| Mon 22 Nov 2010, 7:05 | | ABL - African Bank Investments Limited - Reviewed results for the twelve months |
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ABL ABLP
ABL
ABL - African Bank Investments Limited - Reviewed results for the twelve months
ended 30 September 2010 and cash dividend declarations
African Bank Investments Limited
(Registration Number 1946/021193/06)
(Incorporated in the Republic of South Africa)
(Registered bank controlling company)
Ordinary Share Code: ABL ISIN: ZAE000030060
Preference Share Code: ABLP ISIN: ZAE000065215
("ABIL" or "the group")
REVIEWED RESULTS FOR THE TWELVE MONTHS ENDED 30 SEPTEMBER 2010 AND CASH
DIVIDEND DECLARATIONS
FEATURES
- ABIL reported a return on equity of 15,6% for the twelve months to 30
September 2010.(2009: 15,2%).
- The group generated headline earnings of R1 890 million (2009: R1 810 million)
and headline earnings per share 235,2 cents (2009: 225,2 cents), an increase of
4% respectively.
- A final ordinary dividend per share of 100 cents (2009: 100 cents) was
declared, bringing the dividend for the year to 185 cents (2009: 185 cents).
- African Bank headline earnings declined marginally to R1 505 million (2009: R1
525 million), with higher profits in the second half of the year not sufficient
to offset the lower growth in the first half.
- EHL headline earnings increased by 35% to R385 million (2009: R285 million),
benefiting from firmer sales and margins, a lower bad debt charge and a further
decline in operating expenses.
- The integration of Ellerines financial services into African Bank was
completed in September 2010.
OVERVIEW
The first six months of this financial year was characterised by generally
subdued economic conditions and lower consumer spending resulting from sizable
retrenchments across a variety of industries. These conditions necessitated a
continuation of the lower risk appetite that the group maintained during the
2009 financial year and the group reported muted growth in sales and
profitability at the interim stage. These factors were further exacerbated by a
complex restructuring at EHL. While trading conditions remained tough in the
second half, greater risk segmentation and a significant reinvigoration of the
business had a positive impact on sales and advances growth for the remainder of
the year.
CONSOLIDATED RESULTS
Group headline earnings increased by 4% to R1 890 million, as did headline
earnings per share to 235,2 cents. Average ordinary shareholders` equity grew to
R12,1 billion, with the group return on equity improving marginally from 15,2%
to 15,6%.
Headline earnings for the African Bank business unit were R1 505 million. Income
from operations grew by 8%, with a 20% increase in advances partially offset by
a 360 basis points decline in total income yield. Total charges against income
reduced by 220 basis points, driven by improvements in the bad debt charge,
operating expenses and funding cost as a percentage of advances. The return on
assets declined from 7,7% to 5,7% which, together with increased gearing of 7,8
times, produced a return on equity of 44,8%.
EHL reported headline earnings of R385 million. The retail division achieved a
turnaround in profitability on the back of sales growth, stronger margins and
efficiency gains. Good credit sales growth was offset by write offs, resulting
in flat advances. This, combined with a decline in income yields and a higher
cost allocation, generated lower earnings for the financial services division.
EHL generated a return on equity of 9,6% for the period (excluding goodwill).
CAPITAL AND FUNDING
Total funding increased to R23,9 billion by September 2010, up 30% from R18,4
billion in the prior year, primarily to support the growth in the advances book.
Cash holdings have been particularly significant during the year under review,
not only in response to the muted global liquidity environment, but also to
ensure sufficient capacity to deal with the implications of the integration of
the Ellerines financial services business into the Bank.
The group continued to explore and execute a number of new initiatives in order
to expand the universe of its funding sources. To this end, African Bank
initiated a range of new funding relationships during the year under review.
As at 30 September 2010, the group`s internal capital model indicated an optimal
level of regulatory capital for the ABIL group of R7,1 billion, of 26,3% of
assets at risk. Against this ABIL`s higher total capital base of R8,7 billion
(after impairments for goodwill and trademarks) will enable the group to
maintain its growth momentum.
The financial services business of EHL was transferred to African Bank in
September 2010. The transaction was an important milestone in the realisation of
the group`s strategic objectives for the EHL acquisition. Through the
transaction, ABIL also subscribed for further ordinary shares in African Bank
resulting in R1,4 billion of unimpaired new capital for the Bank.
VALUE TO CUSTOMERS
This year was the start of a journey to reinvigorate the organisation and to get
closer to our staff and our customers. During the year, the group embarked on a
series of nationwide roadshows to all employees and large groups of customers.
The feedback received in these roadshows exceeded all expectations and has
provided a wealth of information, innovation and energy to the organisation.
Various initiatives emanating from the roadshows have already been implemented.
A `payment break` product was introduced and loan sizes were increased from a
maximum R50 000 to R100 000 to better accommodate customers with a need for
housing or vehicle finance. The Bank is piloting the roll out of its own branded
network of ATMs, with the first ATM installed in September 2010. New products
are being tested and will be brought to the market during the 2011 financial
year.
Greater flexibility was introduced in EHL with no deposit and deferred
instalment campaigns. In addition, price reductions and a new credit proposition
have given EHL the ability to launch "lowest instalment product" campaigns. This
has been particularly successful in bringing in new customers and has also
stimulated sales of merchandise. New customers represent 50% of Ellerines`
through the door population.
The group has also been piloting African Bank kiosks and branches in EHL stores
and the initial results in terms of attracting new customers have been positive,
with little cannibalisation of the existing base. Kiosks are being rolled out to
a wider network of stores.
In the retail division, substantial work was done on the implementation of the
new integrated supply chain. Merchandising ranges were rationalised, renewed and
focused around identified customer segments as part of the merchandising
strategy to drive product leadership. The business focused on delivering
differentiated, lowest price credit offerings for each brand. These initiatives
have started to bear fruit as is evidenced in the increase in sales and the
turnaround in profitability of the retail business unit.
Further measures were implemented this year to safeguard the group`s customers
against financial distress
- we improved the assessment of customers` affordability, established a
financial rehabilitation centre to assist over-indebted customers, worked
closely with interested parties to find a sustainable solution for the debt
mediation process and developed a credit health check to warn customers who are
moving towards an over-indebted position. The group piloted various mobile
initiatives to keep customers informed of the status of their financial
obligations and launched three "Imali Matters" money advice offices as part of a
year-long pilot in customer protection, in joint venture with the DTI, Finmark
Trust and the Credit Ombudsman.
We cleansed the credit records of more than 400 000 and rehabilitated 78 000
customers. ABIL extended its credit insurance policies to also cover customers
during periods of short time and compulsory unpaid leave - situations that can
create severe financial distress. The group continues to explore ways of
improving its insurance product as a value enhancement tool for customers.
CHANGES TO THE BOARD
Dave Woollam, who has been on a leave of absence for much of this year, has
requested that upon his return to the group, he change his role from that of a
full time executive, to one that would allow him to act as an advisor to ABIL.
His reasons for this are based on a personal lifestyle choice, which we respect.
Accordingly, Dave Woollam, will resign from the boards of both ABIL and African
Bank with effect from 31 December 2010 and will rejoin ABIL in his new capacity
in the new year. Dave will work closely with Leon Kirkinis and the other ABIL
executives, and we believe will continue to bring his considerable insight and
knowledge of the business to bear on various strategic opportunities and
challenges.
LOOKING AHEAD
Whilst economic conditions are expected to remain challenging, we do expect some
improvement during the next financial year as lower inflation and interest rates
start to stimulate consumer spending.
For African Bank, the recent lift in sales bodes well for the 2011 financial
year. The Bank is targeting an acceleration in its sales and advances growth, a
moderate decline in yield, a more efficient application of cash resources and
steady asset quality. The card division will concentrate on promoting credit
cards to the EHL customer base, increasing call centre sales and improving the
value proposition for existing customers. The Bank is targeting modest growth in
operating costs for the next financial year.
The Bank`s focus areas for 2011 will include becoming more people centered with
regard to our staff, increasing the number of new customers, building on the
recent sales momentum, controlling cost growth, reducing the average cost of
funds, enhancing the branch collection capabilities and branch empowerment
programme, focusing on the rehabilitation of customers in financial distress and
improving client service levels and streamlining customer processes.
EHL`s priorities for the retail part of the business for the next year will
remain on margin delivery, stock, working capital and cash management, supply
chain optimisation and sales growth, while African Bank as the credit provider,
will concentrate on providing EHL with differentiated lowest price credit and
innovative value added products to the EHL customer base. The merchandising
focus for 2011 will be on product innovation to drive higher margin
opportunities, on developing strategic supplier relationships, growing the
imported component of the business in order to ensure differentiation and
enhance margins, and on bringing a number of new opportunities to fruition.
REVIEW REPORT
The accompanying financial information of the group has been reviewed by the
group`s auditors, Deloitte & Touche. The review was conducted in accordance with
ISRE 2410 "Review of Interim Financial Information performed by the Independent
Auditor of the Entity". An unmodified report has been issued. The full review
report is available for inspection at the Company`s registered office. Any
reference to future financial performance included in this announcement, has not
been reviewed or reported on by the group`s auditors.
GROUP ACCOUNTING POLICIES AND BASIS OF PREPARATION
These condensed group consolidated financial statements have been prepared in
compliance with International Accounting Standard (IAS) 34 `Interim Financial
Reporting`, AC500 Standards as issued by the Accounting Practices Board, 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 and their application are:
- In compliance with International Financial Reporting Standards and
interpretations issued by the International Financial Reporting Interpretations
Committee of the International Accounting Standards Board; and
- Consistent with those used for the group`s 2009 annual financial statements
except for changes in disclosure of financial instruments, primary statements
and operating segments.
DIVIDENDS AND DIVIDEND COVER
ABIL has declared a final dividend of 100 cents per ordinary share, bringing the
total dividend for the year to 185 cents per ordinary share. The ordinary
dividend cover was 1,3 times, which represented a payout ratio of 79% of
headline earnings per share. The group has indicated that it will move to a
dividend cover of a minimum of 1,5 times in the next financial year to support
its growth targets.
The group has also declared a final preference share dividend of 336 cents per
share.
CASH DIVIDEND DECLARATIONS
Ordinary shares Preference shares
Share code ABL ABLP
ISIN ZAE000030060 ZAE000065215
Dividend number 20 12
Dividends per share
(cash dividends) 100 cents 336 cents
Declaration date Monday, 22 November 2010 Monday, 22 November 2010
Last date to trade
cum-dividend Thursday,9 December 2010 Thursday, 9 December 2010
Shares commence
trading ex-dividend Friday, 10 December 2010 Friday, 10 December 2010
Record date Friday, 17 December 2010 Friday, 17 December 2010
Dividend payment date Monday, 20 December 2010 Monday, 20 December 2010
Share certificates may not be dematerialised or rematerialised between Friday,
10 December 2010 and Friday, 17 December 2010, both days inclusive.
On behalf of the board
Mutle Mogase, Chairman
Gordon Schachat, Executive deputy chairman
Leon Kirkinis, Chief executive officer
Midrand
22 November 2010
Board of directors
MC Mogase (Chairman), G Schachat (Deputy Chairman)*, L Kirkinis (CEO)*,
N Adams, A Fourie*, DB Gibbon, N Nalliah*, MEK Nkeli, S Sithole, TM Sokutu*,
RJ Symmonds, A Tugendhaft, DF Woollam*
*Executive
Group Secretary
Y Mistry
ABIL Group income statement
for the 12 months ended 30 September 2010
ABIL Consolidated
Reviewed Audited
R million % change 30 Sept 2010 30 Sep 2009
Gross margin on retail business 10 1 974 1 791
Interest income on advances 9 5 950 5 437
Net assurance income (23) 1 600 2 081
Non-interest income 11 2 491 2 251
Income from operations 4 12 015 11 560
Charge for bad and doubtful advances 7 (2 693) (2 511)
Risk-adjusted income from operations 3 9 322 9 049
Other interest and investment income 6 390 367
Interest expense 18 (2 383) (2 025)
Operating costs (2) (4 481) (4 576)
Indirect taxation: VAT 11 (20) (18)
Profit from operations 1 2 828 2 797
Capital items > 100 34 (7)
Profit before taxation 3 2 862 2 790
Direct taxation: STC (8) (147) (159)
Direct taxation: Normal (0) (773) (776)
Profit for the year 5 1 942 1 855
Reconciliation of headline earnings
and per share statistics
Profit for the year (basic earnings) 5 1 942 1 855
Preference shareholders (31) (36) (52)
Basic earnings attributable to ordinary
shareholders 6 1 906 1 803
Adjustments for non-headline items:
Capital items < 100 (19) 7
Tax thereon - 3 0
Headline earnings 4 1 890 1 810
Number of shares in issue (net of
treasury) million 803.7 803.7
Weighted number of shares in issue million 803.7 803.7
Fully diluted number of shares in
issue million 803.8 803.8
Basic earnings per share cents 6 237.2 224.3
Fully diluted basic earnings per
share cents 6 237.1 224.3
Headline earnings per share cents 4 235.2 225.2
Fully diluted headline earnings per
share cents 4 235.1 225.1
Total ordinary dividends per share for the
year cents - 185 185
Total preference dividends per share for
the year cents (18) 691 842
Group statement of comprehensive income
for the 12 months ended 30 September 2010
ABIL Consolidated
Reviewed Audited
% change 30 Sep 2010 30 Sep 2009
R million
Profit for the year 5 1 942 1 855
Other comprehensive income after tax
Exchange differences on translating
foreign operations (56) (11) (25)
Movement in cash flow hedge reserve > 100 (195) (18)
IFRS 2 reserve transactions (employee
incentives) (27) 8 11
Shares purchased into the ABIL
Employee
Share Trust less shares issued to
employees (cost) - 1 0
ABIL Share Trust shares less
dividends received (50) 1 2
Other comprehensive income for
the year, net of tax > 100 (196) (30)
Total comprehensive income for the year (4) 1 746 1 825
Group segmental analysis
for the 12 months ended 30 September 2010
Segment revenue Intersegment income
Reviewed Audited Reviewed Audited
R million 30 Sept 2010 30 Sept 2009 30 Sept 2010 30 Sept 2009
R`000 R`000 R`000 R`000
Banking unit 8 075 7 407 87 21
EHL Retail 4 804 4 513 0 0
EHL Financial
Services 2 141 2 451 15 18
Consolidation
adjustments (102) (39) 0 0
Consolidated 14 918 14 332 102 39
Segment profit after taxation
Reviewed Audited
R million 30 Sept 2010 30 Sept 2009
R`000 R`000
Banking unit 1 541 1 577
EHL Retail 140 (192)
EHL Financial Services 261 470
Consolidation adjustments 0 0
Consolidated 1 942 1 855
ABIL group statement of financial position
as at 30 September 2010
ABIL Consolidated
Reviewed Audited
% change 30 Sept 2010 30 Sep 2009
R million
Assets
Short-term deposits and cash (4) 3 410 3 553
Statutory assets - bank and insurance 37 1 806 1 323
Inventories (1) 851 859
Other assets (10) 321 357
Taxation >100 97 20
Net advances 24 25 360 20 486
Deferred tax asset (18) 409 501
Assets held for sale (97) 5 181
Policy holders` investments 0 15 15
Property and equipment 6 622 586
Intangible assets (8) 834 906
Goodwill 0 5 472 5 472
Total assets 14 39 202 34 259
Liabilities and equity
Short-term funding (67) 1 038 3 108
Other liabilities 28 1 743 1 363
Taxation (57) 33 77
Deferred tax liability 48 392 265
Liabilities held for sale (100) 0 25
Life fund reserve (7) 14 15
Bonds and other long-term funding 42 20 877 14 705
Subordinated bonds 9 2 226 2 044
Total liabilities 22 26 323 21 602
Ordinary shareholders` equity 2 12 396 12 174
Preference shareholders` equity 0 483 483
Total equity (capital and reserves) 2 12 879 12 657
Total liabilities and equity 14 39 202 34 259
Net asset value per share 2 1 543 1 515
ABIL Group statement of changes in equity
for the 12 months ended 30 September 2010
Ordinary shares
Share Share-based
capital and Distributable payment
premium reserves reserve
R million
Balance at 30 September 2008
(audited) 9 151 2 201 586
Dividends paid 0 (1 528) 0
Transfer to insurance
contingency reserve 0 (42) 0
Total comprehensive income
for the year 0 1 805 11
Balance at 30 September 2009
(audited) 9 151 2 436 597
Dividends paid 0 (1 488) 0
Transfer to share-based
payment reserve 0 (208) 208
Transfer from insurance
contingency reserve 0 25 0
Total comprehensive income
for the year 0 1 907 8
Balance at 30 September 2010
(reviewed) 9 151 2 672 813
Preference share
capital and
Other premium Total
R million
Balance at 30 September 2008 (audited) (9) 483 12 412
Dividends paid 0 (52) (1 580)
Transfer to insurance contingency reserve 42 0 0
Total comprehensive income for the year (43) 52 1 825
Balance at 30 September 2009 (audited) (10) 483 12 657
Dividends paid 0 (36) (1 524)
Transfer to share-based payment reserve 0 0 0
Transfer from insurance contingency reserve (25) 0 0
Total comprehensive income for the year (205) 36 1 746
Balance at 30 September 2010 (reviewed) (240) 483 12 879
Notes
Reviewed Audited
30 Sept 2010 30 Sept 2009
1. Treasury shares
Treasury shares at cost R million 12 13
Number of shares held million 0.5 0.5
Average cost per share Rand 25.14 26.96
2. Number of ordinary shares at 30
September 2010 Total Weighted Diluted
Number of shares in issue at the
beginning of the year 804 175 200 804 175 200 804 175 200
Treasury shares on hand (477 415) (479 722) (479 722)
Dilution as a result of
outstanding options 0 0 82 501
803 697 785 803 695 478 803 777 979
ABIL Group statement of cash flows
for the 12 months ended 30 September 2010
Reviewed Audited
R million 30 Sept 2010 30 Sep 2009
Cash generated from operations 5 698 6 026
Cash received from lending and insurance
activities and cash reserves 15 662 14 756
Recoveries on advances previously written off 103 172
Cash paid to funders, staff, suppliers and
insurance beneficiaries (10 067) (8 902)
Increase in gross advances (7 658) (6 918)
Decrease in working capital 205 (62)
Increase in inventories 8 (89)
Increase in other assets (103) (40)
Decrease in other liabilities 300 67
Indirect and direct taxation paid (794) (1 192)
Cash inflow from equity accounted incentive
transactions 2 1
Cash outflow from operating activities (2 547) (2 145)
Cash outflow from investing activities (493) (399)
Acquisition of property and equipment (to
maintain operations) (277) (289)
Acquisition of joint venture book (19) 0
Disposal of property and equipment 240 18
Disposal of option 15 0
Other investing activities (452) (128)
Cash inflow from financing activities 2 760 3 068
Cash inflow from funding activities 4 284 4 648
Preference shareholders` payments and transactions (36) (52)
Ordinary shareholders` payments and transactions (1 488) (1 528)
Increase in cash and cash equivalents (280) 524
Cash and cash equivalents at the beginning of the year 3 996 3 472
Cash and cash equivalents at the end of the year 3 716 3 996
Made up as follows:
Short-term deposits and cash 3 410 3 553
Statutory cash reserves - insurance 306 443
3 716 3 996
For more detailed information on ABIL`s results, please refer to the investor
zone on our website, at www.abil.co.za
Sponsor
RAND MERCHANT BANK (A division of Firstrand Bank Limited)
Date: 22/11/2010 07:05:14 Produced by the JSE SENS Department.
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