| Mon 24 May 2010, 7:05 | | ABL - African Bank Investments Limited - Unaudited interim results and cash |
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ABL ABLP
ABL
ABL - African Bank Investments Limited - Unaudited interim results and cash
dividend declaration for the six months ended 31 March 2010
African Bank Investments Limited
(Incorporated in the Republic of South Africa)
(Registered bank controlling company)
(Registration number 1946/021193/06)
Ordinary share code: ABL ISIN: ZAE000030060
Preference share code: ABLP ISIN: ZAE000065215
("ABIL" or "the group")
UNAUDITED INTERIM RESULTS AND CASH DIVIDEND DECLARATION FOR THE SIX MONTHS ENDED
31 MARCH 2010
FEATURES
- Group headline earnings of R914 million (H1 2009:R937 million) and headline
earnings per share of 113,7 cents (H1 2009: 116,6 cents), a decline of 2%
respectively.
- Dividends per ordinary share maintained at 85 cents.
- African Bank headline earnings of R713 million (H1 2009: R747 million),
impacted negatively by higher suspension of income on non-performing loans,
funding costs and bad debt charges.
- Ellerines headline earnings of R201 million (H1 2009: R190 million),
benefiting from a lower bad debt charge and a further decline in operating
expenses.
- Strong momentum in the Ellerines financial services integration project, with
full completion expected by the end of the current financial year.
OVERVIEW OF RESULTS
In the first half of the current financial year, the group`s operating
environment was characterised by generally subdued economic conditions and lower
consumer spending, following the sharp decline in formal sector employment over
the past year. Tentative signs of recovery in some segments of the economy were
tempered by continued pressure and further retrenchments in others. The retail
trading environment in particular lagged the modest recovery in the broader
economy.
These conditions necessitated a continuation of the largely risk-averse stance
that the group maintained during the 2009 financial year. Credit underwriting
appetite remained relatively conservative in the first quarter, and this
impacted on sales volumes in this period. Emerging consumer demand in the second
quarter, together with greater risk segmentation, enabled the group to relax
credit criteria selectively, with a concomitant lift in sales volumes. This was
supported by a renewed focus on removing internal impediments to growth.
As a result of the above, the growth in net advances of 18% was somewhat below
the targeted 25% for the current year. Income yields were affected by
proportionally larger non-performing loans on which interest and fees were
suspended, as well as an increasing proportion of loans to lower risk customer
segments. Net assurance income continued to reflect relatively high retrenchment
claims. In aggregate, group revenues grew by 2% over the prior comparable
period.
The group`s bad debt charge increased by 9%, with a higher charge at African
Bank on the back of the high sales volumes written towards the end of 2008,
offsetting lower provisioning requirements at Ellerines. A heightened focus on
cost control resulted in a multitude of initiatives being implemented to reduce
operating expenses, with a strong emphasis on extracting benefits from closer
cooperation between African Bank and Ellerines. The group`s operating expenses
declined by 4%.
Substantial progress was made with the migration and integration of Ellerines`
financial services activities into African Bank and the completion of the
project by the end of the 2010 financial year remains on track. All of the
Ellerines, Dial-a-Bed and Furniture City branches have now been converted onto
the African Bank front end credit origination platform, as has the majority of
the Geen & Richards and Beares stores.
The remaining stores are expected to be converted by September 2010 in
preparation for the peak trading period from October to December. A phased
approach is being used to convert the existing Ellerines advances book onto the
African Bank systems, to ensure that customers and collections are not impacted
by the conversion. The ownership of the loans is expected to be transferred to
African Bank at the end of September 2010.
Liquidity conditions improved considerably during the period, with a
commensurate reduction in risk premiums and greater availability of funding. The
group raised substantial new long-term deposits which in part were applied to
settle maturing liabilities and replace more expensive debt. At the same time,
against the backdrop of continued volatility in capital markets, the group
increased its cash reserves significantly in order to support both the
anticipated pick-up in sales volumes going forward as well as the efficient
transfer of the remaining financial services assets of Ellerines into African
Bank. While the average funding rate declined from 11,7% to 10,5%, the higher
absolute amount of funding resulted in the net interest expense increasing by
24%.
Group headline earnings declined by 2% to R914 million as a result of the above
factors, as did headline earnings per share to 113,7 cents. Average ordinary
shareholders` equity was effectively unchanged at R11,9 billion, with the group
return on equity (RoE) declining marginally from 15,8% to 15,3%.
Headline earnings for the African Bank business unit declined by 5% to R713
million (H1 2009: R747 million). The total income yield declined by 310 basis
points to 36,0%, which was partly offset by a 130 basis point improvement in
total charges, resulting in a decline in the return on assets (RoA) from 8,3% to
5,8%. The return on assets was also impacted by the higher levels of cash
reserves held of R6,5 billion (H1 2009: R2,4 billion) with a consequential
increase in gearing from 6,8 times to 7,7 times. The return on equity was 44,2%.
Ellerines reported headline earnings of R201 million, a 6% increase over the
prior comparable period. The retail division achieved a strong turnaround in
profitability, while earnings for the financial services activities were sharply
lower, the latter driven largely by a decline in income yields, primarily as a
result of the high level of interest suspension. Ellerines generated an
aggregate RoE of 10,1% for the period, calculated excluding goodwill.
ECONOMIC PROFIT
African Bank`s economic profit declined by 15% to R455 million while Ellerines
incurred a R119 million economic loss, based on its internal capital. Together
with the R377 million economic loss based on the goodwill arising from the
acquisition of Ellerines, the ABIL group generated a net economic loss of R41
million, relative to a loss of R11 million for the six months to March 2009.
DIVIDENDS AND DIVIDEND COVER
ABIL has declared an interim dividend of 85 cents per ordinary share, in line
with the dividend declared in the first half of 2009. The ordinary dividend
cover has declined marginally to 1,3 times, representing a payout ratio of 75%
of headline earnings per share. As communicated previously, the dividend cover
is expected to rise to approximately 1,5 times over time, in order to support
the expected increase in sales growth at both African Bank and Ellerines.
The group has also declared an interim preference share dividend of 355 cents
per share.
FUNDING AND CAPITAL MANAGEMENT
ABIL maintained its conservative approach to capital management during this
period, which ensured stable credit ratings for the bank, a steady flow of
available funding and a reduction in the cost of funding as the relatively
elevated risk premiums of 2009 returned to more normalised levels.
The group`s internal capital model indicated an optimal level of regulatory
capital for the ABIL group of R6,5 billion, or 26,7% of assets at risk at 31
March 2010. Against this, ABIL held total capital of R7,9 billion (after
impairments for goodwill, trademarks and dividends declared).
The transfer of the remaining financial services assets of Ellerines into
African Bank by the end of the current financial year, will result in a more
efficient distribution of capital between the two businesses, and create a
significant foundation for further growth within African Bank.
LEAVE OF ABSENCE
Executive director David Woollam, has requested, and the board has agreed, to a
six month leave of absence in order to focus on his health, wellbeing, and his
family.
LOOKING AHEAD
Whilst trading conditions are not expected to show any material improvement in
the short term, the group expects a stronger performance for the full year,
given the better sales momentum evident in recent months, the expectation of
lower bad debt charges as previously higher vintages work their way through, and
the benefits of the various cost savings initiatives recently implemented. At
the same time, the integration of the group`s financial services activities into
the African Bank business unit will enable more efficient utilisation of capital
and liquidity balances, with a positive impact on overall group returns.
African Bank is targeting an acceleration in its sales growth, a lower rate of
increase in operating costs, more efficient application of cash resources and
improved collections from its branch collections initiative amongst others.
Ellerines` priorities for the retail part of the business for the next six
months will remain on margin delivery, stock management, supply chain
optimisation and sales growth, while the financial services part of the business
will concentrate on finalising the integration and providing innovative value
added products to its customer base.
The forecast financial information has not been reviewed and reported on by
ABIL`s auditors.
BASIS OF PREPARATION
These condensed group interim consolidated financial statements have been
prepared in accordance with International Accounting Standard (IAS) 34 - Interim
Financial Reporting, the requirements of the South African Companies Act (Act 61
of 1973), as amended and the Listing Requirements of the JSE Limited.
The group has adopted the following standards and interpretations during the
financial year:
- IFRIC 17 - Distribution of Non-cash Assets to Owners
- IFRS 2 (amended) - Vesting Conditions and Cancellations
- IFRS 7 - Financial Instruments: Disclosures
- IFRS 8 - Operating Segments
- IAS 1 (revised) - Presentation of Financial Statements
- IAS 23 - Borrowing Costs
- IAS 32 (amended) - Financial Instruments Puttable at Fair Value and
Classification of Rights Issues.
The accounting policies are in compliance with International Financial Reporting
Standards (IFRS) and their application is consistent with those used for the
group`s 2009 annual financial statements except for changes in disclosure of the
following: financial instruments, primary statements and operating segments.
On behalf of the board
Mutle Mogase Gordon Schachat Leon Kirkinis
Chairman Executive deputy chairman Chief executive officer
ABIL GROUP INCOME STATEMENT
for the six months ended 31 March 2010
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
31 March 31 March 30 September
R million % change 2010 2009 2009
Revenue 2 7 549 7 415 14 332
Gross margin on retail 1 1 014 1 007 1 791
business
Interest income on 9 2 932 2 682 5 437
advances
Net assurance income (24) 854 1 124 2 081
Non-interest income 9 1 227 1 130 2 251
Income from operations 1 6 027 5 943 11 560
Charge for bad and 9 (1 473) (1 351) (2 511)
doubtful advances
Risk adjusted income (1) 4 554 4 592 9 049
from operations
Other interest and 6 188 177 367
investment income
Interest expense 21 (1 142) (944) (2 025)
Operating costs (4) (2 251) (2 354) (4 576)
Indirect taxation: VAT 33 (12) (9) (18)
Profit from operations (9) 1 337 1 462 2 797
Capital items >100 34 (7) (7)
Profit before taxation (6) 1 371 1 455 2 790
Direct taxation: STC (12) (78) (89) (159)
Direct taxation: (15) (345) (408) (776)
Normal
Profit for the period (1) 948 958 1 855
Reconciliation of
headline earnings and
per share statistics
Profit for the period (1) 948 958 1 855
(basic earnings)
Preference (36) (18) (28) (52)
shareholders
Basic earnings 0 930 930 1 803
attributable to
ordinary shareholders
Adjustments for non-
headline items:
Capital items <100 (19) 7 7
Tax thereon 3 0 0
Headline earnings (2) 914 937 1 810
Number of shares in 803,7 803,7 803,7
issue (net of
treasury)
Weighted number of 803,7 803,7 803,7
shares in issue
Fully diluted number 803,8 803,8 803,8
of shares in issue
Basic earnings per 0 115,7 115,7 224,3
share
Fully diluted basic 0 115,7 115,7 224,3
earnings per share
Headline earnings per (2) 113,7 116,6 225,2
share
Fully diluted headline (2) 113,7 116,6 225,2
earnings per share
The capital items in the income statement relate to African Bank`s sale of its
pre-emptive right to repurchase the equity of SA Taxi Finance (Pty) Limited and
the sale of a property portfolio by Ellerines.
ABIL GROUP STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31 March 2010
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
31 March 31 March 30 September
R million % change 2010 2009 2009
Profit for the period (1) 948 958 1 855
Other comprehensive
income after tax
Exchange differences (65) (6) (17) (25)
on translating foreign
operations
Movement in cash flow 13 (87) (77) (18)
hedge reserve
IFRS 2 reserve >100 13 3 11
transactions (employee
incentives)
Shares purchased into 1 0 0
the ABIL Employee
Share Trust less
shares issued to
employees (cost)
ABIL Share Trust (100) 0 1 2
shares less dividends
received
Other comprehensive (12) (79) (90) (30)
income for the period
Total comprehensive 0 869 868 1 825
income for the period
ABIL GROUP STATEMENT OF FINANCIAL POSITION
as at 31 March 2010
Unaudited Unaudited Audited
31 March 31 March 30 September
R million % change 2010 2009 2009
Assets
Short-term deposits >100 5 112 1 396 3 553
and cash
Statutory assets - 11 1 604 1 448 1 323
bank and insurance
Inventories 2 777 764 859
Other assets 64 486 297 357
Taxation >100 16 5 20
Net advances 18 22 599 19 133 20 486
Deferred tax asset 13 514 454 501
Assets held for sale (98) 5 205 181
Policyholders` (20) 16 20 15
investments
Property and equipment 19 588 493 586
Intangible assets (8) 870 942 906
Goodwill 0 5 472 5 472 5 472
Total assets 24 38 059 30 629 34 259
Liabilities and equity
Short-term funding (40) 2 716 4 491 3 108
Other liabilities 7 1 531 1 429 1 363
Taxation 31 97 74 77
Deferred tax liability (12) 211 241 265
Liabilities held for (100) 0 31 25
sale
Life fund reserve (17) 15 18 15
Bonds and other long- 68 18 575 11 063 14 705
term funding
Subordinated bonds >100 2 210 874 2 044
Total liabilities 39 25 355 18 221 21 602
Ordinary shareholders` 2 12 221 11 925 12 174
equity
Preference 0 483 483 483
shareholders` equity
Total equity (capital 2 12 704 12 408 12 657
and reserves)
Total liabilities and 24 38 059 30 629 34 259
equity
NOTES
31 March 30 September 31 March
1. Treasury shares 2010 2009 2009
Treasury shares at R million 13 13 13
cost
Number of shares million 0,5 0,5 0,5
held
Average cost per Rand 27,23 26,96 26,73
share
2. Number of Total Weighted Diluted
ordinary shares at
31 March 2010
Number of shares in 804 175 200 804 175 200 804 175 200
issue at the
beginning of the
year
Treasury shares on (477 415) (482 041) (482 041)
hand
Dilution as a 0 0 74 747
result of
outstanding options
803 697 785 803 693 159 803 767 906
ABIL GROUP STATEMENT OF CASH FLOWS
for the six months ended 31 March 2010
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
31 March 31 March 30 September
R million 2010 2009 2009
Cash generated from operations 3 079 3 271 6 026
Cash received from lending and 7 811 7 478 14 756
insurance activities and cash
reserves
Recoveries on advances 58 160 172
previously written off
Cash paid to funders, staff, (4 790) (4 367) (8 902)
suppliers and insurance
beneficiaries
Increase in gross advances (3 626) (4 333) (6 918)
Decrease in working capital (342) (201) (62)
Decrease/(increase) in 82 3 (89)
inventories
Increase in other assets (297) (154) (40)
Decrease in other liabilities (127) (50) 67
Indirect and direct taxation (449) (680) (1 192)
paid
Cash (outflow)/inflow from (2) 1 1
equity accounted incentive
transactions
Cash outflow from operating (1 340) (1 942) (2 145)
activities
Cash outflow from investing (178) (273) (399)
activities
Acquisition of property and (106) (108) (289)
equipment (to maintain
operations)
Disposal of property and 196 21 18
equipment
Other investing activities (268) (186) (128)
Cash inflow from financing 2 923 494 3 068
activities
Cash inflow from funding 3 745 1 366 4 648
activities
Preference shareholders` (18) (28) (52)
payments and transactions
Ordinary shareholders` (804) (844) (1 528)
payments and transactions
Increase/(decrease) in cash and 1 405 (1 721) 524
cash equivalents
Cash and cash equivalents at the 3 996 3 472 3 472
beginning of the period
Cash and cash equivalents at the 5 401 1 751 3 996
end of the period
Made up as follows:
Short-term deposits and cash 5 112 1 396 3 553
Statutory cash reserves - 289 355 443
insurance
5 401 1 751 3 996
ABIL GROUP SEGMENTAL ANALYSIS
for the six months ended 31 March 2010
Segment revenue
Unaudited Unaudited Unaudited
6 months to 6 months to 12 months to
31 March 31 March 30 September
R million 2010 2009 2009
Banking unit 4 012 3 579 7 407
Ellerines Retail 2 518 2 474 4 513
Ellerines Financial Services 1 070 1 372 2 451
Consolidation adjustments (51) (10) (39)
ABIL Consolidated 7 549 7 415 14 332
Intersegment revenues
Unaudited Unaudited Unaudited
6 months to 6 months to 12 months to
31 March 31 March 30 September
R million 2010 2009 2009
Banking unit 44 1 21
Ellerines Retail 0 0 0
Ellerines Financial Services 7 9 18
Consolidation adjustments 0 0 0
ABIL Consolidated 51 10 39
Segment profit after taxation
Unaudited Unaudited Unaudited
6 months to 6 months to 12 months to
31 March 31 March 30 September
R million 2010 2009 2009
Banking unit 731 775 1 577
Ellerines Retail 148 (38) (192)
Ellerines Financial Services 69 221 470
Consolidation adjustments 0 0 0
ABIL Consolidated 948 958 1 855
ABIL GROUP STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 March 2010
Ordinary shares
Share-based
Share Distributable payment
capital
R million and premium reserves reserve Other
Balance at 30 9 151 2 201 586 (9)
September 2008
Dividends paid 0 (844) 0 0
Total comprehensive 0 931 3 (94)
income for the period
Balance at 31 March 9 151 2 288 589 (103)
2009 (unaudited)
Dividends paid 0 (684) 0 0
Transfer to insurance 0 (42) 0 42
contingency reserve
Total comprehensive 0 874 8 51
income for the period
Balance at 30 9 151 2 436 597 (10)
September 2009
(audited)
Dividends paid 0 (804) 0 0
Total comprehensive 0 930 13 (92)
income for the period
Balance at 31 March 9 151 2 562 610 (102)
2010 (unaudited)
Preference
share
capital and
R million premium Total
Balance at 30 483 12 412
September 2008
Dividends paid (28) (872)
Total comprehensive 28 868
income for the period
Balance at 31 March 483 12 408
2009 (unaudited)
Dividends paid (24) (708)
Transfer to insurance 0 0
contingency reserve
Total comprehensive 24 957
income for the period
Balance at 30 483 12 657
September 2009
(audited)
Dividends paid (18) (822)
Total comprehensive 18 869
income for the period
Balance at 31 March 483 12 704
2010 (unaudited)
CASH DIVIDEND DECLARATION
Ordinary shares Preference shares
Share code ABL ABLP
ISIN ZAE000030060 ZAE000065215
Dividend number 19 11
Dividends per share 85 cents 355 cents
(cash dividends)
Declaration date Monday, 24 May 2010 Monday, 24 May 2010
Last date to trade cum Thursday,10 June 2010 Thursday, 10 June 2010
dividend
Shares commence Friday, 11 June 2010 Friday, 11 June 2010
trading ex dividend
Record date Friday, 18 June 2010 Friday, 18 June 2010
Dividend payment date Monday, 21 June 2010 Monday, 21 June 2010
Share certificates may not be dematerialised or rematerialised between Friday,
11 June 2010 and Friday, 18 June 2010, both days inclusive.
Share transfer secretaries
Link Market Services SA Pty Limited
11 Diagonal Street, Johannesburg, 2001
PO Box 4844, Johannesburg, 2000.
Telephone: +27 11 630 0800
Telefax: +27 86 674 4381
africanbank@linkmarketservices.co.za
Board of directors
MC Mogase (Chairman), G Schachat (Deputy Chairman)*L Kirkinis (CEO)*, N Adams, A
Fourie*DB GibbonN Nalliah*, MEK Nkeli, S SitholeTM Sokutu*, RJ Symmonds, A
Tugendhaft, DF Woollam*
* Executive
Company Secretary
Y Mistry
Registered office
59 16th Road
Midrand, 1685
Sponsor
RAND MERCHANT BANK (A division of FirstRand Limited)
For a more detailed discussion of ABIL`s results and outlook for the remainder
of 2010, please refer to the investor zone on our website, at
http://www.abil.co.za
Date: 24/05/2010 07:05:10 Produced by the JSE SENS Department.
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