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FGL
FGL
FGL - Finbond Group Limited - Unaudited Consolidated Results for the Six Months
Ended 31 August 2009
FINBOND GROUP LIMITED
(Previously Finbond Property Finance Limited)
(Incorporated in the Republic of South Africa)
(Registration number: 2001/015761/06)
Share code: "FGL" ISIN: ZAE000138095
("Finbond" or "the Company")
UNAUDITED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2009
INTRODUCTION
Against the backdrop of South Africa being firmly in a recession and the economy
posting its third consecutive annualized quarterly decline in the second
quarter, the directors are pleased to present the interim financial results of
the Finbond Group for the six months ended 31 August 2009. During the six months
under review Finbond made good progress despite continued extremely challenging
market conditions. This process resulted in a number of achievements and
significant developments for Finbond:
- Net profit before tax - R38,6 million (up 0.8%)
- Basic earnings per share - 8.7 cents (up 0.9%)
- Headline loss per share - 8.7 cents (down 215.4%)
- Annualised return on average equity - 30.2% (up 82,2%)
- Total assets - R513,4 million (August 2008: R426,6 million), (up 20.3%);
- Centralised control, standardised operations and rebranded 154 branch
national network in the South African and African Micro Finance sectors
The six month period ended 31 August 2009 has been pivotal for Finbond in terms
of its evolving strategy of repositioning itself in the micro finance market, as
well as the restructuring of the Mortgage Origination business.
The Group continues to invest in infrastructure, people, training, information
technology and systems, as well as in enhanced collection strategies and
systems, to build a sustainable, professional business. We believe that doing
the right things now, will allow us to reap the rewards in the medium and long
term.
Due to the re-positioning of the Group in the Micro Finance market and the
company`s positioning with Strategic Funding Partners FMO and Standard Chartered
Bank, innovative product design and development, infrastructure spend, 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.
MARKET CONDITIONS
South Africa is firmly in recession with public sector investment preventing a
significantly larger contraction. The economy posted its third consecutive
annualized quarterly decline in the second quarter, and households continue to
face tremendous financial pressure. Despite a significant response from monetary
and fiscal policy, it looks very much like South Africa`s growth recovery will
come later than most and that it will be largely up to the global recovery to
lift South Africa`s fortunes.
Mortgage Origination
Total segment revenue declined by 77.6% to R13,6 million (2008: R60.5 million).
Mortgage origination activities reported a decline in net commission income of
86.4% to R1,8 million (2008: R13,3 million).
According to Reserve Bank Statistics in September 2009 mortgage advances growth
by monetary institutions tapered off to 4,8% year-on-year (y/y) in September
2009 (5,6% y/y in August), which was the lowest growth rate since February 2000.
According to ABSA`s Senior Analyst Jacques du Toit`s the abovementioned trends
with regard to the growth in mortgage advances and household credit is a
reflection of the extent to which the economic cycle affected the household
sector, the property market and the demand for mortgage finance. This despite
the fact that interest rates were cut by a cumulative 500 basis points since
December last year, which caused mortgage repayments to be down by a total of
26,3%, on average. Conditions in the housing market appear to be changing for
the better, with nominal and real growth in house prices recorded on a monthly
basis lately. Year-on-year price deflation slowed down markedly, while
transaction volumes are picking up. However, the household sector is still
experiencing some financial strain with high levels of debt and income remaining
under pressure.
Mortgage advances growth is set to remain relatively low in the near term, only
to recover in 2010 on the back of a steadily growing economy and the lagged
effect of lower interest rates.
Micro Finance
Total segment revenue from Micro Finance activities, made up of interest, fee
and insurance income (portfolio yield) grew 13.9% to R70,7 million (2008: R62,1
million).
The net loss for the six months ended 31 August 2009 attributable to equity
holders in the micro finance segment of R23,9 million is as result of the
following:
- The effect of accelerated amortisation of intangibles due to the rebranding
of all branches to Finbond Micro Finance of R13,3 million (refer notes to
condensed consolidated interim financial statements for further detail -
expected to recur in the six months ahead);
- The once-off effect of the write-off of a financial asset amounting to
R11,1 million (non recurring);
- Share option expenses of R2,3 million (diminishing effect going forward);
- Infrastructure and rebranding expenditure of R2,5 million (to recur in the
short term);
- An increase in net loan impairment expenses due to consumer distress in the
current environment. Refer portfolio quality below.
Other than impairment, which has moved in line with the current market
environment, adding the above back (net of taxation) the net profit figure
amounts to R2,7 million for the six months ended 31 August 2009.
Bad debts experienced during the period deteriorated but remained within
industry ranges in the current market environment with a net impairment loss
ratio (total impairment loss to the income statement over the last 12 months/
average gross loan portfolio) of 15.7% (10.4% after the valuation placed on
handed-over loans). This ratio has improved to 15.4% as at 30 September 2009.
Portfolio at risk (PaR90 - outstanding loans with arrears over 90 days/ total
gross loan portfolio) stood at 15.3%. This ratio has improved to 13.6% as at 30
September 2009 as collections strategy and effort is starting to take effect on
the portfolio. This ratio is within industry norms, but when viewed together
with the net impairment loss ratio above, is an indicator that Finbond is not
immune to consumer distress and job losses in the current recessionary
environment. Management have invested significantly in collections strategy,
processes, training and people during the first six months of the period, the
benefit of which will flow through to the numbers in the second half of the
year.
Loan loss reserve, also referred to as the risk coverage ratio (Loan loss
reserves (impairment provision)/ PaR90) is strong at 94.7%, which is an
indication of a micro finance institution`s ability to cope with estimated loan
losses. This ratio is favourably well above industry norms.
The Group continues to follow strict credit granting criteria upfront, supported
by robust collection strategies and processes to achieve improved default rates
going forward.
Gross loans and advances grew 6.7% to R137,3 million, after taking the effects
of the Blue Chip Finance (BCF1) transaction with minorities and the purchase of
the net assets of Moneyline Financial Services into account (2008: R152,8
million less BCF1: R39,7 million plus Moneyline`s R16,7 million). Finbond`s
debtors book remains geared at lower than one times, well below industry
average.
Finbond`s liquidity position remains strong. At the end of August Finbond had
R79,9 million cash in bank and R43,5 million in undrawn facilities. 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).
Strategic initiatives underway include:
- Expanding the product offering to include longer-term loans as well as
increasing the size of average loans;
- Further staff training and continued roll out of collections strategies and
processes throughout the country;
- Offering funeral insurance products at all branches, an initiative expected
to contribute significantly to net operating profit;
- 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.
Property Investments
Given Finbond`s strong liquidity and cash position (R79,9 million cash in bank
and R43,5 million in undrawn facilities) the Finbond board has approved an
investment strategy that focuses on:
- strategically positioning Finbond as a Southern African Micro Finance
Institution;
- securing additional markets and revenue streams; and
- growing Finbond`s balance sheet.
In the current recessionary environment numerous opportunities present
themselves for the acquisition of assets that are substantially undervalued or
where cash strapped institutions or individuals are forced to sell assets at
prices far below their market value. With Finbond`s strong liquidity and cash
position it will exploit these opportunities and will continue to evaluate
investment opportunities that will grow its balance sheet, including property
investment opportunities which meet the following criteria: the investment is
priced at a significant discount to fair market value and this discount is
supported by two independent property valuations. Finbond`s anticipated
investment term in respect of investment properties is approximately 5 years.
In giving effect to our strategic plan of action with regards to new investments
the following progress has been made:
Finbond`s Property Investment Division inter alia purchased the farm
Zwartkoppies 316 JT Mpumalanga measuring 926 hectares that have been granted
following development rights by the Mpumalanga Development Tribunal in terms of
the Development Facilitation Act 67 of 1995,
- 932 residential stands;
- 61 special residential stands (2 dwellings per stand (i.e. 122 units));
- 20 residential (maximum of 10 units per stand(i.e. 200 units));
- 3 stands for golf course and ancillary land uses;
- 1 clubhouse stand;
- 1 stand for hotel purposes;
- 1 stand for a sports centre;
- 1 stand for access control;
- 2 stands for an equestrian and dairy centre; and
- 12 private open space stands.
Prior to the DFA Approval, the Mpumalanga Provincial Government`s Department of
Agricultre and Land Administration Environmental Management: Nkangala Region,
granted authorisation to undertake a listed activity in terms of section 22 of
the Environment Conservation Act 73 of 1989 for the change of land use from
agriculture to 6 star boutique hotel, golf estate, polo estate, fly fishing
estate and a dairy estate on portion 11, the remaining extent of portion 6 ( a
portion of portion 1) and portion 10 of the farm Swartkoppies 316 JT Mpumalanga.
In line with Finbond policy, two independent valuations have been obtained prior
to making the investment for the purpose of the board considering and assessing
the investment.
Finbond also entered into a separate agreement in terms of which it purchased an
outstanding call option against the investment properties. It is important to
note that the option agreement was only entered into after the interim period,
and is therefore not accounted for in the interim numbers to 31 August 2009.
The bottom line effect of this acquisition on the current interim period numbers
is a favorable R56,2 million (an additional R50,3 million - favorable, is
expected to flow to the Group following the purchase of the outstanding call
option in the second half of the year).
EXECUTIVE OVERVIEW
General Overview
In the context of this challenging business environment the Group achieved
satisfactory trading results for the six months under review, the result of
sustained progress in the execution of the Group`s strategy.
Due to the timeous re-positioning of the Group in the Micro Finance Market, the
company`s positioning with Strategic Funding Partners, product design, matched
funding transfer pricing implementation, cost containment and significant
national distribution channels, the Group performed well notwithstanding lower
earnings levels in current market conditions.
During the past months, Finbond have continued the improvement and refinement of
management structures, management information and processes. Finbond have also
continued to invest management time and money in building the Finbond Micro
Finance brand and a unified culture through:- Finbond branded clothing for
personnel, marketing material, rebranding of branches, revamping of branches,
branch infrastructure spend, taxi branding, training of personnel and customers.
As stated, the result of these initiatives will take time before the effect
thereof will be visible in the bottom line performance of the company, however
these improvements have already started to show their worth in respect of
quality of management information systems, standardised operating procedures and
internal control across the Group.
There remain numerous challenges for Finbond in the short and medium term, not
only in respect of the prevailing market conditions, but also relating to the
ongoing process of improving the overall effectiveness of the company to enable
it to compete aggressively with its peers. This is a challenge that management
welcome and look forward to in attaining Finbond`s short, medium and long term
goals.
The Netherlands Development Finance Company (FMO) have again approved a Capacity
Development Program for Finbond, which will allow the Group to significantly
improve the core loan management system, overall reporting, management
information, collections and legal systems, change control, impairment
provisioning, automated credit scoring, as well as (and most importantly) the
seamless integration of the aforementioned.
Delivering on Strategy
Despite the challenges facing Finbond in the current business environment we
remain committed to the Group`s principle objective of maximizing shareholder
value.
Finbond has a sound platform and strategic base from which to grow. The focus
for the remainder of the financial year remains on further expansion and
diversification into the micro finance market, funding, growth, optimal capital
utilization, operational efficiency, consolidation and rationalization of
mortgage origination businesses.
A challenging and competitive business environment necessitates optimal
operational efficiencies. Finbond continue implementing measures in all business
divisions in order to improve efficiencies and reduce cost base, and will
continue to do so.
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 impacting extremely negatively on Finbond`s Mortgage Origination
Division.
Although the Group is confident that we have the required resources and depth in
management to successfully confront these challenges, market conditions in
general, availability of funding for future growth, and in particular further
declines and potential losses in our mortgage origination business, could have a
negative impact on the performance of the Group in the year ahead.
We are positive about our prospects for the future due to Finbond`s:
- Management expertise;
- Liquidity position;
- Improved infrastructure after centralisation and Capacity Development;
- People;
- Current access to funding;and
- Untapped potential in the micro finance market.
Finbond believes that the continued expansion into the Micro Finance market and
the growth of our balance sheet in the implementation of our strategic action
plan, will ensure that we achieve results in the medium and long term.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Interim Interim unaudited 31 Full year
Figures in Rand unaudited 31 August 2008 audited 28
August 2009 February 2009
Assets
Non-current assets
Investment property 197 032 562 8 150 000 49 599 294
Property, plant and 6 181 965 6 859 470 8 073 375
equipment
Goodwill 63 596 582 101 598 781 68 873 709
Intangible assets 40 175 658 101 002 097 54 706 804
Other financial 5 570 26 144 000 5 570
assets
Total non-current 306 992 338 243 754 348 181 258 752
assets
Current assets
Loans to managers and 199 915 183 918
employees -
Other financial 11 362 160 11 069 500
assets -
Loans and advances 96 169 301 124 796 206 118 390 972
Maximum exposure to 137 311 933 152 760 245 153 815 631
credit risk (Gross
book)
Deferred future (21 275 906) (24 839 522) (22 034 902)
income
Allowance for (19 866 727) (3 124 516) (13 389 757)
impairment to loans
and advances
Other receivables 18 837 594 42 919 794 17 571 942
Cash and cash 79 852 841 15 149 929 86 759 323
equivalents
Total current assets 206 421 810 182 865 929 233 975 655
Total Assets 513 414 149 426 620 277 415 234 407
Equity and
liabilities
Equity
Equity attributable 227 012 606 236 252 626 193 689 136
to equity holders of
parent
Share capital and 207 342 407 168 154 957 166 117 212
premium
Non distributable - 38 716 052
reserves -
Accumulated profit/ 19 670 199 68 097 669 (11 144 128)
(loss)
Non-controlling 213 133 21 638 998 20 196 152
interest
Total equity 227 225 739 257 891 624 213 885 288
Liabilities
Non-current
liabilities
Other financial 183 148 023 94 521 784 115 986 438
liabilities
Finance lease 754 761 754 761
obligation -
Deferred tax 18 967 053 29 126 517 13 695 380
Total non-current 202 869 837 123 648 301 130 436 579
liabilities
Current liabilities
Other financial 29 504 953 75 098 29 504 953
liabilities
Loans from group 8 591 951 6 318 000 8 093 589
companies
Current tax payable 12 370 813 22 645 356 10 004 357
Finance lease - 95 237
obligation -
Trade and other 32 850 857 16 041 898 23 214 404
payables
Total current 83 318 573 45 080 352 70 912 540
liabilities
Total liabilities 286 188 410 168 728 653 201 349 119
Total equity and 513 414 149 426 620 277 415 234 407
liabilities
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Interim Interim Full year
Figures in Rand unaudited 31 unaudited 31 audited 28
August 2009 August 2008 February 2009
Interest income 34 434 311 28 910 187 55 196 880
Interest expense (8 293 275) (7 293 700) (15 497 772)
Net interest income 26 141 036 21 616 487 39 699 108
Net fee income 32 393 443 33 553 247 63 544 026
Net commission income 1 809 475 14 082 303 16 068 724
Other income 10 329 017 11 464 722 5 157 167
Fair value adjustments 69 967 800 - 24 565 646
Net impairment charge (11 216 362) 14 137 745 (7 745 426)
on loans and advances
Operating expenses (93 757 559) (56 527 503) (111 368 806)
Operating profit 35 666 850 38 327 001 29 920 439
Impairment of goodwill - - (91 237 953)
and intangibles
(Loss)/ profit on sale - - (740 059)
of subsidiary
Excess of acquirers` 2 957 700 - -
interest in net assets
Profit/ (loss) before 38 624 550 38 327 001 (62 057 573)
taxation
Taxation (6 739 484) (12 356 502) 4 376 429
Profit/ (loss) from 31 885 066 25 970 499 (57 681 144)
continuing operations
Discontinued - - -
operations
Profit/ (loss) for the 31 885 066 25 970 499 (57 681 144)
period
Other comprehensive - - -
income
Total comprehensive 31 885 066 25 970 499 (57 681 144)
income for the period
Profit attributable
to:
Owners of the company 31 785 466 21 248 366 (60 960 431)
Non controlling 99 600 4 722 133 3 279 287
interest
Total comprehensive
income attributable
to:
Owners of the company 31 785 466 21 248 366 (60 960 431)
Non controlling 99 600 4 722 133 3 279 287
interest
Earnings per share:
Basic earnings per 8.7 8.6 (23.0)
share
Diluted earnings per 8.7 8.6 (23.0)
share
Total number of 382 025 250 296 713 315 297 392 725
ordinary shares
outstanding
Weighted average 366 066 960 246 948 029 265 498 675
number of ordinary
shares outstanding
Reconciliation of
headline earnings per
share:
Profit/ (loss) 31 785 466 21 248 366 (60 960 431)
attributable to owners
of the company
Adjusted for:
Excess of acquirer (2 957 700) - -
interest in net asset
value
Loss on sale of - - 636 451
subsidiary
(Profit)/ loss on - (2 607 000) (23 937)
disposal of property,
plant and equipment
Goodwill and - - 78 899 275
intangible impairment
Revaluation of (60 709 980) - (21 143 397)
investment properties
Headline earnings (31 882 214) 18 641 366 (2 592 039)
(loss) per share
(cents)
Headline earnings per
share:
Basic headline (8.7) 7.5 (1.0)
earnings per share
Diluted headline (8.7) 7.5 (1.0)
earnings per share
CONDENSED STATEMENT OF CHANGES IN EQUITY
Figures in Share Share premium Treasury Total Share Share reserve
Rand Capit shares Capital
al
For the six months ended 31 August
2009
Balance at 1 297 168 419 631 (2 302 716) 166 117 212 38 716 052
March 2009
Total
comprehensiv
e income for
the period:
Profit for - - - - -
the period
Other - - - - -
comprehensiv
e income
Total - - - - -
comprehensiv
e income for
the period
Transactions
with owners,
recorded
directly in
equity:
Contribution
s by and
distribution
s to owners:
Issue of 85 43 846 190 - 43 846 275 (34 796 052)
ordinary
shares
Shares - - (4 698 294) (4 698 294) -
reclaimed
based on
contingent
consideratio
n
Dealings - - - - -
with
minorities
Share based - - - - 2 345 470
payment
transactions
Own shares - - (268 256) (268 256) -
purchased
Reclassifica - - - - (3 920 000)
tion to
liabilities
based on
amended
settlement
Total 85 43 846 190 (4 966 550) 38 879 725 (36 370 582)
transactions
with owners
Balance at 382 212 265 821 (7 269 266) 204 996 937 2 345 470
31 August
2009
For the six months ended 31 August 2008
Balance at 1 230 142 059 247 - 142 059 477 64 224 960
March 2008
Total
comprehensiv
e income for
the period:
Profit for - - - - -
the period
Other - - - - -
comprehensiv
e income
Total - - - - -
comprehensiv
e income for
the period
Transactions
with owners,
recorded
directly in
equity:
Contribution
s by and
distribution
s to owners:
Issue of 67 26 095 413 - 26 095 480 (64 224 960 )
ordinary
shares
Dealings - - - - -
with
minorities
Dividends to - - - - -
equity
holders
Total 67 26 095 413 - 26 095 480 (64 224 960)
transactions
with owners
Balance at 297 168 154 660 - 168 154 957 -
31 August
2008
For the year ended 28 February 2009
Balance at 1 230 142 059 247 - 142 059 477 64 224 960
March 2008
Total
comprehensiv
e income for
the period:
(Loss)/ - - - - -
profit for
the period
Other - - - - -
comprehensiv
e income
Total - - - - -
comprehensiv
e income for
the period
Transactions
with owners,
recorded
directly in
equity:
Contribution
s by and
distribution
s to owners:
Issue of 67 26 360 384 (2 302 716) 24 057 735 (64 224 960)
ordinary
shares
Share - - - - 38 716 052
reserve
Dividends to - - - -
equity
holders
Total 67 26 360 384 (2 302 716) 24 057 735 (25 508 908)
transactions
with owners
Balance at 297 168 419 631 (2 302 716) 166 117 212 38 716 052
28 February
2009
CONDENSED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
Figures in Rand Accumulated Total Non- Total equity
profit/ Attributable controlling
(loss) to equity interest
holders of
the company
For the six months ended 31 August 2009
Balance at 1 (11 144 128) 193 689 136 20 196 152 213 885 288
March 2009
Total
comprehensive
income for the
period:
Profit for the 31 785 466 31 785 466 99 600 31 885 066
period
Other - - - -
comprehensive
income
Total 31 785 466 31 785 466 99 600 31 885 066
comprehensive
income for the
period
Transactions with
owners, recorded
directly in
equity:
Contributions by
and distributions
to owners:
Issue of ordinary - 9 050 223 - 9 050 223
shares
Shares reclaimed - (4 698 294) - (4 698 294)
based on
contingent
consideration
Dealings with (971 139) (971 139) (20 082 620) (21 053 759)
minorities
Share based - 2 345 470 - 2 345 470
payment
transactions
Own shares - (268 256) - (268 256)
purchased
Reclassification - (3 920 000) - (3 920 000)
to liabilities
based on amended
settlement
Total (971 139) 1 538 004 (20 082 620) (18 544 616)
transactions with
owners
Balance at 31 19 670 199 227 012 606 213 132 227 225 739
August 2009
For the six months ended 31 August 2008
Balance at 1 69 984 794 276 269 231 16 916 865 293 186 096
March 2008
Total
comprehensive
income for the
period:
Profit for the 21 248 366 21 248 366 4 722 133 25 970 499
period
Other - - - -
comprehensive
income
Total 21 248 366 21 248 366 4 722 133 25 970 499
comprehensive
income for the
period
Transactions with
owners, recorded
directly in
equity:
Contributions by
and distributions
to owners:
Issue of ordinary - (38 129 480) - (38 129 480)
shares
Dealings with (2 967 000) (2 967 000) - (2 967 000)
minorities
Dividends to (20 168 491) (20 168 491) - (20 168 491)
equity holders
Total (23 135 491) (61 264 971) - (61 264 971)
transactions with
owners
Balance at 31 68 097 669 236 252 626 21 638 998 257 891 624
August 2008
For the year ended 28 February 2009
Balance at 1 69 984 794 276 269 231 16 916 865 293 186 096
March 2008
Total
comprehensive
income for the
period:
(Loss)/ profit (60 960 431) (60 960 431) 3 279 287 (57 681 144)
for the period
Other - - - -
comprehensive
income
Total (60 960 431) (60 960 431) 3 279 287 (57 681 144)
comprehensive
income for the
period
Transactions with
owners, recorded
directly in
equity:
Contributions by
and distributions
to owners:
Issue of ordinary - (40 167 225) - (40 167 225)
shares
Share reserve 38 716 052 38 716 052
Dividends to (20 168 491) (20 168 491) - (20 168 491)
equity holders
Total (20 168 491) (21 619 664 ) - (21 619 664)
transactions with
owners
Balance at 28 (11 144 128) 193 689 136 20 196 152 213 885 288
February 2009
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Figures in Rand Interim Interim Full year audited
unaudited 31 unaudited 31 28 February 2009
August 2009 August 2008
Cash flows from
operating activities
Cash receipts from 90 346 403 88 010 459 241 329 870
customers
Cash paid to (91 365 077) (106 470 076) (208 669 457)
suppliers and
employees
Cash (utilised)/ (1 018 674) (18 459 617) 32 660 412
generated in
operating activities
Interest paid (8 293 275) (4 680 993) (11 707 966)
Interest received on 2 632 392 3 056 000 7 534 017
cash and cash
equivalents
Taxation paid 898 645 (3 618 000) (17 229 109)
Dividends paid - (20 168 491) (23 867 453)
Net cash from (5 780 913) (43 871 101) (12 610 098)
operating activities
Cash flows from
investing activities
Property, plant and (2 630 210) (837 500) (3 976 091)
equipment acquired
Proceeds on disposals - 124 000 1 621 796
of property, plant
and equipment
Investment properties (2 215 268) - (4 943 949)
acquired
Increase in financial (7 477 054) (11 312 500) (2 569 500)
assets
Proceeds on loans to (15 997) - 11
staff members 911
Expenditure to (12 338 529) (12 026 000) (9 855 833)
maintain and expand
operating capacity
Contingent - - (36 749 776)
consideration settled
in cash
Business combinations (3 757 074) (23 270 000) (4 334 735)
and disposals
Expenditure for (3 757 074) (23 270 000) (41 084 511)
expansion
Net cash from (16 095 603) (35 296 000) (50 940 344)
investing activities
Cash flows from
financing activities
Capital raised - -
-
Cash received for - - 34 796 119
shares to be issued
Finance lease (160 979) - (643 915)
payments
Funding (other 20 131 013 46 318 500 68 159 031
financial
liabilities) raised
Funding (other (5 000 000) -
financial -
liabilities) repaid
Net cash from 14 970 034 46 318 500 102 311 235
financing activities
(Decrease)/ increase (6 906 482) (32 848 601) 38 760 793
in cash and cash
equivalents
Cash and cash 86 759 323 47 998 530 47 998 530
equivalents at
beginning of period
Cash and cash 79 852 841 15 149 929 86 759 323
equivalents at end of
the period
Cash (utilised)/
generated in
operating activities
Profit/ (loss) before 38 624 550 38 327 001 (62 057 573)
taxation
Adjustments for:
Depreciation and 15 561 993 1 666 500 5 853 152
amortisation
(Profit)/ loss on - - 706 813
sale of assets
(Profit)/ loss on - (2 607 218)
sale of subsidiaries -
Acquirer`s excess of (2 957 700) -
net asset purchased -
Interest received on (2 632 392) (3 056 000) (7 534 017)
cash and cash
equivalents
Finance costs 8 293 275 7 293 700 15 497 772
Fair value (69 967 800) (15 000 100) (24 565 646)
adjustments
Other non cash items (88 190) - (280 396)
Impairment of - - 91 237 953
goodwill and
intangibles
Share option costs 2 345 470 -
expensed -
Impairment of other 11 069 500 -
investments -
Changes in working
capital:
Trade and other (401 439) (43 097 000) 9 833 454
receivables
Trade and other (865 942) (1 986 500) 3 968 901
payables
Cash (utilised)/ (1 018 674) (18 459 617) 32 660 412
generated in
operating activities
SEGMENTAL
ANALYSIS
Figures in Micro Finance Property Mortgage Total
Rand Investment Origination
Unaudited six
months ended
31 August 2009
Interest 32 312 129 2 043 432 78 750 34 434 311
income
Interest (5 250 302) (3 042 973) - (8 293 275)
expense
Net interest 27 061 827 (999 542) 78 750 26 141 036
income
Net fee income 32 393 443 - - 32 393 443
Net commission - - 1 809 475 1 809 475
income
Other income 5 994 882 4 334 135 - 10 329 017
Fair value - 69 967 800 - 69 967 800
adjustments
Net impairment (11 216 362) - - (11 216 362)
charge on
loans and
advances
Operating (81 030 233) (10 120 445) (2 606 881) (93 757 559)
expenses
Operating (26 796 443) 63 181 948 (718 656 ) 35 666 850
profit
Excess of 2 957 700 - - 2 957 700
acquirers`
interest in
net assets
(Loss)/ profit (23 838 743) 63 181 948 (718 656) 38 624 550
before
taxation
Taxation - (6 953 391) 213 907 (6 739 484)
(Loss)/ profit (23 838 743) 56 228 557 (504 749) 31 885 066
for the year
Attributable
to:
Equity holders (23 938 343) 56 228 557 (504 749) 31 785 466
of the parent
Minority 99 600 - - 99 600
interest
Segment assets 304 995 436 197 032 562 11 386 150 513 414 149
Investment - 197 032 562 - 197 032 562
property
Loans and 96 169 301 - - 96 169 301
advances
Cash and cash 77 412 065 - 2 440 79 852 841
equivalents 776
Micro Finance Property Mortgage Total
Investment Origination
Unaudited six
months ended
31 August 2008
Interest 25 854 108 3 056 079 28 910 187
income -
Interest (4 719 091) (2 574 609) (7 293 700)
expense -
Net interest 21 135 017 481 470 21 616 487
income -
Net fee income 31 454 215 2 099 032 33 553 247
-
Net commission 796 979 - 13 285 324 14 082 303
income
Other income 4 753 417 6 711 305 11 464 722
-
Fair value - - - -
adjustments
Net impairment 14 137 745 - 14 137 745
charge on -
loans and
advances
Operating (38 544 059) (6 236 120) (11 747 324) (56 527 503)
expenses
Operating 33 733 314 3 055 687 1 538 000 38 327 001
profit
Excess of - - - -
acquirers`
interest in
net assets
Profit/ (loss) 33 733 314 3 055 687 1 538 000 38 327 001
before
taxation
Taxation (10 176 513) (854 989) (1 325 000) (12 356 502)
Profit/ (loss) 23 556 801 2 200 698 13 000 25 970 499
for the year
Attributable
to:
Equity holders 18 834 668 2 200 698 213 000 21 248 366
of the parent
Minority 4 722 133 - - 4 722 133
interest
Segment assets 288 652 410 122 808 387 15 159 480 426 620 277
Investment - 8 150 000 - 8 150 000
property
Loans and 124 796 206 - - 124 796 206
advances
Cash and cash 14 686 857 463 072 15 149 929
equivalents
Micro Finance Property Mortgage Total
Investment Origination
Audited year
ended 28
February 2009
Interest 55 196 880 - - 55 196 880
income
Interest (11 896 997) (3 571 619) (29 156) (15 497 772)
expense
Net interest 43 299 883 (3 571 619) (29 156) 39 699 108
income
Net fee income 63 544 026 - - 63 544 026
Net commission - - 16 068 724 16 068 724
income
Other income 4 753 417 403 750 - 5 157 167
Fair value - 24 565 646 - 24 565 646
adjustments
Net impairment (7 745 426) - - (7 745 426)
charge on
loans and
advances
Operating (84 633 984) (14 387 831) (12 346 991) (111 368 806)
expenses
Operating 19 217 916 7 009 946 3 692 577 29 920 439
profit
Impairment of - - (91 237 953 ) (91 237 953)
goodwill and
intangibles
(Loss)/ profit (740 059) - - (740 059)
on sale of
subsidiary
Excess of - -
acquirers` - -
interest in
net assets
Profit/ (loss) 18 477 857 7 009 946 (87 545 376) (62 057 573)
before
taxation
Taxation (5 089 166) (907 827) 10 373 422 4 376 429
Profit/ (loss) 13 388 691 6 102 119 (77 171 954) (57 681 144)
for the year
Attributable -
to:
Equity holders 10 109 404 6 102 119 (77 171 954) (60 960 431)
of the parent
Minority 3 279 287 - 3 279 287
interest -
Segment assets 279 355 726 121 123 785 14 754 896 415 234 407
Investment - 49 599 294 49 599 294
property -
Loans and 118 390 972 - 118 390 972
advances -
Cash and cash 84 463 467 - 2 295 856 86 759 323
equivalents
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Finbond is domiciled in South Africa. The condensed consolidated
interim financial statements of the Company as at and for the six
months ended 31 August 2009 comprise the Company and its subsidiaries
(together referred to as the "Group") and the Group`s interests in
associates and jointly controlled entities.
The consolidated financial statements of the Group as at and for the
year ended 28 February 2009 are available upon request from the
Company`s registered office at Bankforum Building, Cnr. Veale and
Fehrsen Streets, Nieuw Muckleneuk, Brooklyn, Pretoria, 0181 or at
www.finbondlimited.co.za.
These condensed consolidated interim financial statements have been
prepared in accordance with IAS 34 Interim Financial Reporting. They
do not include all of the information required for full annual
financial statements, and should be read in conjunction with the
consolidated financial statements of the Group as at and for the year
ended 28 February 2009.
These condensed consolidated interim financial statements were
approved by the Board of Directors on 12 November 2009.
Significant accounting policies
Except as described below, the accounting policies applied by the
Group in these condensed consolidated interim financial statements
are the same as those applied by the Group in its consolidated
financial statements as at and for the year ended 28 February 2009.
1. Determination and presentation of operating segments
As of 1 March 2009 the Group determines and presents operating
segments based on the information that internally is provided to the
CEO, who is the Group`s chief operating decision maker. This change
in accounting policy is due to the adoption of IFRS 8 Operating
Segments. Previously operating segments were determined and presented
in accordance with IAS 14 Segment Reporting. The new accounting
policy in respect of segment operating disclosures is presented as
follows.
Comparative segment information has been re-presented in conformity
with the transitional requirements of IFRS 8. Since the change in
accounting policy only impacts presentation and disclosure aspects
there is no impact on earnings per share.
Segment results that are reported to the CEO include items directly
attributable to a segment as well as those that can be allocated on a
reasonable basis. Unallocated items comprise mainly insignificant
corporate assets, unallocated head office expenses, and income tax
assets and liabilities, which are reported in the Property Investment
segment.
2. Presentation of financial statements
The Group applies revised IAS 1 Presentation of Financial Statements
(2007), which became effective as of 1 January 2009. As a result, the
Group presents in the consolidated statement of changes in equity all
owner changes in equity, whereas all non-owner changes in equity are
presented in the consolidated statement of comprehensive income. This
presentation has been applied in these condensed interim financial
statements as of and for the six months period ended on 28 August
2009.
Comparative information has been re-presented so that it also is in
conformity with the revised standard. Since the change in accounting
policy only impacts presentation aspects, there is no impact on
earnings per share.
Estimates
The preparation of interim financial statements requires management
to make judgments, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets
and liabilities, income and expense. Actual results may differ from
these estimates.
Except as described below, in preparing these condensed consolidated
interim financial statements, the significant judgments made by
management in applying the Group`s accounting policies and the key
sources of estimation uncertainty were the same as those that applied
to the consolidated financial statements as at and for the year ended
28 February 2009.
During the six months ended 31 August 2009 management reassessed its
estimates in respect of:
The useful lives of intangible assets - trademarks and brand names. A
review of the useful lives of trademarks and brand names was
performed during the period, as required. Management previously
regarded trademarks and brand names as having estimated useful lives
of 20 years. Following the rebranding of all branches to Finbond
Micro Finance, IAS38 requires the useful life of the brand name to be
revised to a period representing the rebranding transition period.
The revised estimate of useful life is one year, to be conservative,
apart from Blue Chip Finance No 1 (which is a separate statutory
legal entity) and BondExcel (mortgage origination), which trademarks
and brand names have both been revised to an expected useful life of
five years, based on factors considered and again, to be
conservative. The adjustment has been accounted for prospectively.
This resulted in an additional amortisation charge of R13,301,406 for
the period, which is expected to recur over the remaining lives of
the trademarks and brand names, being the second half of the current
financial year. The impact relating to Blue Chip Finance No 1 and
BondExcel, which is expected to recur over the remaining lives of the
trademarks and brand names (four years) amounts to R2,323,327.
Business combination
The Group acquired the net assets of Moneyline Financial Services
(Pty) Limited (a micro finance business consisting of 60 branches
nationally) a subsidiary of NET1 U.E.P.S. Technologies, Inc., as part
of its expansion strategy, and effectively gained control on 1 March
2009.
Dealing with minorities
Finbond and Blue Chip Finance No 1 (Pty) Ltd entered into an
agreement in terms of which exiting shareholders would acquire part
of the business of Blue Chip, from Blue Chip, in exchange for the
return of their share in and claims against the company, resulting in
Blue Chip becoming a wholly-owned subsidiary of Finbond, effective 1
March 2009.
DIVIDEND
No interim dividend has been
declared.
For and on behalf of the Board
Dr. Malesela Motlatla
Dr. Willie van Aardt
12 November 2009
Directors:
Chairman: Dr. MDC Motlatla*(BA , D
Com (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, QLTT
(England and Wales UK); Chief
Compliance Officer: H J Wilken
(BCom Hons ( UNISA); Chief Risk
Officer: DC Pentz CA(SA) (B Comm
Hons); Chief Financial Officer: GW
Labuschagne CA(SA) (B Com Fin.Acc
(Cum Laude), B Com Acc (Hons);
Chief Operating Officer: J Trevena
(B Com (UNISA), MBL (UNISA) SEP
(Harvard); N Mapetla*.(BA
(Lesotho) MBA(UK); Adv. J Noeth
SC* (B Iuris LLB). * Non-
Executive
Secretary: Catharina Dora Du
Plessis Sekretari Secretarial
Services
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 Group Limited:
Finbond Group Limited
(Registration Number :
2001/015761/06) also TA Finbond
Micro Finance TM
337 Veale Street , Brooklyn,
Pretoria
PO Box 2127 Brooklyn Square, 0075
www.finbondlimited.co.za
www.finbond.co.za
Designated Advisor:
Grindrod Bank Limited
Date: 12/11/2009 16:03:01 Produced by the JSE SENS Department.
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