| Wed 30 Mar 2011, 8:00 | | CPI / CPIP - Capitec Bank Holdings Limited - Summarised audited financial |
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CPI
CPI / CPIP - Capitec Bank Holdings Limited - Summarised audited financial
statements for the year ended 28 February 2011
Capitec Bank Holdings Limited
Registration number: 1999/025903/06
Registered bank controlling company
Incorporated in the Republic of South Africa
JSE ordinary share code: CPI ISIN code: ZAE000035861
JSE preference share code: CPIP ISIN code: ZAE000083838
SUMMARISED AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED
28 FEBRUARY 2011
* Headline earnings per share up 44% to 757 cents
* Final dividend per share: 205 cents
* Return on equity: 34%
* Active clients: 2.8 million
* Shareholders` funds: R3.5 billion
* Jobs created: 1 177
Change %
2011 2010 2011/2010 2009
PROFITABILITY
Income from banking
operations Rm 3 741 2 556 46 1 983
Net loan impairment
expense Rm (988) (548) 80 (468)
Banking operating
expenses Rm (1 813) (1 368) 33 (1 065)
Non-banking operations Rm - 2 (100) 6
Tax Rm (284) (193) 47 (137)
Preference dividend Rm (16) (14) 14 (19)
Earnings attributable to
ordinary shareholders
Basic Rm 640 435 47 300
Headline Rm 640 437 46 302
Cost to income ratio -
banking activities % 48 54 54
Return on ordinary
shareholders` equity % 34 32 27
Earnings per share
Attributable cents 757 525 44 364
Headline cents 757 527 44 366
Diluted attributable cents 730 509 43 357
Diluted headline cents 730 511 43 359
Dividends per share
Interim cents 85 55 55 30
Final cents 205 155 32 110
Total cents 290 210 38 140
Dividend cover x 2.6 2.5 2.6
ASSETS
Total assets Rm 14 440 9 488 52 4 969
Net loans and advances Rm 10 071 5 225 93 2 982
Cash and cash
equivalents Rm 2 842 2 567 11 1 514
Investments Rm 989 1 306 (24) 150
Other Rm 538 390 38 323
LIABILITIES
Total liabilities Rm 10 989 7 760 42 3 563
Deposits Rm 10 450 7 360 42 3 317
Other Rm 539 400 35 246
EQUITY
Shareholders` funds Rm 3 451 1 728 100 1 406
Capital adequacy ratio % 38 37 43
Net asset value per
ordinary share cents 3 418 1 896 80 1 512
Share price cents 15 901 8 200 94 3 001
Market capitalisation Rm 14 850 6 805 118 2 485
Number of shares in
issue `000 93 388 82 983 13 82 798
Share options
Number outstanding `000 4 222 5 322 5 713
Number outstanding to
total shares in issue % 5 6 7
Average strike price cents 3 510 2 888 2 487
Average time to
maturity months 20 24 25
OPERATIONS
Branches 455 401 13 363
Employees 5 331 4 154 28 3 414
Active clients `000 2 829 2 122 33 1 545
ATMs
Own 479 417 15 368
Partnership 1 182 821 44 571
Capital expenditure Rm 235 149 58 133
SALES
Loans
Value of loans advanced Rm 14 318 8 645 66 6 273
Number of loans
advanced `000 5 471 3 861 42 3 536
Average loan amount R 2 617 2 239 17 1 774
Repayments Rm 12 117 8 288 46 6 744
Gross loans and
advances Rm 10 916 5 607 95 3 238
Loans past due (arrears) Rm 626 350 79 326
Arrears to gross
loans and advances % 5.7 6.2 10.1
Provision for doubtful
debts Rm 845 382 121 256
Provision for
doubtful debts to
gross loans and advances % 7.7 6.8 7.9
Arrears coverage ratio % 135 109 79
Loan revenue Rm 3 800 2 603 46 2 032
Loan revenue to average
gross loans and advances % 46.0 58.9 74.8
Gross loan impairment
expense Rm 1 088 620 75 514
Recoveries Rm 100 72 39 46
Net loan impairment
expense Rm 988 548 80 468
Net loan impairment
expense to loan revenue % 26.0 21.1 23.0
Net loan impairment
expense to average gross
loans and advances % 12.0 12.4 17.2
Net loan impairment
expense to repayments % 8.2 6.6 7.2
Deposits
Wholesale deposits Rm 3 954 3 669 8 1 690
Retail call savings Rm 3 933 2 346 68 1 306
Retail fixed savings Rm 2 316 1 148 102 265
Net transaction fee
income Rm 532 295 80 160
A GROWTH INDUSTRY
Unsecured lending is a growth segment of the South African banking industry.
During the quarter ended September 2010 the total unsecured market, excluding
credit card and furniture finance, grew by 58% compared to the same quarter of
2009. By comparison, total lending by all banks in South Africa didn`t grow
during 2010(growth simply matched inflation).
Today`s unsecured lending market was created in June 2007 by the National Credit
Act (NCA). Before the implementation of the NCA, the maximum permissible loan
in terms of the exemption to the Usury Act was R10 000 with a term of 36 months.
Today there is no legal maximum for either term or loan size.
The average loan at Capitec Bank in February 2007 was R1 180 with an average
outstanding term of 10 months. Today it is R2 617 and 36 months.
Since 2007 the Capitec gross loan book has grown from R950 million to R11
billion. At the same time total unsecured lending as defined by the National
Credit Regulator, in the industry grew from R29 billion to R66 billion. This
market growth represents a triumph for the companies providing loans, their
clients and the authorities wishing to make finance more accessible.
CAREFUL NOW
We want to grow swiftly but cautiously. At the same time, a new legal
dispensation, eager borrowers with little past experience of term loans and many
enthusiastic lenders make us pause.
In November 2008 we tightened our lending criteria. Looking back, this proved to
be exactly the right moment to start worrying. The rate of growth of new loans
granted declined significantly for a few months, before we regained a strong
growth path. Since that date our actual bad debt rate has been on a declining
trend.
We are very selective when granting long term credit. We approve 64% of all loan
applications - but the higher the risk, the shorter the term of the loans
offered. Only 17.1% of our clients would qualify for a 48 month loan, should
they apply for one, only 8.4% for a 60 month loan.
We are aware of the short-comings of credit scoring, as credit models cannot
reflect the future behaviour of a whole market without previous access to long
term credit. We augment credit scoring with home-grown methods.
It is challenging to understand the real changes in our arrears and provisions
over time. Long term trends can be hidden by the fact that fast growth in our
book could result in an apparent decline in arrears.
The provision on a new product is higher at the beginning of the term due to the
uncertainty surrounding the performance of the product over time.
We write off all loans in their entirety if a client is more than 3 months in
arrears.
Our provisions are equal to 135% of the outstanding amount of all loans with
payments in arrears (the "arrear coverage ratio"). This includes only problem
loans with less than three months of arrears, otherwise the loan would have been
written off.
Our net transaction fee income has grown by at least 80% in each of the last
three years. This reduces our reliance on the income from loans.
"SIMPLICITY IS THE ULTIMATE SOPHISTICATION"
Simplicity is our guiding principle. We want clients to understand exactly what
we offer and how much it will cost. The length of queues at the information
counters of banks indicate to what extent there is a difference between what
clients expect and what they get. We don`t offer confusing packages of services
and treat all clients the same. Every consultant whether in a branch or in a
call centre, knows the detail of all our products so that clients are not
referred from one consultant to another. This is the result of simplicity of
product offering and proper training of staff. It is also the reason why we do
not offer banking to companies and trusts, but only to individuals.
Capitec Bank delivers all its products in real time. We don`t open a file and
ask a client to come back later. Even if we`ve never seen a client before
(provided the client has the necessary documents), we will open an account,
issue and activate a debit card, approve a loan and pay the loan into the new
account so that the client has access to its full value by the time that he or
she leaves the bank.
INSTANT SUCCESS
One of the reasons for our growth has been the success of our new branches. We
opened 54 branches during the year, growing our network by 13% to 455 branches.
All our existing branches are profitable.
This is impressive and indicates unmet demand for our products. Every site
location is a serious decision.
Our branches are not comparable to those of traditional banks. All our branches
are based on the same template: there are on average 9 personnel in a branch of
200 m2. We keep no cash on the site, which means that we can use any retail
space and not only purpose-built sites. The absence of cash also means that
there are no glass partitions between the consultant and a client. The majority
of our consultants are fluent in the language used in the vicinity of a
particular branch.
In practical management terms, it is an advantage that all branches fit into the
same mould. Instead of having larger branches, we prefer more branches in a
town. In Mthatha we have five branches, each serving a different retail market
(clients who rely on public transport are more likely to be confined to a single
retail area of even a small town. We rent all our branches, which gives us
flexibility when the retail patterns in a town change.
We encourage our clients to use their cards to purchase goods and withdraw cash
at the tills of supermarkets. For card purchases there is no charge and for cash
withdrawals we charge only R1. During the past year cash withdrawals at
supermarket tills increased by 111% when compared with the previous year.
HIGH COSTS
Our total expenses grew by 33%. Over the past five years our expenses have grown
by on average by 32% per year. This is an enormous rate of increase but it
illustrates our willingness to back a strategy we believe in.
In the past year our personnel numbers increased by 1 177. A reduction in staff
numbers - which most companies try to achieve through higher productivity - is
treated as bad news in the media, whereas a growth in staff numbers is often
ignored. Our society doesn`t seem to understand that in any given year many jobs
disappear and many new ones are created - even inside the same company. This is
an inevitable consequence of progress and a healthy phenomenon. Total employment
can only grow when the business opportunities in our country grow. It serves no
purpose to reduce business opportunities in an attempt to freeze existing
employment.
We invest heavily in training staff. We appointed 1 910 new people (this
includes staff turnover) and every one of them underwent a two week training
course in Stellenbosch at a total cost of R22 million.
Our cost to income ratio declined to less than 50%. This is an important ratio
for a retail bank, but should be treated with caution as it is distorted if a
bank has other income (or expenditure) such as corporate banking. It ignores bad
debts and benefits when a company has surplus capital - and Capitec Bank happens
to have a high capital ratio.
We plan to continue our investment in growth in the coming year.
SHARING IN THE SUCCESS
Ten years ago, when we started the bank, we had a tiny company and a strong
management team. We made them a simple promise: create a success and you will
share in it. The most objective way of doing that is to base a portion of the
remuneration of strategic management on the value created. Although share prices
can fluctuate, the fundamental trend reflects the performance and prospects of a
company and the share price is the most objective measure of the value of a
company. Our share options and share appreciation rights base some of the
rewards for strategic management on the value created. These rights vest over a
period between three and six years. They have to be exercised within 6 months of
due date.
Our share price increased by 94% during the financial year and the participants
in these share schemes received a total value of R108 million from the schemes.
The total growth during the current year in the value of share options and share
appreciation rights which have yet to vest was R279 million. These values will
obviously materialise only if market confidence in our company is maintained.
The next level, senior managers, participate in a bonus scheme based on the
profit growth of the company. Payment of these bonuses takes place over a period
of three years. The total value of bonuses accrued for the year, was R17
million.
Based on our growth in headline earnings per share, all staff (apart from senior
management) received a bonus equal to 142.5% of one month`s salary. These
bonuses are paid out in two tranches: one after the half year, the other tranche
will be paid after this announcement.
The incentive scheme expense as reflected in the income statement is summarised
below.
Strategic Senior Other Total
management management employees
Employees Nr 10 74 5 247 5 331
Share appreciation
rights Rm 86 35 - 121
Share options Rm 5 7 - 12
Senior management
performance bonus Rm - 17 - 17
Staff performance
bonus Rm 4 1 68 73
Total Rm 95 60 68 223
Executive management committee members hold a total of almost 7 million shares
between them. This holding defines the attitude of our senior management: they
are owners rather than employees. It is this attitude that our various schemes
try to instil in all of our 5 331 people.
LIQUIDITY AND SHARE CAPITAL
During the past 12 months we granted 5 471 000 individual loans to a total value
of R14 billion, which is 66% more than last year. The total value of loans
outstanding at year-end amounted to R11 billion.
Our liquidity philosophy remains conservative. At year-end it would have been
possible to repay all deposits due immediately and on an average throughout the
year, within 3 days. We are particularly happy with the doubling of fixed retail
savings to R2 billion.
In December 2010 we offered one new share to existing ordinary shareholders for
every ten they held. Our main shareholder, PSG Group, committed to take up all
their rights. Practically all the rights were taken up by shareholders. Such
confidence is an important element in the success of our group. In total we
raised R1.1 billion new ordinary capital, including R100m worth of shares issued
to the underwriter. In addition, we issued preference shares to a value of R104
million and raised subordinated debt of R200 million.
Our capital adequacy ratio started the year at 37%, but as a result of the rapid
growth of our term book it declined before our capital raising exercises
restored the ratio to 38% at year-end. We will pay careful attention to our
capital structure as we will endeavour to grow our loan book further.
DIRECTORS
We lost a director with valuable international experience when Tshepo Mahloele
had to resign as a result of commitments to his own growing international
business. We thank him for his friendship and his important contributions at
board meetings.
Fortunately we gained in Markus Jooste, a new director with personal experience
of building an international organisation.
During the year we paid a total remuneration of R3 million to our non-executive
directors for their services as director. The chairman received a fixed sum of
R960 000. The other directors received a fee of R108 000 plus additional
compensation for service as a committee member or a committee chairman.
PROSPECTS
In November 2010 we were named as the top company of the year of the Sunday
Times Top 100 Companies. On 1 March 2011 Capitec Bank was 10 years old. We held
no party and didn`t celebrate either of these achievements. We feel that we have
done little more than lay the foundations of a potentially great business.
Excessive celebration of a good start can lead to a false sense of achievement.
Much remains to be done, our management team is still full of ideas.
We will continue investigating opportunities during the year ahead.
DIVIDENDS
The directors have recommended a final dividend of 205 cents per ordinary share
for the year ending 28 February 2011, bringing the total dividends for the year
to 290 cents per share. The dividend will be presented for approval by the
shareholders at the annual general meeting.
Last day to trade cum-dividend Friday, 17 June 2011
Trading ex-dividend commences Monday, 20 June 2011
Record date Friday, 24 June 2011
Payment date Monday, 27 June 2011
Share certificates may not be dematerialised or rematerialised between Monday,
20 June 2011 and Friday, 24 June 2011, both days inclusive.
On behalf of the board
Michiel le Roux
Chairman
Riaan Stassen
Chief executive officer
Stellenbosch
29 March 2011
GROUP BALANCE SHEET
Audited Audited
February February
2011 2010
R`000 R`000
ASSETS
Cash and cash equivalents 2 841 918 2 566 588
Investments designated at fair value 988 664 1 306 298
Loans and advances to clients 10 071 466 5 225 139
Inventory 30 847 26 067
Other receivables 48 177 41 127
Property and equipment 375 185 281 610
Intangible assets - banking system 34 357 22 211
Deferred income tax assets 48 903 19 183
Total assets 14 439 517 9 488 223
LIABILITIES
Loans and deposits at amortised cost 10 449 883 7 360 325
Trade and other payables 489 685 358 352
Current income tax liabilities 35 033 34 452
Provisions 14 403 7 117
Total liabilities 10 989 004 7 760 246
EQUITY
Ordinary share capital and premium 1 918 677 682 219
Cash flow hedge reserve (3 469) (15 839)
Retained earnings 1 276 336 906 991
Share capital and reserves
attributable to ordinary
shareholders 3 191 544 1 573 371
Non-redeemable, non-cumulative,
non-participating preference share
capital and premium 258 969 154 606
Total equity 3 450 513 1 727 977
Total equity and liabilities 14 439 517 9 488 223
GROUP INCOME STATEMENT
Audited Audited
Year Year
ended ended
February February
2011 2010
R`000 R`000
Interest income 2 808 543 1 763 966
Interest expense (751 360) (490 636)
Net interest income 2 057 183 1 273 330
Loan fee income 1 273 574 1 038 905
Loan fee expense (121 710) (52 706)
Transaction fee income 883 040 507 438
Transaction fee expense (351 309) (212 064)
Net fee income 1 683 595 1 281 573
Dividend income 571 519
Net impairment charge on loans
and advances to clients (988 177) (547 731)
Net movement in financial
instruments held at fair value (210) 1 011
Other income 251 43
Non-banking income 22 258 20 750
Sales 219 298 208 604
Cost of sales (197 040) (187 854)
Income from operations 2 775 471 2 029 495
Banking operating expenses (1 812 499) (1 368 324)
Non-banking operating expenses (22 672) (18 815)
Operating profit before tax 940 300 642 356
Income tax expense (284 276) (193 132)
Profit for the year 656 024 449 224
Earnings per share (cents)
Basic 757 525
Diluted 730 509
GROUP STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
Year Year
ended ended
February February
2011 2010
R`000 R`000
Profit for the year 656 024 449 224
Other comprehensive income for the year
net of tax 12 370 8 034
Cash flow hedge before tax 17 181 11 158
Income tax relating to cash flow hedge (4 811) (3 124)
Total comprehensive income for the year 668 394 457 258
RECONCILIATION OF ATTRIBUTABLE EARNINGS TO HEADLINE EARNINGS
Audited Audited
Year Year
ended ended
February February
2011 2010
R`000 R`000
Net profit attributable to
equity holders 656 024 449 224
Less preference dividend (15 754) (14 163)
Net profit after tax attributable to
ordinary shareholders 640 270 435 061
Non-headline items:
Profit on disposal of property
and equipment (638) (378)
Loss on disposal of intangible assets 476 2 665
Income tax charge 60 (640)
Headline earnings 640 168 436 708
GROUP STATEMENT OF CASH FLOWS
Audited Audited
Year Year
ended ended
February February
2011 2010
R`000 R`000
Cash flow from operations (537 593) 2 688 959
Income taxes paid (290 639) (184 324)
Cash flow from operating activities (828 232) 2 504 635
Purchase of property and equipment (203 170) (128 481)
Proceeds from disposal of property
and equipment 3 107 2 161
Purchase of intangible assets (32 193) (20 744)
Disposal/(acquisition)of investments
at fair value through profit or loss 317 425 (1 155 243)
Cash flow from investing activities 85 169 (1 302 307)
Dividends paid (214 092) (153 651)
Preference shares issued 104 363 -
Ordinary shares issued 1 236 458 7 850
Realised loss on settlement of employee
share options less participants`
contributions (108 336) (3 928)
Cash flow from financing activities 1 018 393 (149 729)
Net increase in cash and cash
equivalents 275 330 1 052 599
Cash and cash equivalents at the
beginning of the year 2 566 588 1 513 989
Cash and cash equivalents at the
end of the year 2 841 918 2 566 588
GROUP STATEMENT OF CHANGES IN EQUITY
Audited Audited
Year Year
ended ended
February February
2011 2010
R`000 R`000
Equity at the beginning of the year 1 727 977 1 406 201
Total comprehensive income for the year 668 394 457 258
Ordinary dividend (201 882) (136 921)
Preference dividend (15 754) (14 163)
Employee share option scheme: Value
of employee services 11 706 12 186
Shares issued and acquired for employee
share options at cost (4 422) (12 591)
Proceeds on settlement of employee
share options 23 255 16 538
Tax effect on settlement of share
options 27 587 (506)
Shares issued 1 258 217 -
Share issue expenses (44 565) (25)
Equity at the end of the year 3 450 513 1 727 977
SEGMENT ANALYSIS
The group has two operating segments which conduct business within the Republic
of South Africa:
* Banking - incorporating retail banking services including savings, deposits,
debit cards and consumer loans to individuals.
* Wholesale distribution - consisting of the wholesale distribution of fast
moving consumer goods.
There are no clients that account for more than 10% of revenue.
Transactions between the business segments are on normal commercial terms and
conditions.
The segment information provided to the executive management committee for the
reportable segments is as follows:
Wholesale Intra-
Banking distribution segment Total
R`000 R`000 R`000 R`000
Year ended February 2011
Segment revenue 4 966 768 219 298 (789) 5 185 277
Segment earnings after tax 657 273 (1 249) - 656 024
Year ended February 2010
Segment revenue 3 311 532 208 604 (661) 3 519 475
Segment earnings after tax 448 205 1 019 - 449 224
* The wholesale distribution segment`s contribution to depreciation,
amortisation, interest expenses and other non-cash items is not material.
COMMITMENTS
Audited Audited
February February
2011 2010
R`000 R`000
Capital commitments approved by the
board
Contracted for
Property and equipment 29 609 39 454
Intangible assets - 2 056
Not contracted for
Property and equipment 417 556 227 759
Intangible assets 88 212 60 202
Property and other operating
lease commitments
Future aggregate minimum lease
payments
Within one year 131 058 105 086
From one to five years 362 795 267 967
After five years 54 331 18 566
Total future cash flows 548 184 391 619
Straight lining accrued (25 354) (19 778)
Future expenses 522 830 371 841
NOTES
1. ACCOUNTING POLICIES
The abridged audited consolidated 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.
The unmodified audit reports of PricewaterhouseCoopers Inc. on the annual
financial statements for the year ended 28 February 2011 and the summarised
financial statements contained herein are available for inspection at the
registered office of the company.
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, 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: 2006/01587/07)
DIRECTORS
MS du P le Roux (Chairman), R Stassen (CEO)*, AP du Plessis (FD)*,MJ Jooste,
Prof MC Mehl, Ms NS Mjoli-Mncube, PJ Mouton, CA Otto,
JG Solms, JP van der Merwe
*Executive
ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting of the shareholders of
Capitec Bank Holdings Limited will be held at Molenvliet Wine and Guest Estate,
Helshoogte Pass, Banhoek Road, Stellenbosch, on Friday, 3 June 2010 at 11:30.
The detailed notice will be available at: www.capitecbank.co.za\investor
relations\shareholder centre\notice of annual general meeting from 12 May 2011.
www.capitecbank.co.za
Date: 30/03/2011 08:00:03 Produced by the JSE SENS Department.
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