| Mon 25 Jun 2001, 0:00 | | Mercantile Lisbon Bank: Audited Results For The Ye |
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Mercantile Lisbon Bank Holdings Limited
(Registration number 1989/000164/06)
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2001
Summarised Group Income Statement
Year ended
31 March 31 March
2001 2000
R'000 R'000
Interest income 424 837 525 555
Interest expense (283 513) (338 299)
Net interest income before provision
for credit losses 141 324 187 256
Provision for credit losses (73 800) (225 742)
Net interest income/(expense) 67 524 (38 486)
Non-interest income 230 205 262 649
Net investment revaluation provision 5 725 (34 716)
Total income 303 454 189 447
Operating expenses (352 852) (378 876)
Loss before taxation (49 398) (189 429)
Taxation (12 247) (21 829)
Loss after taxation (61 645) (211 258)
Share of loss from associated companies (864) -
Group loss (62 509) (211 258)
Exceptional item (21 650) -
Attributable loss (84 159) (211 258)
Continuing operations (66 907) 31 991
Discontinuing operations (17 252) (243 249)
Headline (loss)/earnings (49 877) 29 756
Reconciliation between attributable
loss and headline (loss)/earnings
Attributable loss (84 159) (211 258)
Exceptional item
(continuing operations) 21 650 -
Net cost of discontinuing operations 12 632 241 014
Headline (loss)/earnings (49 877) 29 756
Summarised Group Statement of Change in Shareholders' Interest
Opening balance 655 051 887 534
Movements in share capital and
share premium (31 138) (8 645)
Movements in non-distributable reserves (864) (3 174)
Movements in distributable reserves (88 181) (220 664)
Movements in the capital redemption
reserve fund 3 788 -
Movements in shareholders' loan (2 000) -
Shareholders' interest 536 656 655 051
Financial statistics
Shares in issue
Number of ordinary shares in issue
- end of period ('000) 427 014 442 164
- weighted average ('000) 442 164 442 164
Headline (loss)/earnings
per ordinary share (cents) (11,28) 6,87
Net asset value
per ordinary share (cents) 126 148
Capital ratio relative to
8% Banks' Act requirement (%) 15,49 18,79
Summarised Group Balance Sheet
Year ended
31 March 31 March
2001 2000
R'000 R'000
Assets
Cash and short-term funds 198 022 554 282
Negotiable securities 345 060 492 749
Investments 45 126 48 355
Loans and advances 2 792 954 2 814 301
Other assets 123 852 155 678
Interest in associated companies 19 678 23 015
Fixed and intangible assets 184 758 184 728
Client indebtedness for acceptances,
guarantees and credits 203 459 218 024
Total assets 3 912 909 4 491 132
Liabilities
Deposit and credit balances 3 094 538 3 487 200
Other liabilities 64 853 110 238
Debentures - 8 275
Deferred taxation 2 886 1 827
Long-term liabilities 10 517 10 517
Liabilities under acceptances,
guarantees and credits 203 459 218 024
Total liabilities 3 376 253 3 836 081
Shareholders' equity
Share capital 747 786 778 924
Shareholder's loan - 2 000
Reserves (211 130) (125 873)
Total shareholders' equity 536 656 655 051
Total equity and liabilities 3 912 909 4 491 132
Summarised Group Cash Flow Statement
Cash flow from operating activities 51 424 99 636
Cash flow from operating funds (327 882) 319 049
Taxation paid (15 941) (40 320)
Cash flow from investing activities (29 625) (33 210)
Cash flow from financing activities (34 236) (14 251)
Aggregate of cash inflows and outflows (356 260) 330 904
Cash and short-term funds at
beginning of period 554 282 223 378
Cash and short-term funds
at end of period 198 022 554 282
Exceptional item - This relates to an increase in the Group's provision for
credit losses in order to align its provisions with the new requirements as
stipulated in the Banks' Act
COMMENTARY ON 2001 RESULTS
The directors regard the Group's performance in the year to March 2001 as
disappointing and, more instructively, unacceptable.
Mercantile Lisbon Bank Holdings' R49,8 million headline loss for the year
derived largely from insufficient provision having been made in the
corporate advances and credit card books. The directors believe that the
book is now fully provisioned.
Although the past year's poor performance has clearly impacted negatively on
the group's balance sheet, it is highly relevant that the capital adequacy
ratio of 15,49% at the end of March 2001 was comfortably in excess of the 8%
required by the Banks' Act.
Accordingly, the Group's financial health is not in question.
Management has taken decisive steps to reduce the risk of recurrence of
credit losses and to address the issue of ongoing profitability. The
directors are confident that the action taken will generate a marked
improvement in the results for the year to March 2002.
Fresh strategies are now in place and some action has already been taken:
- There have been key changes to the board of directors and to the group's
executive management team.
- Plans to reduce the number of retail outlets are being reviewed.
- Cost containment has been prioritised.
- The treasury operation has been restructured and is now profitable.
Directors and executive management
Several changes are being made to the board of directors and executive
management. The current term of office of Henry Vorster, the group chairman,
expires on the conclusion of the annual general meeting and he is not
available for re-appointment. Barry Wood, who has already proved himself an
active non-executive director of the group, will succeed him. The board is
confident that Mr Wood's vast experience and sound judgement will be of
substantial benefit to the group. We thank Henry for the role he has played
in difficult times and for his continued counsel in future.
Alistair Laughland, the chief executive officer, will apply his specialist
expertise to focus solely on the securities business. Johnny Symmonds will
replace Mr Laughland as the group's chief executive officer. Mr Symmonds was
previously with the Hollard group and is a non-executive director of
Mercantile Lisbon Bank Holdings. Mr Symmonds has enjoyed an impressive track
record at Hollard, having managed the group's substantial interests in the
banking sector. Previously, Mr Symmonds headed up the financial services
group at Deloitte & Touche.
In addition, the following key appointments have recently been made:
- Johann van den Berg - Alliance Banking.
- Adriaan Steyn - Treasury.
- Gordon Driver - IT.
- Gary Borrill - Retail Banking.
These executives were carefully vetted and appointed only after the board
was fully satisfied that they possessed the expertise necessary to perform
their respective tasks with distinction.
Further announcements on the strengthening of the group's board and
management will be announced soon.
Conventional banking activities
In conjunction with our year-end audit we have undertaken a thorough review
of all our advances books in order to satisfy ourselves that adequate
provisions have been made.
In addition, we have curtailed our lending activities in this area and are
closely monitoring existing exposures. The board has approved a plan to
accelerate significantly our plans to reduce the number of our retail
outlets.
Securities banking
The dematerialisation of scrip on the JSE Securities Exchange South Africa
is in full swing and this bodes well for our activities in this area. Our
systems are largely in place and opportunities for ongoing integration of
these activities into our banking infrastructure are being actively
explored. Much of our strength in this business is due to the foresight of
Alistair Laughland and we are fortunate that he has agreed to relinquish his
responsibilities as CEO to focus entirely on the opportunity which exists in
this area.
This has been a consistent contributor to profits and we expect this to
continue.
Alliance banking
The recent appointments we have made are already bearing fruit. We have
restructured some loss-making alliances and are exploring some very exciting
new possibilities in both the card and ATM markets. The Woolworths joint
venture is well underway and is the flagship alliance of this area of
activity. This is still a new business area and profits are not expected
until the 2003 year.
Treasury
Much has already taken place since the appointment of the new head of
treasury. We have discontinued certain non-profitable activities and are
pursuing some new revenue generating ones. The focus is on client business.
Proprietary Trading activities have been stopped. We are actively recruiting
best of breed operators in the activities on which we have chosen to focus
and envisage consequent growth in this area. This area is now profitable.
Systems
Our revenue generating activities require a high degree of systems
sophistication and our IT team is evaluating all existing systems to ensure
that they meet the needs of our various business areas.
Corporate action
There has been persistent speculation concerning future ownership of the
Mercantile Group. At present, control of the Group is vested in a consortium
comprising BNU, Hollard, Management and SARHWU Investments. Gensec is not a
member of this consortium but over the past year it has aligned its
interests with those of the consortium. The consortium regards its control
position as one that is designed to enhance the generation of shareholder
wealth. Accordingly, all approaches that appear to have any prospect of
increasing Mercantile's shareholder wealth are actively pursued.
Outlook
Against the background of the difficult conditions prevailing in the banking
industry during the past two years, management has not performed as well as
shareholders could justifiably have expected.
The new management team will focus ruthlessly on the profitable
opportunities available to the group and will determinedly eliminate non-
profitable activities.
Accounting policies
The annual financial statements are prepared on the historical cost basis in
accordance with the South African Statements of Generally Accepted
Accounting Practice and incorporate the policies, which are in accordance
with those applied in the previous year.
Johannesburg
25 June 2001
Mercantile Lisbon Bank Holdings Limited (Registration number 1989/000164/06)
Registered office:
Mercantile Lisbon House, 142 West Street, Sandown 2196
Share Transfer Secretary:
Mercantile Registrars Limited, 11 Diagonal Street, Johannesburg, 2001
Directors:
Prof. HV Vorster (Chairman), AJ Laughland* (Group managing Director), GP de
Kock, CS dos Santos, GG Lund, A O'Dwyer***
Dr JHR Pereira** (Executive), IB Skosana, Dr AMSA Soares**, RJ Symmonds, PG
van Deventer (Executive), BR van Rooyen, BT Wood
Group Secretary:
F Vicente Coelho**
http://:www.mercantile.co.za *British ** Portuguese *** Irish
