 (20) 34
OPERATIONS
Branches 371 346 7 363
Employees 3 804 3 190 19 3 414
Active clients `000 2 072 1 583 31 1 835
ATMs
Own 385 350 10 368
Partnership 668 520 28 571
Capital expenditure Rm 61 47 133
SALES
Loans
Value of loans advanced Rm 3 684 3 064 20 6 273
Number of loans
advanced `000 1 793 1 725 4 3 536
Average loan amount R 2 054 1 776 16 1 774
Gross loans & advances Rm 3 958 2 898 37 3 238
Loans past due (arrears) Rm 299 288 4 341
Loans past due to gross
loans & advances % 7.6 9.9 10.5
Provision for doubtful
debts Rm 278 236 18 256
Provision for
doubtful debts to
gross loans & advances % 7.0 8.1 7.9
Arrears coverage ratio % 93 82 75
Loan revenue Rm 1 175 925 27 2 032
Loan revenue to gross
loans & advances % 29.7 31.9 62.8
Gross loan impairment
expense Rm 294 249 18 514
Recoveries Rm 36 21 71 46
Net loan impairment
expense Rm 258 228 13 468
Net loan impairment
expense to loan revenue % 22.0 24.7 23.0
Net loan impairment
expense to gross loan
book % 6.5 7.9 14.4
Net loan impairment
expense to instalments
due % 7.2 7.5 7.2
Deposits
Wholesale deposits Rm 2 157 1 377 57 1 690
Retail call savings Rm 1 582 984 61 1 306
Retail fixed savings Rm 800 - 265
Net transaction fee
income Rm 126 72 75 160
SIMPLICITY IS THE ULTIMATE SOPHISTICATION
Capitec Bank focuses on simplifying banking by offering a single solution to
everyday money management. This has resulted in an increase in client numbers
of 489 000 over the past year, to 2.1 million. The number of branches has
grown to 371 and this together with increased advertising should result in
continued growth in client numbers.
RESULTS SUMMARY
Profits for the six months increased by 50% to R178 million.
- Net revenue from banking activities, comprising both loan revenue and
transaction income, grew by 9% from the six months ended February 2009 to
R1.2 billion. This represents a 27% increase year-on-year.
- Loans to the value of R3.7 billion were granted in the last six months.
This represents an increase of 20% on the six month period to August 2008
and a growth of 15% against the six months to February. The number of
loans granted grew by 4% compared to the six months ended August 2008 to
1.8 million. The growth in sales was driven by an increase in the average
loan amount to R2 054 from R1 776. Sales of medium-term products (12 to
36 months) comprised 52% of the total and increased 34% year-on-year.
These products comprised 46% of total sales for the six months to August
2008. This implies that we are attracting clients with a higher income
level.
- Net loan revenue of R1.2 billion consists of interest, origination fees
and monthly administration fees net of loan fee expenses. Loan revenue to
gross loans and advances has dropped from 32% for the six months ended
August 2008 and 34% for the six months ended February 2009 to 30% due
largely to margin-squeeze. The loan revenue was affected by a change in
product mix and yields. The yield on the 12 to 36 month products which
now comprise 88% of the gross loan book is much lower than the yield on
shorter-term products. The longer products are however more profitable
over time due to the annuity income and lower costs. Yields on all
products have declined following the 350 basis points cut in lending
rates by the Reserve Bank since February.
- Commencing July 2009 the loan book has been insured against retrenchment
risk in addition to the life insurance which has been in place for
several years. This will in time decrease the bad debt expense. Loan
revenue is shown net of this cost.
- The increased use of debit cards and electronic banking has led to an
increase of 70% in transaction fee income to R212 million. Net
transaction fee income as a percentage of operating expenses grew to 20%
from 15% in the 2009 financial year. Management intends to drive this
ratio to 40%.
- Operating expenditure grew by 26% year-on-year. Operating expenditure for
the six months includes the cost of new television and branch
advertising. We now employ 3 804 people as compared to 3 190 in August
2008. Since February our staff complement has grown by 390. Capacity has
been added at senior level to support continued growth. The growth in the
loan book has led to an increase in the resources required to manage
collections. A project is underway to centralise monitoring and
collections. The benefit of the costs already incurred in this regard
will manifest over time.
- The cost to income ratio remained steady at 55% year-on-year but
increased from 54% for the 2009 financial year as investment in branch
expansion and people development continued. A change in the management
incentive structure led to an increase of 1.2% in the cost to income
ratio. Also refer to the remuneration section below.
ARREARS AND BAD DEBTS
The gross loans and advances on the balance sheet grew by 37% year-on-year and
by 22% from February 2009 to R4.0 billion.
- The loan impairments are calculated at account level based on historical
data. Trends are closely monitored and recent patterns and events are
given the appropriate consideration.
- The gross loan impairment expense (before recoveries) for the six months
increased to R294 million from R249 million for the same period last
year. The increase of R45 million included a R70 million increase due to
growth in the loan book. The gross loan impairment expense before book
growth has decreased by R1 million due to improvement in default rates,
R18 million due to improved data history and R6 million due to the
valuation being placed on handed-over loans.
- The same comparison in respect of the current six months and the six
months ended February 2009 reveals an increase of R29 million in the
expense from R265 million to the current level. The increase comprises
R26 million in book growth offset by R7 million due to an improvement in
default rates. The growth in the valuation being placed on handed- over
loans for the six months ended February 2009 amounted to R16 million
compared to the R6 million in the current period, bringing the total
valuation to R22 million.
- An improvement in default rates has been achieved through strict credit
granting criteria and a focus on collections. Credit granting criteria
are constantly assessed and amended to ensure that book growth and
arrears remain within our risk appetite.
- The arrears to gross loans and advances percentage improved to 7.6% from
9.9% in August 2008 and 10.5% in February 2009.
- The net loan impairment expense as a percentage of instalments due
remained constant compared to the year ended February 2009 at 7.2% and
improved from 7.5% in August 2008. On short-term products this ratio is a
better measure of impairments than the measure against outstanding
balances because a large portion of these loans are repaid before month-
end and are thus not reflected on the balance sheet.
REMUNERATION
Capitec Bank considers share options to be the appropriate mechanism to reward
management. In previous financial years executive and senior management
participated in the share option scheme. From the current year the scheme will
be restricted to strategic management. Since the 2009 financial year the
scheme consists of cash-settled share appreciation rights and share options in
equal proportions.
From the 2010 financial year senior managers will no longer participate in the
share option scheme but will qualify for a cash-settled performance bonus
scheme. The scheme will reward managers based on the growth in headline
earnings. In order to ensure that the scheme continues to foster a long-term
approach by management the bonuses will be paid out over a three year period.
An expense of R5 million has been included in operating expenses for the six
months to the end of August.
An incentive scheme exists for all Capitec Bank employees and is based on
growth in headline earnings.
FUNDING
We continue to balance our book growth and credit risk appetite against
available funding. At 31 August 2009 it would have been possible to repay all
retail call savings deposits immediately. The intention of the bank is to be
able to repay these deposits within 3 months.
- The fixed-term savings plan that was launched in November 2008 continued
to perform well with R800 million in deposits at the end of August. These
retail fixed deposits now comprise 27% of our fixed term funding. We aim
to maintain this percentage at 40%.
- Wholesale deposits have increased to R2.2 billion. We successfully issued
R322 million on the domestic medium term note programme in May 2009. To
date we have raised R812 million on this programme which was launched in
May 2008. A five year loan of R150 million was obtained from the
Norwegian Investment Fund for Developing Countries in July 2009. We
continue to increase our funding base to outside the borders of South
Africa. All such funding is rand denominated not to be exposed to foreign
exchange risk.
CAPITAL
Our risk-weighted capital adequacy ratio is 36% compared to 43% at the end of
February 2009 and 45% at August 2008.The disclosure in terms of Regulation 43
of the Banks Act is available on our website. Equity at the end of August 2009
totals R1.5 billion and assets excluding cash, R4.3 billion.
The return on ordinary shareholders equity for the six months is 28% and
remains above our goal of 25%.
CREDIT RATING
On 10 September 2009 Moody`s Investors Service announced that it has kept the
long-term and short-term national scale credit ratings of Capitec Bank
Limited, Capitec`s banking subsidiary, unchanged at A2.za and P-1.za
respectively. The outlook for both ratings remains stable.
The long-term rating reflects a good long-term credit quality and the short-
term rating a superior ability to repay short-term debt obligations.
The unchanged ratings are very positive in light of the world economy.
PROSPECTS
Our actions in anticipation of the changing market conditions have delivered
the expected results on arrears and bad debts during this reporting period. We
will continue to manage our book cautiously given the present economic
conditions. We expect to increase new clients for the rest of this financial
year as a result of our revised advertising campaign and our branch expansion
plan. We are on track to reach 400 branches by February 2010. Wholesale and
retail funding has grown according to plan and no changes are anticipated in
our ability to access loan capital for future growth.
INTERIM DIVIDEND
The directors will approve an interim ordinary dividend of 55 cents per share
on 1 October 2009. The dividend will be payable on Monday, 7 December 2009.
The directors believe that a larger part of the total annual dividend should
be paid as an interim dividend. It is expected that the total dividend for the
current year will grow by a smaller percentage than the interim dividend.
The following dates apply:
Last date to trade cum dividend Friday, 27 November 2009
Trading ex dividend commences Monday, 30 November 2009
Record date Friday, 4 December 2009
Date of payment Monday, 7 December 2009
Share certificates may not be dematerialised or rematerialised between Monday,
30 November 2009 and Friday, 4 December 2009, both days inclusive.
The preference dividend of 450.41 cents per share for the six months to 31
August was declared on 31 August 2009 and was paid on 28 September 2009.
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
August August February
2009 2008 Growth 2009
R`000 R`000 % R`000
ASSETS
Current assets
Cash and cash equivalents 2 233 903 1 043 440 114 1 513 989
Investments at fair value
through profit or loss 282 169 17 355 150 044
Loans and advances to clients 2 397 160 1 909 290 26 2 114 208
Inventory 23 466 16 980 38 22 120
Other receivables 28 206 24 719 14 20 114
Non-current assets
Loans and advances to clients 1 283 140 753 162 70 867 477
Property and equipment 247 697 197 173 26 240 134
Intangible assets
- banking system 28 567 37 981 (25) 27 669
Deferred income tax assets 11 757 18 287 (36) 13 667
Total assets 6 536 065 4 018 387 63 4 969 422
LIABILITIES
Current liabilities
Deposits at amortised cost 2 847 219 1 563 810 82 2 065 928
Deposits held at fair value - 40 899 17 916
Trade and other payables 229 390 183 768 25 183 950
Current income tax liabilities 77 487 39 608 96 16 498
Non-current liabilities
Trade and other payables 25 176 14 162 78 45 960
Deposits at amortised cost 1 851 542 896 893 106 1 232 969
Total liabilities 5 030 814 2 739 140 84 3 563 221
EQUITY
Ordinary share capital and
premium 682 219 674 368 1 674 369
Reserves (21 127) (10 972) 93 (23 873)
Retained earnings 689 553 461 245 49 601 099
Ordinary shareholders` funds 1 350 645 1 124 641 20 1 251 595
Non-redeemable, non-cumulative,
non-participating preference
share capital and premium 154 606 154 606 - 154 606
Total equity 1 505 251 1 279 247 18 1 406 201
Total equity and liabilities 6 536 065 4 018 387 63 4 969 422
CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited
Six Six Audited
months months Year
ended ended ended
August August February
2009 2008 Growth 2009
R`000 R`000 % R`000
Interest on loans advanced 715 361 508 321 41 1 156 514
Interest on cash and
cash equivalents 64 949 20 481 217 56 382
Interest expense (204 581) (105 481) 94 (269 621)
Net interest income 575 729 423 321 36 943 275
Net fee income 586 434 487 887 20 1 035 709
Loan fee income 480 498 425 000 13 897 502
Loan fee expense (20 510) (8 675) 136 (21 889)
Transaction fee income 212 314 124 706 70 281 548
Transaction fee expense (85 868) (53 144) 62 (121 452)
Dividend income 485 1 070 (55) 1 099
Net impairment charge on
loans and advances to clients (257 718) (228 085) 13 (467 727)
Net movement in financial
instruments held at fair value (50) 4 019 2 197
Other income 41 147 (72) 280
Non-banking gross profit 10 789 8 499 27 18 218
Non-banking sales 108 866 97 144 12 208 915
Non-banking cost of sales (98 077) (88 645) 11 (190 697)
Income from operations 915 710 696 858 31 1 533 051
Banking operating expenses (637 138) (504 681) 26 (1 063 672)
Non-banking operating expenses (8 419) (5 362) 57 (12 696)
Operating profit before tax 270 153 186 815 45 456 683
Income tax expense (84 429) (58 109) 45 (137 351)
Net profit attributable to
equity holders 185 724 128 706 44 319 332
Cents per Cents per Growth Cents per
share share % share
Earnings per share for profit
attributable to ordinary
shareholders
basic 215 145 48 364
diluted 211 142 49 357
RECONCILIATION OF ATTRIBUTABLE EARNINGS TO HEADLINE EARNINGS
Unaudited Unaudited
Six Six Audited
months months Year
ended ended ended
August August February
2009 2008 Growth 2009
R`000 R`000 % R`000
Net profit attributable to
equity holders 185 724 128 706 44 319 332
Less preference dividend (7 586) (9 619) (21) (19 127)
Net profit attributable to
ordinary shareholders 178 138 119 087 50 300 205
Items excluded from headline
earnings:
Gross loss on disposal of assets 214 54 2 133
Tax - loss on disposal of assets (47) (12) (467)
Headline earnings 178 305 119 129 50 301 871
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited
Six Six Audited
months months Year
ended ended ended
August August February
2009 2008 Growth 2009
R`000 R`000 % R`000
Net profit attributable to
equity holders 185 724 128 706 44 319 332
Other comprehensive income:
Cash flow hedge net of tax 2 746 (10 972) (23 873)
Total comprehensive income 188 470 117 734 60 295 459
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited
Six Six Audited
months months Year
ended ended ended
August August February
2009 2008 2009
R`000 R`000 R`000
Equity at beginning of the period 1 406 201 1 217 427 1 217 427
Total comprehensive income 188 470 117 734 295 459
Employee share option scheme:
share-based employee costs 5 040 4 947 8 992
shares issued and acquired at cost (11 243) (524) (26 661)
realised loss on settlement 14 693 7 110 8 597
tax effect on settlement 982 4 308 8 490
Share issue expenses (25) (38) (38)
Ordinary dividend (91 281) (62 098) (86 938)
Preference dividend (7 586) (9 619) (19 127)
Equity at end of the period 1 505 251 1 279 247 1 406 201
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited
Six Six Audited
months months Year
ended ended ended
August August February
2009 2008 2009
R`000 R`000 R`000
Cash flow from operating activities 1 010 700 535 249 1 285 812
Cash flow from investing activities (193 422) (45 272) (266 176)
Cash flow from financing activities (97 364) (64 438) (123 548)
Net increase in cash and cash
equivalents 719 914 425 539 896 088
Cash and cash equivalents at
beginning of period 1 513 989 617 901 617 901
Cash and cash equivalents at
end of period 2 233 903 1 043 440 1 513 989
SEGMENT INFORMATION
Wholesale Intra-
Banking Distribution segment Total
R`000 R`000 R`000 R`000
Unaudited six months
ended August 2009
Segment revenue 1 473 648 108 866 (320) 1 582 194
Segment earnings after tax 183 514 2 210 - 185 724
Segment assets 6 514 587 33 530 (12 052) 6 536 065
Unaudited six months
ended August 2008
Segment revenue 1 079 725 97 144 (469) 1 176 400
Segment earnings after tax 126 209 2 497 - 128 706
Segment assets 3 998 209 26 690 (6 512) 4 018 387
Audited year
ended February 2009
Segment revenue 2 393 965 208 915 (640) 2 602 240
Segment earnings after tax 314 864 4 468 - 319 332
Segment assets 4 948 274 28 820 (7 672) 4 969 422
The Group conducts business in banking and in the wholesale distribution of
consumer goods. The banking segment incorporates retail banking services,
including savings, deposits, debit cards and consumer loans. Wholesale
distribution consists of the wholesale distribution of fast-moving consumer
goods. The Group`s business is conducted within the RSA.
COMMITMENTS
Unaudited Unaudited Audited
August August February
2009 2008 2009
R`000 R`000 R`000
Capital commitments approved
by the board
Contracted for 30 314 39 732 22 810
Not contracted for 142 161 101 583 163 031
Operating lease commitments
within 1 year 94 142 73 292 80 858
from 1 to 5 years 243 807 159 949 176 269
after 5 years 20 451 3 943 3 213
INTERIM FINANCIAL REPORTS
The abridged consolidated interim financial statements are prepared in
accordance with IAS 34 - Interim Financial Reporting. The accounting policies
applied conform to IFRS and are consistent with those applied in the previous
year except for the standards noted below that became effective on 1 January
2009: IAS 1 - Presentation of Financial Statements (revised) and IFRS 8 -
Operating segments. The adoption of these standards has no material effect on
the results, nor has it required any restatement of the results.
The following items have been reclassified and the reclassification has been
applied to prior period figures: The future value of expected recoveries on
loans and advances written off of R15.6 million which was previously netted
against the impairment provision is included in gross loans and advances. In
order to better disclose the nature of transaction fee expenses the loan fee
expenses have been disclosed separately.
On behalf of the board
Michiel le Roux Riaan Stassen
Chairman Chief executive officer
Stellenbosch: 29 September 2009
www.capitecbank.co.za
Capitec Bank Limited is an authorised financial services and credit provider.
Company secretary and registered office
Christian George van Schalkwyk
BComm LLB CA (SA)
1 Quantum Road
Techno Park
Stellenbosch 7600
(PO Box 12451 Die Boord Stellenbosch 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)
Sponsor
PSG Capital (Pty) Limited
(Registration number: 2006/015817/07)
Directors
MS du P le Roux (Chairman) R Stassen (CEO)* AP du Plessis (FD)* TD Mahloele
Prof MC Mehl Ms NS Mjoli-Mncube PJ Mouton CA Otto JG Solms JP vd Merwe
*Executive
Date: 29/09/2009 11:00:02 Produced by the JSE SENS Department.
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