| Tue 20 Feb 2001, 0:00 | | Nedcor - Audited Results |
|
NEDCOR LIMITED
Reg. No: 1966/010630/06
FINANCIAL RESULTS for the year ended 31 December 2000
- Headline earnings up 26% to R3 027 million
- Headline earnings per share up 24% to 1 267 cents
- Return on assets 2,10%
- Return on equity 24,0%
- Efficiency ratio 50,0%
Overview
The first year of the millennium has been tough but eventful, with the group
positioning itself for future growth. The year has seen three non-linear
strategies unfold with the forming of alliances with best-of-breed companies in
their fields, the commercialisation of our Technology and Operations (T & O)
Division and the acquisition of strategic investments in leading companies
whose technology capabilities have specific relevance and application in the
banking environment.
Firstly, in order to broaden our scope and reach into the retail banking
market, we made significant progress in the development of our alliance and
partnership strategy. We acquired the business of FBC Fidelity Bank Limited
(out of curatorship) and merged the Peoples Bank and NedEnterprise businesses
into it. This business has been renamed Peoples Bank and is now one of the
largest financial institutions serving the previously underbanked population of
South Africa. Empowerment parties will shortly join Peoples Bank as important
shareholders.
Nedcor further expanded this strategy through alliances formed with Capital One
to utilise its unique datamining capabilities; Old Mutual Group Schemes to
offer assurance and savings products; furniture retailer JD Group to develop
and distribute products through its 645 outlets across South Africa; Pick 'n
Pay Financial Services to launch a new range of financial services through its
outlets; Imperial Holdings through the purchase of 50,1% of Imperial Bank, a
specialist asset-based finance house, to create a new force in the asset-
financing market; and Virgin Active, through the acquisition of a 30% private
equity interest in the Virgin Active South Africa health and fitness business.
We also acquired international partners through the merger of the operations of
Nedcor Investment Bank Asset Management with the South African operations of
Templeton International Inc and acquired leading corporate advisers Edward
Nathan & Friedland at the end of 1999, which contributed to greater deal flows
in the corporate finance area during 2000. These initiatives will generate
operational and marketing synergies for both our partners and Nedcor.
Secondly, during the past year our T & O Division moved towards
commercialisation as a standalone entity. This will enable us to utilise more
widely the capacity within T & O and create a potential destination for the
outsourcing of IT and processing needs of other financial institutions.
A third leg of our strategy has seen exciting developments in our investments
in strategic IT companies and other business-enhancing relationships. This led
to further investment in Dimension Data International and new investments in
The Internet Solution, Aplitec, IQ Business Group, Nihilent Technologies and
Miraculum, all new technology businesses that will add value to our traditional
business in future years.
Commentary on results
We continued on our path of sustained performance with growth in attributable
income of 26% to R3 027m (1999: R2 406m). Headline earnings per share increased
by 24%, resulting in a five-year compound growth rate of 26%.
Total assets grew by 22% to R158,3 billion as a result of good core growth, the
acquisition of FBC Fidelity Bank and growth in the Dimension Data investment.
Return on average assets increased to 2,10% from 1,95% last year. Average
advances showed satisfactory growth of 12%, while net interest income (NII)
increased by only 9% due to a decline in interest margin from 3,64% last year
to 3,46%. The margin was negatively affected by pure margin compression, the
reduced endowment effects of lower interest rates on free capital and the
redeployment of funds into strategic investments.
Shareholders' funds increased to R16,0 billion, an increase of 59%, mainly as a
result of the exceptional profits of R3,6 billion on the exchange of our 25%
interest in Dimension Data International for shares in the London-listed
Dimension Data Holdings plc. Return on equity (ROE) declined to 24,0% from
25,3% as a result of this significant increase in equity but, excluding our
technology investments, the adjusted ROE for the banking business is 25,3%
(1999: 23,9%). The levels of regulatory and economic capital of the group
remain among the strongest in the industry.
Non-interest revenue (NIR) continued to grow strongly and is 23% up due to good
all-round performance and excellent foreign exchange income. NIR to total
income is 47,6%, which reflects the strong growth in NIR, compared with NII.
The continuing improvement in the credit environment resulted in a 5% increase
in the bad debt charge (1999: 24% increase). The ratio of doubtful debt
provisions, including credit insurance cover of R284m (1999: R193m), to average
advances increased to 3,8% from 3,0% last year. This increase is mainly due to
the acquisition of FBC Fidelity Bank, where we acquired an advances book with
significant provisions. Provisions overall remain conservative and meet the new
statutory requirements effective 1 January 2001.
Core expenses grew by 8% and the expense-to-income ratio improved further to
50,0% (1999: 51,7%). Nedcor is proud of attaining this goal, which benchmarks
us with international trends. Total expense growth of 11% included the
increased base costs from the acquisitions of Edward Nathan & Friedland , FBC
Fidelity Bank and the new Capital One activities, offset by a final recognition
of the pension fund surplus.
The tax charge grew by 16% to R722m (1999: R625m), and reflecting a slight
decline in the effective tax rate from 21,4% to 20,1%.
Segmental reporting
The contributions to headline earnings and the segmental analysis by operation
and by geography are set out in the financial results.
Nedcor Bank performed well with all key indicators showing improvement. Growth
was recorded across all divisions, with especially good growth in the Retail,
Corporate, International and Treasury Divisions. Nedcor Investment Bank again
produced solid growth in income of 23%, while Cape of Good Hope Bank's increase
in profits of 21% is in line with expectations. Peoples Bank performed well
while restructuring as a merged entity.
Exceptional items
Exceptional items totalled R3 343m and include the following principal items:
- A net profit of R3 634m on disposal of investments and businesses, including
the exchange of the investment in Dimension Data International for R1 800m cash
and an 8% interest in Dimension Data Holdings plc, the sale of 50% of the funds
management business of Nedcor Investment Bank to Templeton International Inc,
and the dilution of Nedcor Bank's interest in Linx Holdings (Pty)Limited from
30% to 20% as part payment for the acquisition of a 20% interest in The
Internet Solution.
- R251m relating to the amortisation of goodwill and other acquisition costs.
- R106m before taxation for the further writedown of properties and leasehold
premises to recognise permanent diminution in value resulting from the
reconfiguration of our retail branch network.
Prospects
The improvement in the economic climate should have a positive effect into the
future. Ongoing cost control and increased efficiencies, benefits from our
alliances and our continued drive to improve client service should lead to
market share growth, which will enhance future earnings. These factors,
together with anticipated growth from the group's strategic investments, should
contribute to positive results for Nedcor in 2001.
Declaration of final cash dividend
A final cash dividend of 240 cents per ordinary share has been declared and is
payable to shareholders registered in the books of the company at the close of
business on Friday, 9 March 2001.
It is expected that dividend cheques will be posted to shareholders, or will be
electronically transferred to the bank accounts of shareholders who make use of
this facility, as the case may be, on or about Thursday, 19 April 2001.
For and on behalf of the board
CF Liebenberg RCM Laubscher
Chairman Chief Executive
19 February 2001
Registered office Transfer secretaries
Nedcor Limited Mercantile Registrars Limited
13th Floor 11 Diagonal Street
100 Main Street Johannesburg, 2001
Johannesburg, 2001 PO Box 1053, Johannesburg, 2000
PO Box 1144 Tel (011) 370-5000
Johannesburg, 2000
Directors
CF Liebenberg (Chairman); PG Joubert (Deputy Chairman); RCM Laubscher* (Chief
Executive); GH Bulterman; WAM Clewlow; PTW Curtis; BJS Hore*; Prof MM Katz*; MJ
Leeming*; MJ Levett; JB Magwaza; ME Mkwanazi; E Molobi; SG Morris*; DGS
Muller*; ML Ndlovu*; CC Parker; JVF Roberts (British); AA Routledge*; AJ
Trahar; GS van Niekerk; Dr WP Venter
*Executive
Company Secretary: GS Nienaber
Financial highlights
% Audited Audited
change 31.12.2000 31.12.1999
Rm Rm
Income statement
Net income before taxation (Rm) 23 3 598 2 922
Headline earnings
(1999: adjusted) (Rm) 26 3 027 2 406
Headline earnings per share
(1999: adjusted) (cents) 24 1 267 1 024
Income attributable to
shareholders (Rm) 165 6 370 2 406
Earnings per share (cents) 160 2 665 1 024
Dividends per share (cents) 25 400 320
Dividend cover (times) 3,2 3,2
Selected returns
Return on average
shareholders' funds (%) 24,0 25,3
Return on average total assets (%) 2,10 1,95
Non-interest revenue to total
income (%) 47,6 44,4
Efficiency ratio (%) 50,0 51,7
Net interest income to
interest-earning assets (%) 3,46 3,64
Doubtful debt provisions to
average advances (%) 3,8 3,0
Balance sheet
Total shareholders' funds (Rm) 59 15 980 10 066
Deposit, current and other
accounts (Rm) 19 140 689 118 225
Advances and other accounts (Rm) 16 120 085 103 783
Total assets (Rm) 22 158 259 129 844
Capital ratio (%) 13,2 12,0
Capital ratio - Tier 1 (%) 11,5 10,5
Share statistics
Share price (cents) 25 17,100 13 700
Number of shares in issue (m) 1 240,1 237,2
Weighted average number of
shares (m) 2 239,0 235,0
Price-earnings ratio (historical) 13,5 13,4
Market capitalisation (Rbn) 27 41,4 32,5
Group balance sheet
% Audited Audited
change 31.12.2000 31.12.1999
Rm Rm
Assets
Cash and short-term funds 70 12 860 7 549
Other short-term securities (6) 6 873 7 315
Government and public sector
securities 11 6 886 6 230
Advances and other accounts 16 120 085 103 783
Customers' indebtedness for
acceptances (2) 859 874
Associate and other investments 271 8 518 2 293
Fixed property 30 1 149 883
Equipment 9 644 594
Intangible assets 19 385 323
Total assets 22 158 259 129 844
Shareholders' funds and liabilities
Share capital 1 240 237
Reserves 61 15 316 9 524
Ordinary shareholders' interest 59 15 556 9 761
Minority shareholders' interest 424 305
Total shareholders' funds 59 15 980 10 066
Subordinated debt instruments 8 731 679
Deposit, current and other
accounts 19 140 689 118 225
Liabilities under acceptances (2) 859 874
Capital, reserves and liabilities 22 158 259 129 844
Confirmed letters of credit
and other 7 150 2 726
Guarantees 8 727 5 844
Contingent liabilities 15 877 8 570
Group income statement
% Audited Audited
change 31.12.2000 31.12.1999
Rm Rm
Interest income (6) 15 236 16 260
Interest expense (12) 10 504 11 901
Net interest income 9 4 732 4 359
Non-interest revenue 23 4 292 3 486
Total income 15 9 024 7 845
Specific and general provisions 5 910 869
Net income 16 8 114 6 976
Expenses 11 4 516 4 054
Net operating income before
exceptional items 23 3 598 2 922
Exceptional items 3 277 (217)
Net capital profit on sale of
long-term investments 3 634 711
Amortisation of goodwill and
other acquisition costs (251)
Writedown of property and
leasehold premises (106) (225)
Special general provision
supplement (703)
Net income before taxation 154 6 875 2 705
Taxation 16 722 625
Taxation: exceptional items (77) (217)
Net income after taxation 171 6 230 2 297
Attributable earnings of
associates 91 249 130
Income attributable to minority
shareholders (109) (21)
Income attributable to
shareholders 165 6 370 2 406
Headline earnings
% Audited Audited
change 31.12.2000 31.12.1999 *
Rm Rm
Income attributable to
shareholders 165 6 370 2 406
Less: non-headline-earnings items 3 343
Exceptional items 3 277
Taxation: exceptional items 77
Share of exceptional items
attributable to minorities (11)
Headline earnings (1999: adjusted) 26 3 027 2 406
*Adjusted headline earnings for 1999 have been calculated excluding exceptional
items to ensure comparability.
Group cash flow statement
% Audited Audited
change 31.12.2000 31.12.1999
Rm Rm
Cash flows from operating activities 4 395 3 514
Cash received from clients 19 436 19 650
Cash paid to clients, employees
and suppliers (14 624) (15 648)
Dividends received 96 64
Dividends paid (513) (552)
Net decrease/(increase) in
operating funds 4 131 (1 366)
Taxation paid (264) (392)
Net cash (utilised)/generated in
investing activities (3 055) 314
Net cash provided by financing
activities 104 229
Net increase in cash and
short-term funds 5 311 2 299
Cash and short-term funds at beginning
of period 7 549 5 250
Cash and short-term funds at end
of period 12 860 7 549
Statement of change in ordinary shareholders' interest
Audited Audited
31.12.2000 31.12.1999
Rm Rm
Share capital 240 237
Balance at beginning of year 237 233
Issued during the year 5 4
Less: shares held by subsidiary company (2)
Share premium 934 833
Balance at beginning of year 833 1 125
Issue of shares 405 250
Share issue expenses (3) (12)
Less: shares held by subsidiary company (301)
Goodwill written off (530)
Non-distributable reserves 516 443
Balance at beginning of year 443 286
Transfer from distributable reserves 254 285
Foreign currency translation 120
Release of reserves previously
not available (284) (197)
Other movements (17) 69
Distributable reserves 13 866 8 248
Balance at beginning of year 8 248 7 487
Attributable income 6 370 2 406
Transfer to non-distributable
reserves (254) (285)
Dividends paid (513) (552)
Goodwill written off (795)
Other movements 15 (13)
Ordinary shareholders' interest 15 556 9 761
Associate and other investments
Audited Audited
31.12.2000 31.12.1999
Rm Rm
Book value 8 518 2 293
Associate investments 1 457 848
Other investments 7 061 1 445
Market/Directors' valuation 9 082 5 980
Associate investments 1 974 4 457
Other investments 7 108 1 523
Valuation surplus 564 3 687
Segmental analysis - headline earnings
Audited Audited
% 31.12.2000 31.12.1999
Change Rm % Rm %
By operation
Nedcor Bank and group operations 31 2 430 80 1 862 77
Retail (including
Peoples Bank) 41 369 12 261 11
Commercial 6 697 23 660 27
Corporate 39 836 28 601 25
International and Treasury 34 305 10 227 9
Associate income 97 223 7 113 5
Nedcor Investment Bank
(net of minority)** 8 518 17 479 20
Cape of Good Hope Bank 21 79 3 65 3
26 3 027 100 2 406 100
By geography
South Africa 6 2 214 73 2 084 87
Rest of Africa 71 147 5 86 4
Rest of the world 182 666 22 236 10
26 3 027 100 2 406 100
**NIB reported earnings growth of 23% to R615 million (December 1999: R500
million) of which R97million (December 1999: R21 million) was attributable to
NIB minorities.
Comparative figures are restated, where necessary, to afford a proper
comparison.
Percentages are calculated using actual numbers.
This information is also available on our website:
www.nedcor.co.za
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