| Mon 21 May 2001, 0:00 | | Boe Limited: Interim Results |
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BoE LIMITED
BoE LIMITED: INTERIM RESULTS
BoE LIMITED
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INTERIM RESULTS
UNAUDITED FOR THE SIX MONTHS ENDED 31 MARCH 2001
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* EPS up 25% to 25.1 cents per share
* Cost : income ratio improves to 51.7%
* Total assets under management of R120 billion
* Gross advances R47 billion
* Group remains strongly capitalised
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FINANCIAL HIGHLIGHTS
Actual Pro forma Pro forma
Six months Six months Year ended
to March to March September
Change 2001 2000 2000
Headline earnings R'm 14% 573 501 1 084
Headline earnings per share cents 25% 25.1 20.1 45.3
Attributable earnings per share cents 24.6 18.5 40.6
Number of shares in issue 'm 2 293 2 484 2 304
Weighted average number of shares 'm 2 287 2 487 2 392
Net asset value per share
(investments at market value) cents 281 259 253
Dividends declared/proposed
per share cents 7.0 5.0 16.0
Dividend cover 3.6 4.0 2.8
Return on equity % 16.2 14.1 15.8
Cost to income ratio % 51.7 53.2 54.0
Non-interest revenue
to total income % 49.5 49.4 47.9
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CONSOLIDATED BALANCE SHEET
Actual Pro forma Actual
March March September
R'm 2001 2000 2000
ASSETS
Investments 11 207 11 577 10 903
Advances 45 910 43 285 43 366
Other assets 8 749 6 597 8 193
65 866 61 459 62 462
EQUITY AND LIABILITIES
Capital and reserves 7 311 6 499 6 798
Interest-bearing borrowings 1 045 995 851
Life funds liabilities 6 708 6 820 6 665
Deposits and other accounts 49 355 45 062 46 253
Other liabilities 1 447 2 083 1 895
65 866 61 459 62 462
Off balance sheet
assets under management 54 222 52 084 52 306
Total assets under management 120 088 113 543 114 768
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CONSOLIDATED INCOME STATEMENT
Actual Pro forma Pro forma
Six months Six months Year ended
to March to March September
R'm 2001 2000 2000
Income from advances 3 416 3 120 6 440
Interest on deposits 2 470 2 248 4 614
Net margin 946 872 1 826
Other income 928 853 1 678
INCOME FROM NORMAL OPERATIONS 1 874 1 725 3 504
Bad and doubtful debts 225 243 412
Operating expenses 969 917 1 893
PROFIT FROM NORMAL OPERATIONS 680 565 1 199
Exceptional items 26 (3) (40)
PROFIT FROM OPERATIONS 706 562 1 159
Financing cost 59 51 103
Share of earnings of associate companies35 38 73
PROFIT BEFORE TAXATION 682 549 1 129
Taxation 120 88 159
ATTRIBUTABLE INCOME 562 461 970
Exclusions 11 40 114
Final proceeds from sale of
Norwich interest (32) - -
Amortisation of goodwill 41 40 80
Other 2 - 34
HEADLINE EARNINGS FOR THE YEAR 573 501 1 084
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CONSOLIDATED CHANGES IN EQUITY STATEMENT
Actual Pro forma Actual
Six months Six months Year ended
to March to March September
R'm 2001 2000 2000
CAPITAL AND RESERVES
Balance at beginning of the year 6 798 6 993 12 610
Changes in share capital and premium (56) (839) (4 578)
Shares held by group entities - (847) (127)
Share options exercised and convertible
debentures redeemed 19 8 40
Effects of group restructure - - (3 708)
Share buy-backs (75) - (783)
Changes in reserves 569 345 (1 234)
Net profit/(loss) for the year 562 461 (255)
Dividends - (110) (369)
Revaluation of investments
directly to reserves (5) 10 (640)
Foreign currency translation reserve
directly to reserves 12 (2) 12
Other - (14) 18
Balance at end of the year 7 311 6 499 6 798
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SEGMENTAL ANALYSIS OF HEADLINE EARNINGS
Actual Pro forma
Six months Year ended
to March September
R'm Contribution 2001 2000
DIVISIONAL ANALYSIS
Banking Related Activities 73% 421 777
BoE Corporate 20% 117 198
NBS 9% 49 142
BoE Merchant Bank 8% 44 87
BoE Private Bank 1% 8 19
BoE Bank Business Division 14% 78 128
Group Treasury 6% 36 61
Capital and Investments 15% 89 142
Asset Management 3% 16 41
Insurance 12% 69 136
ABIL 12% 67 130
573 1 084
GEOGRAPHICAL ANALYSIS
South Africa 95% 547 1 024
International 5% 26 60
573 1 084
CONSOLIDATED CASH FLOW STATEMENT
Actual Actual
Six months Year ended
to March September
R'm 2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES 439 3 242
Cash received 7 039 13 928
Cash paid (6 668) (13 369)
Increase in operating assets (2 935) (1 970)
Increase in operating liabilities 3 003 4 653
CASH FLOWS FROM INVESTING ACTIVITIES (374) (59)
CASH FLOWS FROM FINANCING ACTIVITIES 138 (2 909)
CASH AND CASH EQUIVALENTS
Net increase 203 274
At beginning of the year 1 557 1 283
At end of the year 1 760 1 557
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NOTES
1. The interim financial statements comply with South African Statements of
Generally Accepted Accounting Practice. Accounting policies used are
consistent with those applicable for the September 2000 Annual Financial
Statements.
2. Pro forma figures have been used for the comparative results where
appropriate, due to the substantial changes which took place within the BoE
Group. A full reconciliation to the actual figures can be found in the
September 2000 Annual Financial Statements.
COMMENTARY ON HALF YEAR RESULTS
The results for the six months ended 31 March 2001 reflect some of the
positive impact of the restructuring that took place within the Group during
the last financial year.
Headline earnings per share increased by 25% to 25,1 cents, which is in line
with both the Group's targeted objectives and its forecast earnings growth.
In addition to satisfactory earnings growth, the Group has continued to make
good progress in its strategy of dealing with its non-core investments,
focusing on operations and deploying excess capital into new operating
businesses.
Following in-depth discussions with the management of African Bank
Investments Limited (ABIL) both groups have agreed that ABIL will pursue its
own strategy and not form an integral part of BoE's mass market initiative.
Consequently, BoE decided to dispose of its 17.4% interest in ABIL by way of
a specific share buy back which has been agreed to by the board of ABIL, but
which requires shareholder and regulatory approval. The buy back was
concluded at 875 cents per share which will realise R949 million in cash for
BoE.
In order to position the Group to serve the needs of the fast growing mass
market, the Group has accelerated the roll out of the PEP Bank branches (42
to date) and has acquired Credcor Limited, a leading provider of consumer
finance to the emerging market, for R637 million.
In support of its strategy, BoE also acquired 100% of Edge Investments (Pty)
Ltd for R103 million. Edge is an unlisted financial services group providing
investment products and services to the upper middle income and high net
worth markets.
Both these acquisitions will be fully integrated into BoE's existing
operations.
In the current market environment there are many opportunities to make
additional acquisitions in BoE's chosen market segments and a number of
alternatives are currently being explored.
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REVIEW OF OPERATIONS
Banking
The bank produced strong results, contributing R421 million to the Group's
headline earnings.
BoE Corporate, through its primary focus on secured commercial property and
specialised lending, has produced consistently strong results, while the
refocused Business Division (formally Boland PKS) has shown significant
earnings growth, following its restructuring last year.
BoE Merchant Bank generated improved earnings from its structured finance
and corporate finance activities, while the institutional stockbroker
suffered from low volumes and aggressive competition within the market.
NBS had a disappointing period, with its earnings affected by lower margins
through intense competition in the retail mortgage market, as well as
ongoing high levels of bad debt and funding costs on properties in
possession.
Margins in the bank have been under pressure through increased competition
in the market as a result of weak credit demand. In addition, the average
cost of funds increased marginally due to competition for deposits as well
as the 25 basis point increase in the South African Reserve Bank repo rate
in the last quarter of 2000. The Group also conducted share buy backs in the
latter part of the last financial year which reduced margin, but had a
compensating positive impact on both return on equity and earnings per
share.
Other operating income has generally performed in line with expectations and
now contributes 50% of total income.
Cost control remains a high priority and the 6% growth in overheads has
resulted in the cost to income ratio dropping to under 52%. Further cost
alignments are taking place in NBS where the business model, including the
mortgage loan process, is being actively reviewed.
Bad debts continue to improve slowly, primarily due to the lower interest
rate environment and the income statement charge has stabilised at 1% of
advances versus 1.2% for the comparable period. Provisions remain stable and
relatively conservative at 2.3% of advances. The level of non-performing
debt remains of concern, and initiatives have been implemented to manage the
reduction in the level of properties in possession.
Insurance
The insurance division produced satisfactory results with strong
improvements in underwriting income being partially offset by the poor
performance of the equity market during the period under review. Embedded
value has continued to show strong growth.
Asset Management
The investment performance of the division has been excellent. However, the
earnings contribution has been below expectation largely due to lower fees
from both pension fund management and unit trusts. This is partly due to the
poor performance of equity markets as well as a slower than expected inflow
of funds. The cost base of the business is being re-assessed including plans
to outsource certain elements of administration.
Group
The Group's effective tax rate is higher due to a planned reduction of non-
taxable income-generating investments. The current effective tax rate of
approximately 19% is within the parameters of a sustainable rate going
forward.
The general outlook for earnings remains positive. Income from organic
growth, together with the acquisitions of Credcor and Edge, will have a
positive effect on second half earnings.
The Group has maintained high levels of capital adequacy, which will
increase further following the sale of ABIL. The Group will target to
maintain above average levels of capital adequacy, at between 11.5% and 12%,
in order to ensure that it can continue to attract funding at acceptable
costs and will invest surplus capital into new growth opportunities, both
organic and by acquisition. During the period under review, the Group
embarked on a programme to both lengthen and strengthen its liquidity
profile. The Group successfully concluded a $130 million overseas syndicated
loan and a R1,75 billion domestic bond issue, both of which were over-
subscribed.
The Group continues to focus on the need to improve the return on equity.
While this has improved to 16.2%, it still remains below acceptable levels.
This will be addressed through a combination of active capital management
and earnings growth.
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CONCLUSION
Real progress has been made with the implementation of the Group's strategy.
The Group expects to perform at acceptable levels for the remainder of the
year.
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APPROVAL
The interim results set out above were approved by the board of directors on
17 May 2001 and are signed on its behalf by:
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WJ McAdam TA Boardman
Chairman Chief Executive
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Declaration of dividend
Notice is hereby given that an interim dividend of 7 cents (2000: 5 cents)
per ordinary share was declared on 17 May 2001 in respect of the six months
ended 31 March 2001, payable to shareholders registered at the close of
business on 8 June 2001. Payment will be made on or about 29 June 2001.
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By order of the board
JH Acutt
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Company Secretary
Directors: WJ McAdam (Chairman), CJW Ball (Deputy Chairman), TA Boardman
(Chief Executive), P Gorvalla, PS Leaf-Wright, JG Maxwell, JR McAlpine, JAC
McGregor, LA Meyerowitz, JG Modibane, E Osrin, JR Sanders (British), CML
Savage, WJ Swain
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Registered Office: 4 Wale Street, Cape Town, 8001 PO Box 86, Cape Town,
8000
Telephone: +27 21 481 1000. Telefax: +27 21 423 8663
Company Registration Number: 1987/003281/06
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Transfer Secretaries: Mercantile Registrars Limited, 11 Diagonal Street,
Johannesburg, 2001
PO Box 1053, Johannesburg, 2000 Telephone: +27 11 370 5000
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Sponsoring Brokers: BoE Securities (Pty) Ltd UBS Warburg Se
