| Wed 28 Mar 2012, 7:05 | | CPI/CPIP - Capitec Bank Holdings Limited - Summarised audited financial |
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CPI CPIP
CPI
CPI/CPIP - Capitec Bank Holdings Limited - Summarised audited financial
statements for the year ended 29 February 2012
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 29 FEBRUARY 2012
Headline earnings per share up 49% to 1 125 cents
Earnings up 68%
Final dividend per share: 300 cents
Return on equity: 29%
Active clients: 3.7 million
Change %
2012 2011 2012/2011 2010
PROFITABILITY
Income from banking
operations Rm 5 646 3 741 51 2 556
Net loan impairment
expense Rm (1 604) (988) 62 (548)
Banking operating
expenses Rm (2 486) (1 813) 37 (1 368)
Non-banking operations Rm 3 - 2
Tax Rm (464) (284) 63 (193)
Preference dividend Rm (19) (16) 19 (14)
Earnings attributable to
ordinary shareholders
Basic Rm 1 075 640 68 435
Headline Rm 1 078 640 68 437
Cost to income ratio -
banking activities % 44 48 54
Return on ordinary
shareholders` equity % 29 34 32
Earnings per share
Attributable cents 1 122 757 48 525
Headline cents 1 125 757 49 527
Diluted attributable cents 1 096 730 50 509
Diluted headline cents 1 099 730 50 511
Dividends per share
Interim cents 125 85 47 55
Final cents 300 205 46 155
Total cents 425 290 47 210
Dividend cover x 2.6 2.6 2.5
ASSETS
Net loans and advances Rm 16 863 10 071 67 5 225
Cash and cash
equivalents Rm 4 551 2 842 60 2 567
Investments Rm 1 199 989 21 1 306
Other Rm 1 009 538 88 390
Total assets Rm 23 622 14 440 64 9 488
LIABILITIES
Deposits Rm 17 692 10 450 69 7 360
Other Rm 744 539 38 400
Total liabilities Rm 18 436 10 989 68 7 760
EQUITY
Shareholders` funds Rm 5 185 3 451 50 1 728
Capital adequacy ratio % 39 41 37
Net asset value per
ordinary share cents 4 962 3 418 45 1 896
Share price cents 18 500 15 901 16 8 200
Market capitalisation Rm 18 367 14 850 24 6 805
Number of shares in
issue `000 99 282 93 388 6 82 983
Share options
Number outstanding `000 3 087 4 222 (27) 5 322
Number outstanding to
total shares in issue % 3 5 (40) 6
Average strike price cents 4 358 3 510 24 2 888
Average time to
maturity months 16 20 (20) 24
OPERATIONS
Branches 507 455 11 401
Employees 7 194 5 331 35 4 154
Active clients `000 3 706 2 829 31 2 122
ATMs
Own 550 479 15 417
Partnership 1 526 1 182 29 821
Capital expenditure Rm 381 235 62 149
SALES
Loans
Value of loans advanced Rm 19 393 14 318 35 8 645
Number of loans
advanced `000 4 648 3 907 19 2 899
Average loan amount R 4 172 3 665 14 2 982
Repayments Rm 16 173 12 117 33 8 288
Gross loans and
advances Rm 18 408 10 916 69 5 607
Loans past due (arrears) Rm 932 626 49 350
Arrears to gross
loans and advances % 5.1 5.7 6.2
Provision for doubtful
debts Rm 1 545 845 83 382
Provision for
doubtful debts to
gross loans and advances % 8.4 7.7 6.8
Arrears coverage ratio % 166 135 109
Loan revenue Rm 5 660 3 800 49 2 603
Loan revenue to average
gross loans and advances % 38.6 46.0 58.9
Gross loan impairment
expense Rm 1 780 1 088 64 620
Recoveries Rm 176 100 76 72
Net loan impairment
expense Rm 1 604 988 62 548
Net loan impairment
expense to loan revenue % 28.3 26.0 21.1
Net loan impairment
expense to average gross
loans and advances % 10.9 12.0 12.4
Deposits
Wholesale deposits Rm 7 162 3 954 81 3 669
Retail call savings Rm 6 348 3 933 61 2 346
Retail fixed savings Rm 4 015 2 316 73 1 148
Net transaction fee
income Rm 836 532 57 295
IT IS ALL ABOUT CLIENTS
Acquiring new clients and encouraging existing clients to use more of our
products and services is what we do. We`ve acquired 877 000 new active clients
for the year.
As the bank has grown to a sizeable business with over 7 000 employees and 507
branches, we retain the focus and discipline of a small organisation. Every new
employee, from the most experienced to the person in their first job, must
participate in the same client orientation training course. During the year 2
694 employees (including replacements) were appointed and 1 863 jobs were
created.
Capitec Bank has changed banking in South Africa. We focus on effective system-
driven solutions and centralised control. We minimise administration and costs
for our clients. We innovate and keep banking simple. This approach is
attracting more and more high income clients that recognise that what we offer
is all they need.
CAPITAL AND LIQUIDITY
In January 2011 when capital was needed to meet the requirements for the 2012
financial year, there was uncertainty surrounding the Basel 3 criteria for
subordinated debt to qualify as capital. For this reason a rights issue, which
raised R1.1 billion in ordinary share capital, was undertaken.
A private placement of ordinary share capital took place in November 2011. A
total of R787 million in ordinary share capital was raised from domestic and
international institutional shareholders at R172.00 per share. The price was at
a discount of 7.6% to the volume weighted share price of the previous 30 days.
This increased the number of ordinary shares in issue by 4.91%. We consider this
placement a success. The sharply higher taxes on dividends and capital gains
will increase the cost of capital.
The return on ordinary shareholders equity was 29% (2011: 34%) despite the
increase in ordinary share capital in January and November 2011.
During the course of the 2012 financial year, as the uncertainty surrounding
subordinated debt diminished, we issued R619 million in subordinated debt to
fund operational requirements. All the subordinated debt issued by Capitec
qualifies for the phase-out in terms of Basel 3 criteria.
Retail deposits (the total of savings accounts and fixed deposits) have grown to
R10 billion, increasing by 66% compared to a year ago. At Capitec savings
attract interest from the first cent. The average retail call savings balance
grew by 12% to over R1 800 during the year. Competitive fixed deposit rates have
seen fixed deposits grow by 73% during the last year to R4 billion.
UNSECURED CREDIT
The unsecured credit market is showing continued growth. Unsecured credit
(excluding credit card facilities) granted during the year to September 2011
grew by 56% according to the statistics published by the National Credit
Regulator ("NCR"). The loan sales reported to the NCR by Capitec for the same
period grew by 71%. The NCR reports loans disbursed as the total of all new
credit, even if such loans are used to repay previous loans. In this report
Capitec reports loan sales net of repayments. In other words, when a new loan is
used to settle a current loan, we report only the additional money advanced. On
this basis loans advanced grew by 35% for the full 2012 financial year to total
R19.4 billion.
The term of credit granted has also continued to lengthen. During the 2012 year
loans with terms longer than three years advanced by Capitec grew to R8.9
billion and totalled 46% of all loans advanced (2011: 25%).
There is a perception that a credit bubble is developing in the unsecured credit
market as a result of continuing growth in the term and value of credit granted.
We believe that growth will continue and that there is not a significant threat
to the market as long as affordability and client behaviour is considered when
granting credit.
When the credit market in South Africa was governed by the Usury Act, credit was
only available to prime clients who could provide security. Interest rates were
capped and credit providers sold credit insurance in order to increase their
returns. It was difficult for the ordinary South African to get credit.
Subsequently, the exemption to the Usury Act for loans under R10 000 with terms
shorter than three years, opened the market to micro-lenders and interest rates
increased dramatically.
When Capitec entered the market, our aim was to reduce the cost of credit to the
client and make unsecured credit available to a wider market.
The implementation of the National Credit Act in June 2007 capped interest rates
and fees but did not restrict the term or the amount of credit that could be
granted. This spurred growth in the market.
The impact of the resulting lengthening loan terms and increasing loan values to
clients can be measured best by comparing loan instalments to the disposable
income of clients.
An analysis of our credit granting for the last quarter of the 2012 financial
year compared to the last quarter of the 2009 financial year indicates that
average compounded growth in credit granted was 97%, while the compounded growth
in the average loan instalment was only 9.8%. Disposable income grew by 9.2% per
year during the same period, slightly more than wage inflation.
The percentage of loan instalments on loans with terms longer than 12 months to
disposable income in 2012 is 40% compared to 39% in 2009. The client`s
disposable income has not been significantly impacted by the changes taking
place in the market and according to our analysis our clients are not over-
indebted.
The granting of longer-term, higher value loans has not had a negative impact on
the quality of Capitec`s loan book. The gross loan book grew by R7.5 billion
during the 2012 financial year to R18.4 billion. Arrears grew by R306 million
and arrears to loans and advances was 5.1% compared to 5.7% in 2011 (2010:
6.2%). This is because longer-term loans are granted to our better rated clients
with lower credit risk.
The gross loan impairment expense (before recoveries) increased by R692 million
(64%). This increase is a result of the growth in the size of our loan book and
not as a result of higher risk in the loan book.
REDUCING MARGINS, INCREASING PROFIT
Loan revenue grew by 49% to R5.7 billion, but loan revenue to average gross
loans and advances decreased to 39% from 46% in 2011. Interest rates on all loan
products declined during the year as we continued to make lending more
affordable for our clients. The lengthening term of the loan book also
contributed to decreasing yields but increased the annuity income from loans and
decreased the loan impairment expense.
Despite the fact that Capitec did not increase its fees in 2011, transaction fee
income grew by 57% to R836 million. The number of clients as well as the number
of monthly transactions per client increased during the past year because a
growing number of clients are using Capitec for stop orders, debit orders and
transfers. We have already announced our new fees for this year, which included
no increase on our monthly fee and that the cost of internet and mobile payments
(irrespective of the amount involved) will be reduced from R2.75 to R1.50 each.
BOARD OF DIRECTORS
The core management team has been with the bank since its inception. They are
supported by an informed board. During the year we had to say goodbye to Johnnie
Solms who was a director of the Capitec Bank since the inception of the bank. He
made a solid and entrepreneurial contribution, for which we thank him. We are
pleased that Jackie Huntley, a lawyer, could join us as a board member. From the
1 March 2012 our board will also benefit from the presence of Jock McKenzie, who
has been chairman and CEO of Caltex Petroleum Corporation.
DIVIDENDS
The directors declared a final dividend of 300 cents per ordinary share for the
year ended 29 February 2012 on 1 March 2012, bringing the total dividends for
the year to 425 cents per share. The final dividend was paid on 26 March 2012.
THE FUTURE
The focus remains on clients, from systems that provide convenience and ease of
access, to the support clients require to make decisions in their own best
interest.
We shall continue to build our bank platform to deliver this support. New card
services, loan products and mobile banking functions are planned for the coming
year, as well as less visible improvements to our infrastructure. All of these
will make banking easier and more cost effective for our clients.
We are confident that this and the 55 new branches planned for the current year
will continue to grow our client base as in the past.
On behalf of the board
Michiel le Roux
Chairman
Riaan Stassen
Chief executive officer
Stellenbosch
28 March 2012
GROUP BALANCE SHEET
Audited Audited
February February
2012 2011
R`000 R`000
ASSETS
Cash and cash equivalents 4 551 203 2 841 918
Investments designated at fair value 1 198 833 988 664
Loans and advances to clients 16 863 028 10 071 466
Inventory 42 079 30 847
Other receivables 57 745 48 177
Current income tax assets 62 331 -
Property and equipment 543 121 375 185
Intangible assets 69 262 34 357
Deferred income tax assets 234 242 48 903
Total assets 23 621 844 14 439 517
LIABILITIES
Loans and deposits at amortised cost 17 692 062 10 449 883
Provisions 24 998 14 403
Trade and other payables 718 549 489 685
Current income tax liabilities 885 35 033
Total liabilities 18 436 494 10 989 004
EQUITY
Ordinary share capital and premium 2 926 435 1 918 677
Cash flow hedge reserve (1 920) (3 469)
Retained earnings 2 001 866 1 276 336
Share capital and reserves
attributable to ordinary
shareholders 4 926 381 3 191 544
Non-redeemable, non-cumulative,
non-participating preference share
capital and premium 258 969 258 969
Total equity 5 185 350 3 450 513
Total equity and liabilities 23 621 844 14 439 517
GROUP INCOME STATEMENT
Audited Audited
Year Year
ended ended
February February
2012 2011
R`000 R`000
Interest income 4 346 902 2 808 543
Interest expense (1 022 374) (751 360)
Net interest income 3 324 528 2 057 183
Loan fee income 1 657 018 1 273 574
Loan fee expense (186 360) (121 710)
Transaction fee income 1 360 308 883 040
Transaction fee expense (524 202) (351 309)
Net fee income 2 306 764 1 683 595
Dividend income 1 532 571
Net impairment charge on loans
and advances to clients (1 604 190) (988 177)
Net movement in financial
instruments held at fair value 12 070 (210)
Other income 679 251
Sales 217 145 219 298
Cost of sales (191 996) (197 040)
Non-banking income 25 149 22 258
Income from operations 4 066 532 2 775 471
Banking operating expenses (2 486 318) (1 812 499)
Non-banking operating expenses (22 342) (22 672)
Operating profit before tax 1 557 872 940 300
Income tax expense (463 532) (284 276)
Profit for the year 1 094 340 656 024
Earnings per share (cents)
Basic 1 122 757
Diluted 1 096 730
GROUP STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
Year Year
ended ended
February February
2012 2011
R`000 R`000
Profit for the year 1 094 340 656 024
Cash flow hedge before tax 2 151 17 181
Income tax relating to cash flow hedge (602) (4 811)
Other comprehensive income for the year
net of tax 1 549 12 370
Total comprehensive income for the year 1 095 889 668 394
RECONCILIATION OF ATTRIBUTABLE EARNINGS TO HEADLINE EARNINGS
Audited Audited
Year Year
ended ended
February February
2012 2011
R`000 R`000
Net profit attributable to
equity holders 1 094 340 656 024
Less preference dividend (19 419) (15 754)
Net profit after tax attributable to
ordinary shareholders 1 074 921 640 270
Non-headline items:
Loss/(Profit) on disposal of property
and equipment 596 (638)
Income tax charge - property and
equipment (192) 193
Loss on scrapping of intangible assets 3 048 476
Income tax charge - intangible assets (853) (133)
Headline earnings 1 077 520 640 168
GROUP STATEMENT OF CASH FLOWS
Audited Audited
Year Year
ended ended
February February
2012 2011
R`000 R`000
Cash flow from operations 2 406 380 (537 593)
Income taxes paid (603 066) (290 639)
Cash flow from operating activities 1 803 314 (828 232)
Purchase of property and equipment (315 366) (203 170)
Proceeds from disposal of property
and equipment 1 236 3 107
Purchase of intangible assets (65 873) (32 193)
Acquisition of investments at fair
value through profit or loss (1 542 428) (1 469 502)
Disposal of investments at fair
value through profit or loss 1 344 330 1 786 927
Cash flow from investing activities (578 101) 85 169
Dividends paid (337 570) (214 092)
Preference shares issued - 104 363
Ordinary shares issued 1 007 758 1 236 458
Realised loss on settlement of employee
share options less participants`
contributions (186 116) (108 336)
Cash flow from financing activities 484 072 1 018 393
Net increase in cash and cash
equivalents 1 709 285 275 330
Cash and cash equivalents at the
beginning of the year 2 841 918 2 566 588
Cash and cash equivalents at the
end of the year 4 551 203 2 841 918
GROUP STATEMENT OF CHANGES IN EQUITY
Audited Audited
Year Year
ended ended
February February
2012 2011
R`000 R`000
Equity at the beginning of the year 3 450 513 1 727 977
Total comprehensive income for the year 1 095 889 668 394
Ordinary dividend (317 939) (201 882)
Preference dividend (19 419) (15 754)
Employee share option scheme: Value
of employee services 11 778 11 706
Shares issued and acquired for employee
share options at cost (702) (4 422)
Proceeds on settlement of employee
share options 35 091 23 255
Tax effect on share options 142 886 27 587
Shares issued 798 932 1 258 217
Share issue expenses (11 679) (44 565)
Equity at the end of the year 5 185 350 3 450 513
COMMITMENTS
Audited Audited
February February
2012 2011
R`000 R`000
Capital commitments approved by the
board
Contracted for
Property and equipment 85 195 29 609
Intangible assets 6 744 -
Not contracted for
Property and equipment 458 247 417 556
Intangible assets 122 329 88 212
Property and other operating
lease commitments
Future aggregate minimum lease
payments
Within one year 170 248 131 058
From one to five years 475 371 362 795
After five years 99 694 54 331
Total future cash flows 745 313 548 184
Straight lining accrued (35 749) (25 354)
Future expenses 709 564 522 830
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.
Banking segment revenue consists of interest income and fee income on consumer
loans, transaction fee income on savings accounts, dividend income and other
income. Wholesale distribution revenue consists of sales of fast moving consumer
goods.
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 2012
Segment revenue 7 367 351 217 145 (912) 7 583 584
Segment earnings after tax 1 092 630 1 710 - 1 094 340
The following items are
included in segment
earnings after tax:
Interest income 4 347 814 - (912) 4 346 902
Interest expense (1 022 329) (957) 912 (1 022 374)
Net fee income 2 306 764 - - 2 306 764
Net impairment charge (1 604 052) (138) - (1 604 190)
Depreciation (145 141) (457) - (145 598)
Amortisation (27 920) - - (27 920)
Other operating expenses (2 313 257) (21 885) - (2 335 142)
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
The following items are
included in segment
earnings after tax:
Interest income 2 809 332 - (789) 2 808 543
Interest expense (751 299) (850) 789 (751 360)
Net fee income 1 683 595 - - 1 683 595
Net impairment charge (988 192) 15 - (988 177)
Depreciation (106 647) (479) - (107 126)
Amortisation (19 571) - - (19 571)
Other operating expenses (1 686 281) (22 193) - (1 708 474)
NOTES
The summarised audited consolidated financial statements are prepared in
accordance with International Accounting Standard (IAS) 34 `Interim Financial
Reporting`, the requirements of the Companies Act of South Africa (Act No 71 of
2008), as amended, and the Listings Requirements of the JSE Limited. The
accounting policies applied conform to IFRS and are consistent with those
applied in the previous year. Standards, interpretations and amendments to
published standards applied for the first time during the current financial year
did not have any significant impact on the financial statements. The group
complies in all material respects with the requirements of the King III Code.
The unmodified audit reports of PricewaterhouseCoopers Inc. on the annual
financial statements for the year ended 29 February 2012 are available for
inspection at the registered office of the company.
The definition of the number of loans advanced as reflected in the key
performance indicators was amended to count one multi-loan per month and not
each draw-down on a multi-loan as a loan advanced. Statistics for comparative
years were restated.
The preparation of the summarised audited consolidated financial statements was
supervised by the financial director, Andre du Plessis CA(SA).
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 (Proprietary) Limited (Registration number:
2004/003647/07)
Ground Floor, 70 Marshall Street, Johannesburg 2001,
PO Box 61051, Marshalltown 2107
SPONSOR
PSG Capital (Proprietary) Limited (Registration number: 2006/015817/07)
DIRECTORS
MS du P le Roux (Chairman), R Stassen (CEO)*, AP du Plessis (FD)*, Ms RJ
Huntley, MJ Jooste, JD McKenzie, Prof MC Mehl, Ms NS Mjoli-Mncube, PJ Mouton, CA
Otto,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 the Auditorium, Conference centre,
Spier, R310, Stellenbosch on Friday, 1 June 2012 at 12:00. The detailed notice
will be available from 11 May 2012 at: www.capitecbank.co.za\investor
relations\shareholder centre\notice of annual general meeting.
capitecbank.co.za
enquiries@capitecbank.co.za
Date: 28/03/2012 07:05:01 Produced by the JSE SENS Department.
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