| Thu 2 Aug 2001, 0:00 | | Nedcor Limited - Interim Results |
|
Financial results
for the six months ended 30 JUNE 2001
Headline earnings per share up 20% to 619 cents
Advances growth 29%
Market share gain 2,8%
Capital adequacy ratio 11,1%
Efficiency ratio 51,9%
Commentary on results
Attributable income for the six months, excluding exceptional items,
increased by R255m to R1 485m, representing an increase of 21% over the R1
230m achieved in the first six months of the previous financial year.
Earnings per share increased by 20% to 619 cents (2000: 517 cents). Dividend
cover has been maintained at 3,2 times.
The diminution of R3,7bn in value of Nedcor's investment in Dimension Data
plc ("Dimension Data") from a market value of R5,2bn at 31 December 2000 to
a post-balance-sheet market value of R1,6bn at 23 July 2001, after release
of Dimension Data's trading statement, has been charged as an exceptional
item at 30 June 2001. The investment incentive bonus provision of R195m
created at 31 December 2000 has been reversed and set off against the
investment writedown. Return on equity increased from 24,2% to 24,5%,
excluding the effect on equity of Dimension Data investment revaluations,
while return on assets declined marginally to 1,81% (2000: 1,89%).
Total advances growth of 29% generated a year-on-year increase in market
share of 2,8% to 18,9%, which is a quantum leap.
Net interest income growth at 14% was affected by the continuing pressure on
margins, the negative endowment effect of lower interest rates, and the
deployment of capital into strategic acquisitions to increase Nedcor's
presence in both the domestic and international markets. It was further
affected by lower yields on R750m of capital that was externalised, cash
dividends paid and share buyback activity during the period. Non-interest
revenue grew by 15% to R2 309m, representing good growth in commission and
fee income and also, in accordance with GAAP and IAS, the inclusion of
translation gains of R168m (2000: R128m) on offshore monetary assets in
integrated branch and other operations. The increase in translation gains
has created the opportunity prudently to set aside an additional unallocated
provision of R50m for bad debts, which effectively neutralises the
bottomline effect of the additional translation gains.
Conservative provisioning adopted in a high advances growth scenario
resulted in the specific and general provision charge increasing by 2% to
R494m over the comparative period. Excluding the abovementioned R50m, the
provision charge reduced by 8%, reflecting the improving credit climate and
trend in arrears in a declining interest rate environment.
Expenditure increased by 14% year-on-year, with an efficiency ratio of 51,9%
(2000: 52,1%). Expenditure was significantly influenced by the acquisitions
made during the period and the fully expensed costs of strategic banking
alliance startups. Excluding these acquisitions and startups, expenditure
increased by 9%, demonstrating effective cost containment in our core
business.
Tax increased by only 2% as a result of higher levels of dividend and non-
taxable income, including foreign income and translation gains earned during
the period. Equity-accounted income from associates grew strongly, taking
into account the fact that Dimension Data earnings are no longer equity-
accounted.
The absence of equity-accounted income from Dimension Data and the startup
costs of the strategic banking alliances have had an adverse impact of
approximately 6% on EPS growth, which would otherwise have been
approximately 26%.
Strategic initiatives and asset growth
The growth in our core business and the finalisation of several acquisitions
have contributed materially to asset and market share growth. The most
significant of these acquisitions were:
- FBC Fidelity Bank, with effect from 1 August 2000, which has been merged
with the Peoples Bank Division and renamed Peoples Bank Limited;
- 50,1% of Imperial Bank with effect from 1 January 2001; and
- 74% of Fleming Offshore Banking on the Isle of Man, with effect from1 June
2001, which has subsequently been renamed Gerrard Private Bank.
As a result of these acquisitions and organic growth, which on its own led
to an increase in market share, the group achieved total asset growth of 31%
over the past 12 months to become the second largest group by banking assets
in South Africa. Total assets increased by R41bn to R173bn. Excluding
acquisitions and non-core items, assets grew by 15%. An analysis of the May
2001 returns submitted by the banks to the South African Reserve Bank in
terms of the Banks Act reveals that, year-on-year, Nedcor has increased its
market share by 2,8% and that, excluding acquisitions, Nedcor has shown the
largest market share growth among the major South African banks. Since June
1995 Nedcor has been the only group among the big four South African banking
groups to gain market share on a consistent basis.
Good progress is being made in the integration of the strategic banking
alliances. Client databases and branding are being brought into line,
ultimately improving the service proposition for both existing and new
clients. Imperial Bank and Gerrard Private Bank are currently performing
strongly and profitably. The other alliances are expected to break even in
the 2001 financial year and contribute to profits in 2002.
Significant milestones have been met by Technology and Operations in the
journey to embed a process culture throughout the division. This
organisational transformation programme provides the cornerstone of
delivering continuously improving productivity and enhanced client service.
Our strategic technology partners Aplitec, Nihilent Technologies and IQ
Business Group are adding further value to Nedcor's product and service
delivery as well as providing access to new intellectual property and early
insights into new developments. Furthermore, we are confident that, through
our investments in Dimension Data, Internet Solution and Miraculum, Nedcor
is well-positioned to take advantage of unfolding e-commerce opportunities.
Shareholders' funds and
capital adequacy
During 2000 Nedcor's investment in Dimension Data added R3,6bn to
shareholders' funds, which stood at R16,0bn as at 31 December 2000, and gave
Nedcor a primary capital ratio of 11,5%. At this level the primary capital
was regarded as excessive in relation to banking norms, but justifiable in
view of the size of the investment in Dimension Data. Nedcor therefore
decided simultaneously to reduce its investment in Dimension Data and by way
of a buyback reduce its primary capital to the optimal level, which is
considered to be 9%.
This was further evidenced by a move to a cash dividend only. Events
relating to Dimension Data overtook this decision, and the net R3,5bn
diminution in the value of the investment in 2001 has reduced Nedcor's
primary capital to 9,5%. Nedcor's existing secondary capital of 1,6%
increases total capital to 11,1%, which is well above the new required level
of 10%. As at 30 June 2001 Nedcor's shareholders' funds stood at R13,6bn. In
view of the rate of growth in advances and the prospects going forward,
Nedcor has decided to increase its total capital to 12% by raising further
secondary capital. At this level Nedcor will be within the 25% limit on
secondary capital and will have a favourable balance of primary and
secondary capital. This will enable Nedcor to optimise its capital mix,
minimise its average cost of capital and take advantage of favourable
conditions in the capital markets.
Prospects
With the continued growth in our core business, topline benefits from
strategic alliances and improved efficiencies from technology applications,
current momentum should continue in the second half. We expect margins to
remain under pressure in the short term. Lower interest rates should,
however, contribute to an improving bad-debt environment. We remain
concerned regarding lower levels of economic growth, volatile equity and
currency markets, and the contagion effect of the uncertain economic
environment in the US. For all of the above reasons the second six months
will remain challenging.
Accounting policies and presentation
The interim consolidated financial statements are prepared in accordance
with `AC127 - Interim Financial Reporting'. The accounting policies applied
in the preparation of these interim consolidated financial statements are
consistent with those used in the annual financial statements for the year
ended 31 December 2000.
Cash dividend
Notice is hereby given that an interim dividend of 190 cents per ordinary
share has been declared in respect of the six months ended 30 June 2001.
Trading under the STRATE environment requires settlement in five business
days. In accordance with the settlement procedures of STRATE, Nedcor has
determined the last day to trade to participate in the interim dividend to
be Thursday, 20 September 2001. The shares will commence trading ex-dividend
on Friday, 21 September 2001, and the record date will be Friday, 28
September 2001. Payment will be made on Monday, 1 October 2001.
In relation to certificated shareholders, the last day to register will be
Friday, 28 September 2001. Certificated shareholders may not dematerialise
their shares between Thursday, 13 September 2001, and Monday, 1 October
2001. Dividend cheques will be posted on Monday, 1 October 2001.
For and on behalf of the board
CF Liebenberg RCM Laubscher
Chairman Chief Executive
2 August 2001
Registered office Transfer secretaries
Nedcor Limited Mercantile Registrars Limited
Nedcor Sandton 11 Diagonal Street
135 Rivonia Road Johannesburg, 2001
Sandton, 2196 PO Box 1053, Johannesburg, 2000
PO Box 1144, Johannesburg, 2000
Directors: CF Liebenberg (Chairman); PG Joubert (Deputy Chairman); RCM
Laubscher (Chief Executive); 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; GS
van Niekerk; Dr WP Venter
Company Secretary: GS Nienaber
Reg No: 1966/010630/06
Financial highlights
% Unaudited Unaudited Audited
change June 2001 June 2000 Dec 2000
Selected returns
Headline earnings (Rm) 21 1 485 1 230 3 027
Headline earnings per
share (cents) 20 619 517 1 267
Return on shareholders'
funds (%)* 24,5 24,2 24,0
Return on total assets (%) 1,81 1,89 2,10
Non-interest revenue to total
income (%) 47,0 46,8 47,6
Efficiency ratio (%) 51,9 52,1 50,0
Net interest income to interest-
earning assets (%) 3,36 3,65 3,46
Doubtful-debt provisions to
average advances (%) 3,6 3,1 3,8
Balance sheet
Total shareholders' funds (Rm) 22 13 601 11 184 15 980
Deposit, current and other
accounts (Rm) 32 157 141 119 170 140 689
Advances and other accounts (Rm) 29 135 390 105 276 120 085
Total assets (Rm) 31 173 012 131 914 158 259
Capital ratio (%) 11,1 12,0 13,2
Capital ratio - tier 1 (%) 9,5 10,5 11,5
Share statistics
Number of shares in issue (m) 241,3 239,7 240,1
Weighted average number
of shares (m) 240,0 237,7 239,0
Earnings per share after
exceptional items (cents) (846) 517 2 665
Fully diluted weighted average
number of shares (m) 244,1 241,8 244,2
Diluted headline earnings
per share (cents) 608 509 1 240
Dividends per share (cents) 19 190 160 400
Dividend cover (times) 3,2 3,2 3,2
Share price (cents) 11 15 800 14 240 17 100
Price-earnings ratio (historical) 11,5 12,6 13,5
Market capitalisation (Rbn) 13 38,5 34,1 41,4
*Excluding effect of Dimension Data revaluations.
Group income statement
Unaudited Unaudited Audited
% June 2001 June 2000 Dec 2000
change Rm Rm Rm
Interest income 18 8 610 7 290 15 236
Interest expense 20 6 006 5 009 10 504
Net interest income 14 2 604 2 281 4 732
Non-interest revenue 15 2 309 2 010 4 292
Total income 15 4 913 4 291 9 024
Specific and general provisions 2 494 484 910
Net income 16 4 419 3 807 8 114
Expenses 14 2 550 2 235 4 516
Net operating income before
exceptional items 19 1 839 1 572 3 598
Exceptional items (3 515) (1) 3 277
Net capital profit on sale of
long-term investments (3 467) 80 3 634
Amortisation of goodwill and
other acquisition costs (48) (81) (251)
Writedown of property and
leasehold premises (106)
Net income before taxation (1 646) 1 571 6 875
Taxation 2 402 393 722
Taxation: exceptional items (77)
Net income after taxation (2 048) 1 178 6 230
Attributable earnings
of associates 2 100 98 249
Income attributable to minority
shareholders (82) (46) (109)
Income attributable to shareholders (2 030) 1 230 6 370
Headline earnings
Unaudited Unaudited Audited
% June 2001 June 2000+ Dec 2000
change Rm Rm Rm
Income attributable to shareholders (2 030) 1 230 6 370
Less: Non-headline earnings items (3 515) 3 343
Exceptional items (3 515) 3 277
Taxation: exceptional items 77
Share of exceptional items
attributable to minorities (11)
Headline earnings 21 1 485 1 230 3 027
+Adjusted headline earnings as at 30 June 2000 have been calculated
including exceptional items to ensure comparability.
Group balance sheet
Unaudited Unaudited Audited
% June 2001 June 2000 Dec 2000
change Rm Rm Rm
Assets
Cash and short-term funds 260 14 699 4 084 12 860
Other short-term securities (11) 7 034 7 907 6 873
Government and public
sector securities (8) 7 022 7 669 6 886
Advances and other accounts 29 135 390 105 276 120 085
Customers' indebtedness for
acceptances (12) 736 838 859
Associate and other investments 23 5 215 4 238 8 518
Fixed property 33 1 343 1 010 1 149
Equipment (19) 605 892 644
Intangible assets 546 968 385
Total assets 31 173 012 131 914 158 259
Shareholders' funds and liabilities
Share capital 241 240 240
Reserves 20 12 711 10 593 15 316
Ordinary shareholders' interest 20 12 952 10 833 15 556
Minority shareholders' interest 649 351 424
Total shareholders' funds 22 13 601 11 184 15 980
Subordinated debt instruments 112 1 534 722 731
Deposit, current and
other accounts 32 157 141 119 170 140 689
Liabilities under acceptances (12) 736 838 859
Capital, reserves and liabilities 31 173 012 131 914 158 259
Confirmed letters of credit and other 6 964 3 626 7 150
Guarantees 8 683 5 577 8 727
Contingent liabilities 15 647 9 203 15 877
Group cash flow statement
Unaudited Unaudited Audited
June 2001 June 2000 Dec 2000
Rm Rm Rm
Cash flows from operating activities 2 052 1 793 4 395
Cash received from clients 10 918 9 242 19 436
Cash paid to clients, employees
and suppliers (8 353) (7 147) (14 624)
Dividends received 65 33 96
Dividends paid (578) (335) (513)
Net decrease/(increase) in
operating funds 678 (3 171) 4 131
Taxation paid (150) (185) (264)
Net cash utilised in
investing activities (886) (1 989) (3 055)
Net cash provided by financing
activities 145 87 104
Net increase/(decrease) in cash and
short-term funds 1 839 (3 465) 5 311
Cash and short-term funds at
beginning of period 12 860 7 549 7 549
Cash and short-term funds at end
of period 14 699 4 084 12 860
Statement of change in ordinary
shareholders' interest
Unaudited Unaudited Audited
June 2001 June 2000 Dec 2000
Rm Rm Rm
Share capital 241 240 240
Balance at beginning of year 240 237 237
Issued during the year 1 3 5
Less: Shares held by subsidiary company (2)
Share premium 1 075 1 021 934
Balance at beginning of year 934 833 833
Issue of shares 188 189 405
Share issue expenses (1) (3)
Less: Shares held by subsidiary company (47) (301)
Non-distributable reserves 512 401 516
Balance at beginning of year 516 443 443
Transfer from distributable reserves 112 (30) 254
Foreign currency translation 29 91 120
Release of reserves previously
not available (112) (104) (284)
Other movements (33) 1 (17)
Distributable reserves 11 124 9 171 13 866
Balance at beginning of year 13 866 8 248 8 248
Attributable income (2 030) 1 230 6 370
Transfer to non-distributable reserves (112) 30 (254)
Dividends paid (578) (335) (513)
Other movements (22) (2) 15
Ordinary shareholders' interest 12 952 10 833 15 556
Associate and other investments
Unaudited Unaudited Audited
June 2001 June 2000 Dec 2000
Rm Rm Rm
Book value 5 215 4 238 8 518
Associate investments 1 612 2 471 1 457
Other investments 3 603 1 767 7 061
Market/Directors' valuation 5 455 8 292 9 082
Associate investments 1 811 6 492 1 974
Other investments 3 644 1 800 7 108
Valuation surplus 240 4 054 564
Segmental analysis - headline earnings
Unaudited Unaudited Audited
% June 2001 June 2000 Dec 2000
change Rm % Rm % Rm %
By operation
Nedcor Bank and
group operations 21 1 125 76 928 75 2 430 80
Retail (including
Peoples Bank) 48 160 11 108 9 369 12
Commercial
(including
Imperial Bank) 25 330 22 264 21 697 23
Corporate 16 409 28 354 29 836 28
International
and Treasury 17 135 9 115 9 305 10
Associate income 5 91 6 87 7 223 7
Nedcor Investment
Bank (net of
minorities)** 19 317 21 266 22 518 17
Cape of Good
Hope Bank 19 43 3 36 3 79 3
21 1 485 100 1 230 100 3 027 100
By geography
South Africa 17 1 068 72 912 74 2 214 73
Rest of Africa 52 85 6 56 5 147 5
Rest of the world 27 332 22 262 21 666 22
21 1 485 100 1 230 100 3 027 100
** NIB reported earnings growth of 20% to R376 million (June 2000: R313
million) of which R59 million (June 2000: R47 million) was attributable to
NIB minorities.
Comparative figures are restated, where necessary, to afford a proper
comparison.
Percentages are calculated using actual numbers.
OLD MUTUAL
- Personal Financial Planning overhauled
- Direct sales targeted more narrowly
- Unique inbranch product to be launched
- New credit cover products developed
- Group Schemes cross-selling significant
- Old Mutual credit card successfully launched
IMPERIAL BANK
- Regulatory approval obtained
- ROE 20%
- Advances growth 33%
- Core motor finance book growth 51%
- Cost-to-income ratio 31%
- Net profit after tax up 60% to R40m
JD GROUP
- 98 Peoples Bank branches
- Target of 350 branches within JD stores
by mid 2002
- Efficiency ratio < 25%
- Management team appointed
PICK N PAY
- Go Banking brand approved
- Migration of 41 000 accounts by
31 August 2001
- New card offering to existing clients
- Point-of-sale functionality under development
CAPITAL ONE
- 50 000 accounts
- R378m in advances
- 50% of American Express Card
South Africa acquired
- American Express Blue Card
successfully launched
- JD alliance adding impetus
GERRARD PRIVATE BANK
- 74% shareholding by Nedcor
- 26% shareholding by Old Mutual
- Management team in place
- Marketing of products commenced
TECHNOLOGY PARTNERS
Dimension Data
The IQ Business Group
IS internet solutions
Net 1 Applied Technology Holdings Ltd.
Miraculum
Nihilent
These results and additional information
are available on our website:
http://www.nedcor.com
